What would any Halloween be in the channel without considering some of the things in the channel that go bump in the night. Without further ado, here’s a list of 10 things that tend to scare the average solution provider executive these days:
Managed Services: This may be one of the most profitable aspects of the IT services industry, especially in a down economy. It also requires a gut-wrenching transformation of the solution provider’s entire business model that can be very painful to execute.
Cloud Computing: This style of enterprise computing is probably the natural conversion of managed services and software-as-a-service. But it also allows vendors to more easily deliver products as sets of services, which in turn may mean that the solution provider becomes little more than an agents. In that model, there’s very little value being provided by the solution provider, which will have an adverse effect on the valuation of their companies.
Vendor Leads: Most of the leads that vendors pass through the channel are pretty old by the time they get passed on to a solution provider. You can easily find yourself with an increasing cost of sales chasing down bad leads from vendors that have lousy demand generation systems.
The Direct Sales Force: A lot of them now have the right incentives in place to work with channel partners today. The problem is that they all have their favorites in the channel. So when a direct sales force representative discovers your account, more often than not they are they to help somebody in the channel. It just might not necessarily be you.
Vendor Portal Upgrades: This has become vendor code for finally getting around to modernizing antiquated business systems for processing channel orders. The problem is that most of the vendors are not too good at building these systems, so it takes them two to three years to iron out the kinks. In the meantime, it takes longer to pay solution providers and nobody really seems to know what is going on with any account.
Vendor Sales Incentives: Incentive programs—or SPIFs—usually amount to little more than an effort to hijack your sales force by giving them incentive to concentrate extra hard on selling products and technologies that most customers have already signaled they don’t want. As a result, you get to pay for the privilege of watching your sales representative try to get rich while you go broke.
Certifications: To sell and service new products, you have to keep pace with the level of IT skills required. But finding people with the right skill sets even in a down economy is a tough task, so usually you have to routinely get your people certified on new technologies. When you do find good people, it turns out everybody else is looking for the same few people. This creates a demand situation that results in higher payroll costs as you move into specialty areas where the talent pool is low. Worse yet, rivals are always trying to tempt your existing people away. To add insult to injury, all too often vendors are trying to make money on the backs of training programs. The end result is you wind up paying for the right to train people to get certifications to sell products so vendors can actually make money. In a rational world, vendors would be paying you to invest the time needed to training and certification your people.
New Channel Chiefs: Every new channel chief feels like they need to do something different than their predecessor during their first 100 days. That thing, however, is usually ill-advised due to the fact that the new channel chief is working off a serious of flawed assumptions based on data derived from equally flawed IT systems.
Mergers and Acquisitions: There is nothing quite as heart-pounding as waking up to discover that one of your key vendor partners is no more. Either they have been acquired by an arch rival, resulting in too many partners selling the same products in the same space. Or they are a small vendor so once where there were only a few partners, there are now thousands. Eventually, vendors are going to have to give key solution provider partners stock in their companies to mitigate all the risks they take when partnering with vendors that come and go every other day.
The Economy: No matter what anybody says, the mid-market where most solution providers get their business from is pretty much frozen for the fourth quarter. Now only are businesses running into credit issues, they are not sure what their customers are going to do next. The end result is a perfect nightmare where spending freezes and solution providers start cutting back, even thought they know they will need those very same people again when the economy does turn.
So who needs Halloween when you work in the channel? Most solution providers routinely live with terror and fright every day of the year. That’s what makes them a breed apart in this industry. In the final analysis, the person who usually takes on the most risk with the least reward is the solution provider. It would be nice if the rest of the industry would remember that all year long.
Mike Vizard is a member of the Ziff Davis Enterprise Market Experts team and regular columnist for Channel Insider.
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