Channel Trends for 2007

North American vendors have had a very tumultuous relationship with the channel over the past decade. Some years the channel is the "preferred choice" for vendors in their growth initiatives and sales activities while other years selling direct takes priority. But one thing that doesn't change is vendors' ongoing process of redefining the indirect channel's role in their overall business.

The indirect channel can fall out of favor as quickly as a member of the executive management team (channel chief, CEO, vice president of sales) leaves the company or the chief financial officer starts looking for quick margin improvement.

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The past 18 months has been a very positive time for the channel in North America, as it became the "preferred choice" for vendors such as Hewlett-Packard, Oracle, SAP and IBM to penetrate the elusive and fragmented small-business market.

Currently, we also are beginning to see increased attention to the equally complex midmarket segment.

In 2006, vendors in North America made significant changes to their partner programs, most of which revolved around four key areas: simplification (reducing complexities), globalization (program consistency), specialization (certifications and training—depth and/or breadth of coverage of product offerings), and reduced channel conflict (rules of engagement).

With the volume of mergers and acquisitions over the past two years, vendors have been busy integrating disparate channel programs to gain synergies across multiple partner bases.

Examples of these merges and acquisitions include Symantec's Veritas Software acquisition, and Oracle's purchase of PeopleSoft and Siebel Systems. Years of program "enhancements" and modifications coupled with multiple (distinct and separate) programs within one company have resulted in complicated and disjointed partner programs plagued by time-consuming processes that partners insist get rectified or "simplified."

Channel leaders have heard this message, with vendors such as IBM, HP, Cisco Systems and Microsoft working hard to reduce the time partners spend managing their vendor relationships by driving complexities out of their programs. The result is increased time spent on sales and marketing activities.

As the IT landscape continues to push toward a global ecosystem encompassing regional, national and global players, the need to have a consistent global channel program has become much more essential.

These are not issues that can be fixed overnight; it takes time and hard choices to establish a single cohesive program. Cisco, for example, said this year at its Cisco Partner Summit that its own effort will take a year or so.

Vendors also are moving to push the partner community to make a choice between two different and distinct business models: carrying a broad portfolio of their technology solutions with a wide range of technical and sales expertise, or taking a more specialized path with deep technical capabilities within a limited product or solution area. This will allow vendors to better align sales and marketing efforts with the appropriate partners to create more tightly aligned go-to-market strategies.

Reducing conflict and creating a "harmonious" selling environment hasn't been easy. Unlike in European markets, where the channel has been the preferred route to market for IT vendors, some vendors in North America have shown inconsistent, impulsive and irresponsible behavior toward their partners. The channel is much more likely to commit to and support vendors that take a stand.

Tiffani Bova is a Gartner research director covering IT channel sales, programs and alliances. Contact her at tiffani.bova@gartner.com.