Partnering Trends Between Telecom and IT Channels — 2013

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Traditional IT solution providers and telecom services agents continue to forge successful business partnerships that reflect a number of realities today: ongoing convergence between the two …

Traditional IT solution providers and telecom services agents continue to forge successful business partnerships that reflect a number of realities today: ongoing convergence between the two industries, the impact of emerging technologies and trends such as cloud computing, and the need to fill gaps in skill sets with complementary relationships. Channel Partners and CompTIA teamed up for the third time to conduct an in-depth survey exploring the nature and health of these partnerships.

This Report includes the results of that survey and covers:
•The Nature and Value of Agent-VAR Partnerships
•The Drivers, Expectations and Priorities for Agent-VAR Partnerships
•The Factors Driving Success of Agent-VAR Partnerships

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  • 1. IT ™ M T ELEC OMarch 2013 S P E C I A L R E P O R T Partnering Trends Between Telecom and IT Channels – 2013 By Carolyn April, Director of Industry Analysis, CompTIA, and Khali Henderson, Editor-in-Chief, Channel Partners COMMUNICATIONS
  • 2. Table of Contents Overview .............................................................................. 3 Agent-VAR Partnerships Today ................................................. 4 Number of Partnerships Types of Partnerships Compensation Models Value of Partnerships Drivers Behind Partnerships Factors Influencing Agent-VAR Partnerships Impact of Emerging Trends and New Business Models Success Factors and Priorities for Agent-VAR Partnerships .......... 13 Factors Influencing Success Expectations and Priorities The Future of Agent-VAR Partnerships ...................................... 16 Intentions to Partner Factors Influencing the Success of Partnerships Going Forward Conclusion .......................................................................... 19 About ................................................................................. 20 The Research The Authors CompTIA Channel Partners Copyright © 2013 VIRGO Publishing, LLC, and CompTIA, Inc. All rights reserved. The publisher reserves the right to accept or reject any advertising or editorial material. Advertisers, and/or their agents, assume the responsibility for all content of published advertisements and assume responsibility for any claims against the publisher based on the advertisement. Editorial contributors assume responsibility for their published works and assume responsibility for any claims against the publisher based on the published work. Editorial content may not necessarily reflect the views of the publisher. Materials contained on this site may not be reproduced, modified, distributed, republished or hosted (either directly or by linking) without our prior written permission. You may not alter or remove any trademark, copyright or other notice from copies of content. You may, however, download material from the site (one machine readable copy and one print copy per page) for your personal, noncommercial use only. We reserve all rights in and title to all material downloaded.Partnering Trends Between Telecom and IT Channels — 2013 2 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 3. Overview P artnering between IT VARs and telecom services agents continues to grow more commonplace in the industry. The relationships also are maturing as both groups have begun to move beyond opportunistic handshake deals, which easily fray, to a more formalized, accountable approach to the relationships. Evidence of this can be seen in the uptick of joint selling and marketing among a percentage of these two industry players, a distinct shift from what have been loosely coupled arrangements based on referrals. In order to continue tracking the convergence of these markets, Channel Partners and CompTIA teamed up for the third time to conduct an in-depth study exploring the nature and health of these IT VAR and telecom agent partnerships. In separate online surveys to 100 IT VARs (a mix of resellers, solution providers, managed services providers, etc.) and 100 telecom agents (master agents, subagents and consultants), the study covers a range of topics from revenue generation, partnership structure, satisfaction levels, partnering drivers and success factors, and the impact of external developments in the industry such as the cloud computing model. Clearly, the convergence of IT and telecom technologies as well as decision-making at the point of the customer has been a factor in driving these partnerships as agents and VARs seek to provide an end-to-end solution, encompassing both telecom and IT, thus capturing a greater amount of customer wallet share. Components of U.S. Telecom & IT Market 32% 68% Telecom IT Hardware, Services Software & Services The ongoing convergence of the “traditional” IT and telecom services sectors will bring new opportunities for partnering, but also challenges for those ill-prepared. Source: IDC Emerging trends such as cloud also are a strong force driving the two parties together. Ninety percent of VARs and 70 percent of agents said emerging delivery models such as cloud and managed services have had a positive impact on their partnerships. More findings such as these can be found in the following report sections, including additional year-on-year trend comparisons that help illuminate the patterns developing as these partnerships grow more common and entrenched.Partnering Trends Between Telecom and IT Channels — 2013 3 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 4. Agent-VAR Partnerships Today Number of Partnerships As in the previous years’ surveys, the overwhelming majority of agents and VARs responding to the 2013 survey said they have at least one partnership. VARs reported more exclusive relationships with agents than vice versa, while agents tended to have more partnerships of equal importance. Specifically, nearly all of the agent respondents said they currently have at least one partnership with a VAR. Three in 10 said they had one primary partner with other secondary partners. More than half (58 percent) of respondents said they had multiple partnerships of equal relevance. Eight in 10 VARs report having had at least one partnership with either a master agent or subagent in the last year, up from seven in 10 that did so in 2012. The increase comes mainly in the number of partnerships VARs have across multiple subagents as opposed to casting their lot with a single subagent partner. It’s less common for VARs to work with multiple master agents (just 16 percent did), which makes sense since master agents represent a wide swath of telecom service providers and carriers, opening access to a range of services the VAR partner might be seeking to sell or implement. While few agents (less than one in 10) have no partners, one in four VARs do not. Why not? For the most part it comes down to a genuine lack of interest or a case of not having tried. Most VARs (80 percent) that said they are not involved in a telecom agent relationship cited those two reasons. Network and telecom convergence, along with cloud, are driving many of these partnerships, and so for VARs not living in the worlds of unified communications or related technologies, the agent partnership might seem an odd fit. However, as businesses continue to shift toward the cloud and recurring revenue models, and customers seek a single source for IT and telecom services, more VARs and agents are likely to at least consider these relationships. One good reason? The need to fill in skills gaps, which is found to be a primary driver to partnering. Number of Partnerships Between Agents and VARs 58% Multiple partners 16% of equal relevance 25% Agent partnerships 33% One partner, other with VARs 28% secondary partners 31% VAR partnerships with 3% master agents One partner 32% 24% VARs partnerships 7% with agents/subagents None 24% 20% Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013Partnering Trends Between Telecom and IT Channels — 2013 4 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 5. Types of Partnerships A common refrain in this year’s data is the growing formalization of VAR-agent partnerships, which suggests that the success of these relationships lies with close understanding of one another’s business model, clear and regular communication, and set rules of engagement for things like account ownership, sales strategy and compensation/revenue models — all of which are discussed in detail later in this report. So, let’s take a look at the many ways that agents and VARs engage with one another. One of the most common is to swap leads with no reciprocal compensation. This is done both formally and informally. The 2013 survey showed that at least among VAR respondents there is a move toward more formalized partnerships compared to 2012. Lead Swapping Between Agents and VARs Informally swap leads for services, with no reciprocal pay or agreements 2013 9% 18% 2012 18% 18% Formally swap leads under agreement 2013 26% 6% VARs 2012 9% 5% Agents Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2012 and January 2013 Further evidence of the formalization and deepening of agent-VAR partnerships is in the reported increase in joint marketing and selling. Specifically, VARs said joint marketing more than doubled year over year, from 4 percent to 10 percent; agents reported insignificant activity and no increase year over year. However, agents reported a nearly double increase in joint selling — from 10 percent to 18 percent — though VARs noted a marked decline in what was already limited activity. Joint Selling & Marketing Between Agents and VARs Joint marketing under a formal agreement 2013 10% 1% 2012 18% 1% Joint selling under a formal agreement 2013 2% 18% VARs 2012 9% 10% Agents Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2012 and January 2013Partnering Trends Between Telecom and IT Channels — 2013 5 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 6. As in last year’s survey, the most common type of partnership involved VARs selling carrier services through an agent. As telecom services become more entwined with the type of network infrastructure deployments that are the bread and butter of many VARs, offering telecom services as part of an end-to-end offer makes increasing sense. Agents typically pay VARs in one of two ways — a referral fee on a closed sale or a recurring commission as a subagent. Interestingly, two in five agents said they pay VARs commissions while less than one in five VARs said the same. One in 10 agents said they pay VARs a referral fee while one in five VARs said they received a referral fee. These numbers did not change noticeably year over year. How Agents Pay VARs Agent pays recurring commission to VAR under subagent agreement 2013 14% 40% 2012 17% 43% Agents pay a referral fee for closed leads 2013 18% 10% VARs 2012 24% 10% Agents Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2012 and January 2013 Very few partnerships between agents and VARs involved the agent selling for the VAR. In the rare situations that it does occur, the compensation is reportedly balanced between referral fees and a percentage of the total deal. How VARs Pay Agents VAR pays our agency a referral fee for closed leads 2013 4% 4% 2012 7% 5% VAR gives agent a cut of total deal sold to agent’s customer 2013 4% 3% VARs 2012 6% 3% Agents Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2012 and January 2013Partnering Trends Between Telecom and IT Channels — 2013 6 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 7. Compensation Models There appears to be some settling in around compensation models this year that also might reflect a growing understanding of one another’s business. For example, 42 percent of IT VARs describe their compensation structure from agents this year as coming in the form of upfront revenue, which is up from just 28 percent last year. Agents tend to seek out a recurring revenue model, which is in line with how they sell telecom services and renewals, but IT VARs are still mainly steeped in transactional product- and project-based revenue — though many are in transition today to recurring revenue. The fact that the agents are compensating IT VARs more in line with how they typically get paid in the IT world suggests that a better understanding of the business models of their partners, which is singled out as a major determinant to success. Value of Partnerships Partnering is all about generating revenue and profit — whether that’s by expanding offerings to existing customers or acquiring new clients based on a broader portfolio of skills. VARs and agents are no different. Both agents and VARs continue to derive significant value from their partnerships, with an ever greater share of revenue attributable to these relationships. Two in five agents said their partnerships with VARs/dealers accounted for less than 25 percent of their revenue in the last 12 months, but this was a decrease from last year when more than half said the same. More agents said revenue from partnerships has shifted to the 25-49 percent range. VARs also saw a slight shift in the share of revenue from partnerships, with more reporting 75-99 percent. A majority of VARs — two in five — still report that 50-74 percent of their revenue comes from partnerships with agents. Percentage of Revenue from Agent-VAR Partnerships in the Last 12 Months Percentage of Revenue from Agent-VAR Partnerships in the Last 12 Months 4% 1% 100% 5% 0% 18% 11% 75%-99% 12% 10% 45% 12% 50%-74% 43% 13% VARs 21% 30% Agents 25%-49% 25% 25% 12% 42% 2013 Less than 25% 14% 52% 2012 Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2012 and January 2013Partnering Trends Between Telecom and IT Channels — 2013 7 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 8. It’s important to note that these high percentages for revenue reflect the entirety of any deal. For example, if a telecom agent brings an IT VAR partner into a telecom sale to provide the network implementation or hardware solutions, the referral fee is likely the only “real” money that exchanges hands and can be considered a direct result of the partnership. But it’s all about the door-opening opportunity. The follow-on work the IT VAR does with this customer is where the real dollars are made — a situation not likely possible had the agent not pulled the IT firm on board in the first place. While a significant portion of their revenue comes from partnerships, a majority of agents and VARs still view these relationships as “tactical,” or opportunistic based on the needs of specific customers. That said, a significant number — 37 percent of VARs and 30 percent of agents — say these relationships are “strategic,” or key to their portfolio offerings. How VARs and Agents Characterize Their Partnerships 30% Strategic (key to my portfolio) 37% Tactical (opportunistic 63% Agents based on a specific customer need) 58% 8% VARs Referral 5% Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013 Broadly speaking, VARs and agents are quite happy with the results of these partnerships in the last year. Eighty-five percent of VARs and 76 percent of agents are “satisfied” or “highly satisfied” with their partnerships. Almost none were dissatisfied, and very few — one in four agents and one in eight VARs — were neutral on the point. Satisfaction With Partnerships in the Last 12 Months 26% Highly satisfied 85% of VARs and 24% 76% of agents are satisfied with their 50% Satisfied partnerships 61% 24% Neutral 13% 0% Agents Dissatisfied 1% 0% VARs Highly dissatisfied 0% Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013Partnering Trends Between Telecom and IT Channels — 2013 8 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 9. Drivers Behind Partnerships We have mentioned some of the key drivers behind the decision to partner, including the momentum around emerging technology and business models such as cloud computing, along with the need to expand skill sets in order to compete against a widening field of players across IT, telecom and other industries such as audio/visual and physical security. In this study, we assessed demand drivers for two different categories: partnering to sell core services and partnering to sell emerging services and technologies. For VARs, nearly every possible reason to partner with agents increased in frequency, across both core and emerging services areas. As seen in the chart below, the majority of these partnering drivers are financial in nature — either a means to drive sales or to save money on activities such as training. Adding complementary, non-strategic skills to the business through partnering is far less expensive than in-house training in many cases. Nearly universally (91 percent) of VARs say emerging trends, such as cloud and managed services, have affected the status of their partnerships with agents favorably; none said they have done so negatively. This is an interesting finding given that anecdotally there has been a level of conjecture and apprehension that the emergence of cloud solution providers paves the path for VARs to compete more effectively, rather than partner with agents. And yet, 62 percent of VARs report that the emerging business models and technologies have resulted in new partnership opportunities with agents, while half say they are winning more deals and driving more revenue with agents in these areas. Meantime, echoing the theme of more structured partnerships this year, nearly three in 10 said emerging technologies and business models actually are leading to agent partnerships that are more formalized in nature. VAR Drivers Behind Partnering Decisions Core Services Emerging Services 2013 Response Trend from 2012 2013 Response Trend from 2012 79% Gain access to new customers 65% Save money on training 63% Create new revenue streams 62% Fulfill existing customer demand 62% Fulfill existing customer demand 59% Create new revenue streams 60% Help fill in gaps in skill sets 58% Help fill in gaps in skill sets 54% Save money on training 39% Gain access to new customers Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013Partnering Trends Between Telecom and IT Channels — 2013 9 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 10. As with VARs, the primary drivers behind agents’ decisions to partner for core services is to increase sales, specifically gaining access to new customers (81 percent), serving existing customers (73 percent) or creating new revenue streams (72 percent). The softer benefits — filling in skills gaps and saving money on training — also got very high marks with more than two-thirds counting those as motivators. For emerging services, the driver to partner shifted slightly with more agents looking to create new revenue streams. More than three-fourths of agents also are concerned about meeting customer needs for these new services and filling skills gaps by partnering with VARs that they believe have an understanding of the customer environment needed to effectively delivery IT and telephony services that previous lived beyond the carrier demarcation. Agents Drivers Behind Partnering Decisions Core Services Emerging Services 2013 Response Trend from 2012 2013 Response Trend from 2012 81% Gain access to new customers 85% Create new revenue streams 73% Fulfill existing customer demand 79% Fulfill existing customer demand 72% Create new revenue streams 77% Help fill gaps in skill sets 70% Help fill in gaps in skill sets 75% Gain access to new customers 65% Save money on training 62% Save money on training Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013 Factors Influencing Agent-VAR Partnerships Looking a little deeper, the survey explored factors influencing channel partners’ decisions to partner with one company over another; the results were very similar year over year for both agents and VARs. Nine in 10 agents (89 percent) said the partners’ reputation was a “major” factor, topping the list for the third year. Rounding out the top five major factors influencing their decisions to partner is the quality of the VAR’s products and services (81 percent); the VAR’s’ pre-, post- and joint sales support (74 percent); the VAR’s technical support (67 percent); and lastly the agent’s personal relationship with the VAR (56 percent). Interestingly, these factors were quite different from 2012 when the VAR’s technical skills, financial health and understanding of the agent business model were most highly valued. Perhaps this is a further indication that these partnerships are moving past the introductory level to a more trusted, collaborative stage.Partnering Trends Between Telecom and IT Channels — 2013 10 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 11. VARs’ No. 1 factor in deciding to partner with an agent changed this year from product quality to technical support, which was mentioned by 52 percent of VARs as a “major” factor. Product quality moved to No. 3 and was tied with partner’s reputation with 49 percent. The No. 2 factor was the agent’s understanding of the VAR’s business model (50 percent). Rounding out the top five was the agents’ commitment to the VAR’s profitability and growth (48 percent). All of these were in the top five in 2012 as well. The increased emphasis on working with a partner that provides solid technical support is likely due to the prevalence of more sophisticated and complex product sets and solutions, including cloud services and multisite WAN networks that support cloud. Many VARs are getting up to speed in these areas and partnering with a telecom agent that has existing technical acumen only speeds the ramp time. Top 5 Factors Influencing Decisions to Partner VARs Rank Agents Partner’s technical support (52%) 1 Partner’s reputation (89%) Partner’s understanding of my Quality of the partner’s products business model (50%) 2 and services (81%) (TIE) Quality of the partner’s Partner’s pre-, post- and joint products and services and Partner’s reputation (49% each) 3 sales support (74%) 4 Partner’s technical support (67%) Partner’s commitment to my Personal relationship with profitability and growth (48%) 5 the partner (56%) Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013 Impact of Emerging Trends and New Business Models While previous surveys have considered emerging technologies and delivery models like cloud and managed services, the 2013 survey included a new question that specifically asked about their impact on partnerships. The reason for the question was anecdotal information about partnerships struggling as the services agents and VARs offer become more competitive. As an example, would an agent’s cloud UC offer compete with a VAR’s premises-based UC offer, creating conflict in the partnership? While there may be isolated incidences of such conflict, the survey results showed no tangible evidence of a widespread concern. In fact, it showed the opposite: agents and VARs say emerging technologies have a “positive” or “very positive” impact on partnerships. One possible reason for this goes back to the formalization of partnership; agents and VARs increasingly set the ground rules for engaging with customers and account control, avoiding potential conflicts. Indeed, 48 percent of agents and 28 percent of VARs said this formalization of agreements was an outcome.Partnering Trends Between Telecom and IT Channels — 2013 11 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 12. Most agents (66 percent) and VARs (61 percent) said that new partnerships have arisen from emerging technologies. Further 60 percent of agents and 49 percent of VARs said more deals were won and more revenue was realized. One scenario supporting these results is that some VARs are considering cloud-based alternatives to their core offerings so as to not lose a sale altogether. In some cases they are working in tandem with their telecom agent partners to deliver those through a third-party provider. In others, they may in fact be the managed services or cloud provider that the agent recommends. The other dynamic at work here is competition from carriers themselves. As cloud services become more prevalent, carriers such as AT&T and others are in a position to deliver these solutions effectively — and directly — to customers. One way that telecom agents and IT VARs can avoid disintermediation of this sort is to join forces to offer more well-rounded solutions to customers that encompass a variety of technologies and delivery types. How Emerging Technologies and New Business Models Have Impacted Partnerships 18% 90% of VARs and Very positively 70% of agents say 29% emerging technologies like cloud have a 52% Positively positive impact on 61% partnerships. 24% Not at all 9% 5% Agents Negatively 0% 1% VARs Very negatively 0% Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013Partnering Trends Between Telecom and IT Channels — 2013 12 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 13. Success Factors and Priorities for Agent-VAR Partnerships Factors Influencing Success Looking at the factors driving success of agent-VAR partnerships, agent respondents once again overwhelmingly (73 percent) said that effective communications between the agent and the VAR/dealer partner was the No. 1 factor. VAR’s pre-, post- and joint sales support took the No. 2 spot. Leads, last year’s No. 2 factor, took the third spot in 2013. VARs’/dealers’ understanding of the agent business model remained important with 47 percent citing it as a major factor. The big change for agents year over year was in the influence of emerging technologies and business models at No. 4 with 49 percent. This tracks with other data from the survey that shows that emerging technologies have had a positive impact on partnerships. Meanwhile, VARs cited emerging technologies as the No. 2 factor influencing success of partnerships for the second year in a row. This was tied with formal business planning with the agent — again a sign of the increasing formalization of partnerships and performance expectations. No. 1 on the VARs’ list was the agent’s understanding of the VAR business model. This tracks with other data in the survey that shows that agents are working to compensate VARs in an upfront manner that better matches their cash flow model. Effective communication moved down the list, but remained in the top five with 44 percent; it was edged out of the No. 4 spot by government regulation, which did not make an appearance on the 2012 list. It can’t be underestimated how critical business model understanding It can’t be is to the success of these relationships. One of the main reasons that these partnerships fray and fail is simply by not knowing how each other makes underestimated money, structures their operations and sells to customers. Partners that have how critical taken the time to educate themselves in these fundamentals are making a knowledge investment that sets the tone for a more successful partnership. To business model get there necessitates effective communication, which agents heavily attribute understanding is to overall success rates in partnership. to the success of these relationships.Partnering Trends Between Telecom and IT Channels — 2013 13 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 14. Top 5 Factors Influencing Success of Partnerships in Last 12 Months VARs Rank Agents Partner’s understanding of my business model (49%) 1 Effective communication (73%) Formal business planning Partner’s pre-, post- and joint with partner (48%) 2 sales support (54%) Emerging technologies and business models (48%) 3 Leads provided by partner (53%) Government regulation Emerging technologies and and compliance (46%) 4 business models (49%) Partner’s understanding of Effective communication (44%) 5 my business model (47%) Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013 Expectations and Priorities The themes of communication and formalized rules of engagement play into the next set of data. Beginning with the 2012 survey, we sought to evaluate the success of partnerships more closely, asking new questions about expectations and priorities around partnerships over the last 12 months. Selecting from a list of 12 priorities, both partner types indicated a concern over direct competition and the need for ground rules. In 2013, those same concerns resurfaced about establishing roles and account ownership. However, both groups also were concerned about the performance of the partnership through setting sales strategy and/or revenue goals. Top 3 Priorities for Partnerships VARs Priority Agents Establishing pre-and post-sales Setting sales strategy (42%) 1 support roles (51%) Setting sales revenue goals and commitments (33%) 2 Setting sales strategy (46%) (TIE) Establishing and protecting Establishing and protecting account ownership. Establishing rules for interfacing with customers (27%) 3 account ownership (40%) Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013Partnering Trends Between Telecom and IT Channels — 2013 14 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 15. Thinking about these same 12 elements, partners picked the top three most difficult to achieve. While their priorities lined up fairly well, agents’ and VARs’ assessment of the difficulty was very different. Nearly a third of VARs, for example, said assigning responsibility for bad debt was difficult to achieve while only 5 percent of agents said the same. On the other side, 25 percent of agents said establishing project management roles was difficult to achieve while only 4 percent of VARs thought so. What may be more significant is the low percentages logged for each of these items, such that none stands out as a major impediment to partnership success. Top 3 Most Difficult to Achieve Priorities for Partnerships VARs Priority Agents Setting sales strategy (what each Setting sales revenue partner will sell) (30%) 1 goals/commitments (28%) Assigning responsibility for Establishing rules for interfacing bad debt/collections (29%) 2 with customers (27%) Establishing project Establishing exclusivity (28%) 3 management roles (25%) Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013Partnering Trends Between Telecom and IT Channels — 2013 15 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 16. The Future of Agent-VAR Partnerships Intentions to Partner Looking ahead to the next 12 months, both agents and VARs are bullish about their partnerships going forward. Specifically, more than four in five agents and two in five VARs plan to add new partners while four in five agents and one in two VARs plan to increase business with existing partners. VARs were more likely than agents to expect no changes; two in five VARs said they would maintain the status quo. One in five VARs plans to reduce business with existing partners and one in four agents plans to drop partners. These changes are likely the result of a constant re-evaluation of the effectiveness of partnerships and an effort to pour resources into the most productive ones. This routine evaluation process is not unlike the model that VARs employ when it comes to their technology vendor partners. Some of the relationships are strategic, some secondary or tactical, others simply one-off — but none of them is permanently guaranteed. VARs constantly re-evaluate their vendor relationships on a number of measures: revenue and opportunity, products, incentives, market trends and how they are treated. The churn that ensues is only more active now that new models such as cloud are changing the mix of players that are important to partner with, which is driving more telecom relationships. Agent-VAR Intentions to Partner in the Next 12 Months 84% Plan to add Both agents and new partners 42% VARs plan to add partners or increase Plan to increase 79% business with business with existing partners. existing partners 53% 3% Plan to maintain status quo 41% Plan to reduce 2% business with existing partners 22% 24% Agents Plan to drop some partners 7% 2% VARs Don’t know 2% Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013Partnering Trends Between Telecom and IT Channels — 2013 16 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 17. Not surprisingly, both agents and VARs expected revenue from their partnerships to increase in the next 12 months. Two in three agents and one in two VARs expect their revenue to increase significantly or somewhat in 2013. Three in 10 agents and four in 10 VARs expect revenue to stay the same. Few expected revenue declines. While the majority of VARs (53 percent) expect to see revenue increase over the coming 12 months from these partnerships, this represents a dip from last year, when 62 percent said they believed sales would jump. The number of agents expecting increases also decreased year over year from 75 percent in 2012 to 65 percent in 2013. Rather than see this as a negative, however, there is another possible explanation: growing trust and familiarity. Consider the number of VARs and agents that expect revenue from these relationships to remain the same: four in 10 VARs this year versus three in 10 last year and three in 10 agents compared to two in 10 last year. Those 10-point bumps in the status quo category might be further evidence that the partnering relationships are solidifying and that there is trust developing among those firms that have worked together now for years. How Partnership Revenue Is Expected to Change in the Next 12 Months 30% Increase significantly 65% of agents and 17% 53% of VARs expect revenue 35% from partnerships Increase somewhat to increase 36% 29% Stay the same 43% 4% Agents Decrease somewhat 4% 0% VARs Decrease significantly 1% Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013 Factors Influencing the Success of Partnerships Going Forward The factors that agents cited as most influencing the success of their future partnerships are similar to those that they cited last year. Effective communication between the agent and VAR partner was cited as the most important major factor by 81 percent again this year. Leads provided by the partner, a VAR’s understanding of the agent business model and compensation remained major factors in the success of agents’ partnerships in 2013. Pre-, post- and joint sales support snuck into the list in the No. 2 spot, which was held last year by emerging technologies/business models at 57 percent. This year, emerging technologies did not make agents’ top five success factors for 2013 at 44 percent.Partnering Trends Between Telecom and IT Channels — 2013 17 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 18. Interestingly, VARs put emerging technologies as their No. 1 factor influencing success of partnerships in the next 12 months with 52 percent citing it as a major factor. Effective communications moved down to the second spot with 46 percent citing it as major factor. Compensation models tied effective communications for the No. 2 spot. Rounding out the top five factors for VARs were sales incentives and agent’s sales support — each cited as a major factor by 43 percent. Agent’s understanding of the VAR business model was cited by fewer VARs (42 percent) in 2013 than in 2012 (46 percent) and 2011 (60 percent), indicating that agents may be demonstrating a better understanding of how a VAR business runs and therefore making it less of an impediment to success going forward. Factors Influencing Success of Partnerships in the Next 12 Months VARs Rank Agents Emerging technologies and business models (52%) 1 Effective communication (81%) (TIE) Effective communication and Partner’s pre-, post- and joint Compensation model (46% each) 2 sales support (64%) Partner’s understanding of my 3 business model (53%) (TIE) Sales incentives and Partner’s pre-, post- and joint sales support (43% each) 4 Leads provided by partner (48%) 5 Compensation model (47%) Source: Channel Partners and CompTIA Agent-VAR Partnering Survey, January 2013Partnering Trends Between Telecom and IT Channels — 2013 18 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 19. Conclusion The industry is undergoing significant change that is impacting the channels of both the IT and telecom worlds. Cloud computing, as just one example of a trend driver, has sparked new partnerships among unlikely pairs while at the same time inviting new and different types of competitors to the field. Every company is trying to get an advantage. One differentiator comes in adding new skills or capabilities to an existing portfolio, offering more to the customer from a single source. The VARs and telecom agents in this study have discovered the merits in aligning in this way. Partnerships of these sorts aren’t always easy, especially when they are not formalized under a contract, and communications and accountability are weak. So it’s encouraging that satisfaction levels with the partnerships over the last year are as high as the data indicate. The data suggest that partnerships have grown more formalized this past year, with more accountability and structure, two major factors behind success ultimately. In the years ahead, the roles of IT distributors and master agents in terms of training and facilitating more partnerships between VARs and telecom agents is likely to emerge as well. Looking ahead, the success of these partnerships will likely hinge on many of the factors cited by the respondents: good communications, an understanding of one another’s business model and strategies for collectively tapping into emerging models such as cloud.Partnering Trends Between Telecom and IT Channels — 2013 19 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 20. About The Research The CompTIA-Channel Partners Agent-VAR Partnering survey was conducted in January 2013 based on 2012 performance. There were approximately 100 respondents of each partner type — agent and VAR — to two separate surveys. The agent respondents to the 2013 survey were 52 percent independent agents or subagents and 31 percent master agents. Another 17 percent identified themselves as “consultants.” As in the 2012 survey most of the respondents were small businesses; 79 percent reported total gross revenue of less than $5 million. Similarly, most respondents (82 percent) focused on small and medium business customers. The IT VAR respondents to the 2013 survey included 19 percent MSPs, 19 percent IT vendors, 14 percent systems integrators and 16 percent retailers and 11 percent resellers. Most came from smaller businesses: 53 percent with up to $9.9 million in revenue, with another 31 percent with $10 million to $49.9 million. In a change from last year, more larger companies were represented; 15 percent of respondents reported being more than $50 million in annual revenue. Their average customer base was evenly balanced across small, medium and large clients. The Authors Carolyn April, director of industry analysis for CompTIA, joined the organization in April 2010 as director of industry analysis after serving as editor for Channel Insider, a publication focused on news, information and resources for IT resellers and system integrators. Prior to that, April was a principal analyst for the Institute for the Partner Education & Development (IPED) and served as executive editor of VAR Business, an award-winning IT channel print and online publication, and Redmond Magazine, which covers Microsoft technologies and the Microsoft user ecosystem. She also worked in editorial positions for InfoWorld and for daily and weekly newspapers in Massachusetts. Khali Henderson is editor-in-chief of Channel Partners, a leading media brand in VIRGO Publishing’s Communications Network. Henderson has more than 20 years of experience in journalism, covering the communications and IT sectors, including its technology and channels. She has been contributing to Channel Partners as a reporter, editor and freelance writer since 1988 and has been its editor-in-chief since 1998. Henderson’s career also includes seven years in public relations during which time her client list included the Telecommunications Resellers Association (now COMPTEL). She has a bachelor’s degree from Arizona State University’s Walter Cronkite School of Journalism.Partnering Trends Between Telecom and IT Channels — 2013 20 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org
  • 21. CompTIA CompTIA is the voice of the world’s information technology (IT) industry. Its members are the companies at the forefront of innovation and the professionals responsible for maximizing the benefits organizations receive from their investments in technology. CompTIA is dedicated to advancing industry growth through its educational programs, market research, networking events, professional certifications and public policy advocacy. For more information, visitcomptia.org or follow CompTIA on Twitter at twitter.com/comptia. Channel Partners Channel Partners magazine is the leading publication for telecom and IT distribution channels. For more than 25 years, Channel Partners has been the undisputed leader in providing news, analysis and education to the indirect sales channels serving the business technology and communications industry. In addition, Channel Partners online (channelpartnersonline.com) delivers a constant content stream of unique and breaking industry news, feature articles and premium downloadable content. As official media of the Channel Partners Conference & Expo, (channelpartnersconference.com), Channel Partners is the market leader that channel professionals turn to first.Partnering Trends Between Telecom and IT Channels — 2013 21 Channel Partners, channelpartnersonline.com • CompTIA, comptia.org