The Parago 2014 Channel Strategy Report highlights the importance of simplification in vendor-partner relationships and the need for innovative engagement solutions. It reveals that while cloud transition is critical for vendor success, many vendors lack insights into the effectiveness of their partner incentive investments. The report indicates growing investments in partner enablement tools and the necessity of effective partner identification and recruitment strategies.

1. partners incentives cloud reporting insights
simplicity drives success
2014 channel strategy study

2. table of contents

3. executive summary
5
methodology 6
key findings
7
partner insights
8
incentive insights
12
cloud insights
16
reporting insights
19

4. do something
different: simplify

5. executive summary
I’m pleased to present the parago 2014 channel strategy report. We’ve proven that the channel is
alive and well, but there are important opportunities to consider in the next 12 months.
dare to simplify
The good news? Vendors are doing a great job of offering a broad array of essential
engagement solutions. However, they’re not offering unique services that simplify their
partners’ go-to-market programs.
The opportunity? Innovate and differentiate. The key is simplification. Most partners engage in
more than six channel programs, so they want — and actually need — easy and creative incentives.
the cloud challenge is here
It’s no surprise that the cloud is a critical factor for future success. Now is the time to get serious about
developing an agile strategy to help partners migrate to a recurring revenue model.
smarter reporting is critical
Our research revealed that most vendors — even those with over $1 billion in annual revenues
— have limited insight into the impact of their partner incentive investments. They need a
seamless channel platform that aggregates data across the board.
Enjoy this report. I’d like to hear your thoughts about our discoveries. Feel free to reach out to
me directly.
Dan Hawtof
VP of Business Solutions, Global Channel and Employee
972.538.4017
dan.hawtof@parago.com
parago.com/channel
@paragochannel

6. methodology
survey participants
vendor annual revenue
Small Vendors
< $100M in revenue
52%
Mid-size Vendors
$100M – $1B in revenue
22%
Large Vendors
> $1B in revenue
respondents’ titles
26%
other respondents’ titles
Senior Manager or Manager
45%
Senior Director or Director
24%
Vice President
16%
Executive or Senior Vice President
10%
Other 5%
• CEO
• Channel Consultant
• Analyst
• Global Key Account
Manager
• Global Channel Program
Manager

7. key findings
good thoughts
Great news: our research shows that the channel is stronger than ever.
In fact, 2014 vendor strategies include plenty of growth initiatives.
channel investment is growing
34
vendors
of
95%
of vendors
will increase or maintain
partner incentives in 2014.
over
75%
of vendors
will add new sales
enablement tools in 2014.
increased or maintained their
partner incentive participation in 2013.
today’s goals, tomorrow’s vision
only
1 in 10
3 5
vendors
in
vendors
currently gets more than
90% of revenue from the cloud.
1
#
are adding cloud services in 2014.
The cloud is coming, and hybrid
models will be the norm.
most important 2014 vendor initiative:
simplifying the identification
and recruitment of new partners.
1 in 5
vendors
still offer only a legacy model.

8. partner ecosystem
a diverse partner base is important
1
#
VARs
2
#
3
#
Distributors
System Integrators
The most common partners across all vendor revenue profiles.
4
#
Rank of Managed
Service Providers by
Large and
Mid-size Vendors.
who are your partners? (Please select all that apply.)
mid-size vendors $100M – $1B in revenue
small vendors < $100M in revenue
value-added reseller (VAR)
direct market seller (DMR)
distributor
magaged service provider
hosting-service provider
system integrator (SI)
other
76%
38%
54%
24%
33%
9%
14%
100%
38%
54%
54%
31%
77%
0%
total
large vendors > $1B in revenue
value-added reseller (VAR)
direct market seller (DMR)
distributor
magaged service provider
hosting-service provider
system integrator (SI)
other
value-added reseller (VAR)
direct market seller (DMR)
distributor
magaged service provider
hosting-service provider
system integrator (SI)
other
100%
63%
92%
71%
42%
88%
0%
value-added reseller (VAR)
direct market seller (DMR)
distributor
magaged service provider
hosting-service provider
system integrator (SI)
other
90%
49%
72%
49%
35%
55%
5%

9. partner engagement
channel investment is increasing
75%
of all vendors will invest more in
partner enablement tools.
60%
of all vendors will
increase partner incentives.
90%
of Large Vendors will add new
partner enablement tools.
70%
of Small Vendors will increase
partner incentives.
how do you see your channel engagement model changing in the next 12 months? (Please select all that apply.)
small vendors < $100M in revenue
increase incentives
decrease incentives
offer new sales tools
eliminate sales tools
introduce business planning
mid-size vendors $100M – $1B in revenue
67%
5%
62%
0%
29%
62%
15%
69%
0%
23%
total
large vendors > $1B in revenue
increase incentives
decrease incentives
offer new sales tools
eliminate sales tools
introduce business planning
increase incentives
decrease incentives
offer new sales tools
eliminate sales tools
introduce business planning
50%
0%
92%
0%
42%
increase incentives
decrease incentives
offer new sales tools
eliminate sales tools
introduce business planning
57%
7%
75%
0%
32%

10. partner identification
partner recruitment is essential
engaging
new partners
vendors
is the most important 2014 initiative, especially for
Mid-size and Small Vendors.
want help shifting partners from legacy
to recurring revenue incentive models.
please rank, in order of importance, the changes you anticipate in your channel in the next 12 months. 5 = Most Important
small vendors < $100M in revenue
identify new partners
help shift to recurring
shift incentive budget
narrow partner base
mid-size vendors $100M – $1B in revenue
4.5
3.6
2.9
2.3
4.5
3.6
2.9
2.3
total
large vendors > $1B in revenue
identify new partners
help shift to recurring
shift incentive budget
narrow partner base
identify new partners
help shift to recurring
shift incentive budget
narrow partner base
3.9
4.0
2.8
2.5
identify new partners
help shift to recurring
shift incentive budget
narrow partner base
4.3
3.8
2.7
2.6

11. partner ease
partners want simple-to-use programs
No vendors rated their own partner
incentive programs as “very easy.”
discounts
promotions
MDF, points and
rebate incentives
partner
engagement
needs to be easier.
how easy do you think it is for partners to participate in your incentive programs? 5 = Very Easy
small vendors < $100M in revenue
MDF
points
rebates
promotions
discounts
mid-size vendors $100M – $1B in revenue
3.0
3.2
3.0
3.6
4.2
large vendors > $1B in revenue
MDF
points
rebates
promotions
discounts
MDF
points
rebates
promotions
discounts
3.2
2.9
3.2
3.7
3.8
total
3.0
2.9
3.2
3.7
3.8
MDF
points
rebates
promotions
discounts
3.1
3.0
3.0
3.6
3.9

12. incentive participation
partners want more incentives
> 75%
58%
10%
of vendors maintained or
increased their partner
incentive participation in 2013.
Large Vendors saw
the greatest growth.
Small Vendors had
the only decrease.
how has partner participation in your incentive program changed in the last 12 months?
key
small vendors < $100M in revenue
10%
43%
38%
10%
i don’t know
participation increased
participation same
mid-size vendors $100M – $1B in revenue
participation decreased
no answer
15%
38%
38%
24%
large vendors > $1B in revenue
25%
17%
58%
total
2%
18%
47%
28%
5%

13. incentive preferences
all incentives make an impact
A combination of all incentive
types is essential for 2014 strategies.
MDF and Discounts
lead by a very slim margin.
Vendors think all partner incentives impact the bottom line equally.
please rank the incentives provided to your partners in order of impact to your business. 5 = Most Important
small vendors < $100M in revenue
MDF
discounts
rebates
promotions
points
mid-size vendors $100M – $1B in revenue
3.3
3.3
2.8
2.7
2.9
3.8
3.3
2.9
2.7
2.3
total
large vendors > $1B in revenue
MDF
discounts
rebates
promotions
points
MDF
discounts
rebates
promotions
points
3.2
3.4
3.1
2.9
2.4
MDF
discounts
rebates
promotions
points
3.4
3.4
3.0
2.7
2.5

14. refocus incentive
create recurring revenue models
1
#
shifting to recurring revenue incentives
is the top financial focus for all vendors. It beats deal registration and lead generation combined.
driving training and certification
is the top financial focus for Mid-size Vendors.
what is the number one shift that you plan to make in your channel?
small vendors < $100M in revenue
recurring revenue
deal registration
drive training
drive MDF
lead generation
drive case studies
other
mid-size vendors $100M – $1B in revenue
49%
31%
10%
0%
10%
0%
0%
23%
0%
31%
23%
15%
0%
8%
total
large vendors > $1B in revenue
recurring revenue
deal registration
drive training
drive MDF
lead generation
drive case studies
other
recurring revenue
deal registration
drive training
drive MDF
lead generation
drive case studies
other
34%
26%
9%
18%
9%
4%
0%
recurring revenue
deal registration
drive training
drive MDF
lead generation
drive case studies
other
36%
21%
15%
13%
11%
2%
2%

15. incentive challenges
budgets are not a problem
2X
transitioning to a
recurring revenue model
is the greatest challenge for all vendors. 2X as many of them identified
this change as their primary pain point.
Small and Mid-size Vendors are focused on
incenting partner participation
what is the greatest challenge to your incentive program in the next 12 months?
small vendors < $100M in revenue
transitioning recurring
reporting
partcipation
budget
other
mid-size vendors $100M – $1B in revenue
29%
26%
26%
14%
5%
62%
8%
22%
8%
0%
total
large vendors > $1B in revenue
transitioning recurring
reporting
partcipation
budget
other
transitioning recurring
reporting
partcipation
budget
other
43%
30%
18%
9%
0%
transitioning recurring
reporting
partcipation
budget
other
43%
22%
21%
12%
2%

16. cloud revenue
the cloud is growing
hybrid
models
are what all vendors must develop
to maintain legacy business while
managing transition to recurring
revenue programs.
over
2 3
40%
vendors expect >11% growth in their
2014 cloud revenue.
of Large Vendors expect
> 20% growth.
out of
please estimate how much you expect your company’s cloud services revenue to increase/decrease over the next year.
small vendors < $100M in revenue
mid-size vendors $100M – $1B in revenue
no growth
increase 1% – 10%
increase 11% – 20%
increase 21% – 30%
increase > 30%
i don’t know
24%
5%
14%
5%
52%
0%
0%
60%
0%
19%
27%
27%
19%
8%
0%
large vendors > $1B in revenue
60%
total
no growth
increase 1% – 10%
increase 11% – 20%
increase 21% – 30%
increase > 30%
i don’t know
0%
20%
25%
38%
4%
13%
0%
no growth
increase 1% – 10%
increase 11% – 20%
increase 21% – 30%
increase > 30%
i don’t know
60%
no growth
increase 1% – 10%
increase 11% – 20%
increase 21% – 30%
increase > 30%
i don’t know
10%
14%
22%
23%
23%
8%
0%
60%

17. driving the cloud
vendors need hybrid models
25%
30%
=
Half of vendors will dedicate up to
25% of budget on servicing their cloud.
Half of vendors expect to get up to
30% of revenue from the cloud.
vendors
are aligning cloud budgets to expected cloud revenue.
what percentage of your channel budget will be focused on driving your cloud business in the next 12 months?
small vendors < $100M in revenue
mid-size vendors $100M – $1B in revenue
0%
1 – 10%
11 – 25%
26% – 50%
51 – 75%
76 – 100%
i don’t know
19%
24%
10%
10%
14%
19%
4%
0%
40%
0%
15%
23%
9%
23%
15%
15%
0%
large vendors > $1B in revenue
40%
total
0%
1 – 10%
11 – 25%
26% – 50%
51 – 75%
76 – 100%
i don’t know
0%
29%
33%
4%
4%
8%
22%
0%
0%
1 – 10%
11 – 25%
26% – 50%
51 – 75%
76 – 100%
i don’t know
40%
0%
1 – 10%
11 – 25%
26% – 50%
51 – 75%
76 – 100%
i don’t know
7%
23%
22%
7%
8%
19%
14%
0%
40%

18. cloud services
plan your cloud transition
1 5 3 5 1 5
in
the cloud is coming,
vendors focus
only on legacy
model.
but the channel is still in transition.
in
vendors are
adding cloud
services.
in
vendors have
fully migrated
to the cloud.
describe your product/sales model (Please select all that apply.)
small vendors < $100M in revenue
product only model
adding cloud services
selling some cloud
provide cloud
offer hybrid model
migrating to cloud
fully in cloud
mid-size vendors $100M – $1B in revenue
31%
54%
46%
31%
23%
0%
15%
product only model
adding cloud services
selling some cloud
provide cloud
offer hybrid model
migrating to cloud
fully in cloud
large vendors > $1B in revenue
product only model
adding cloud services
selling some cloud
provide cloud
offer hybrid model
migrating to cloud
fully in cloud
25%
75%
50%
25%
63%
3%
25%
total
18%
71%
7%
52%
34%
3%
13%
product only model
adding cloud services
selling some cloud
provide cloud
offer hybrid model
migrating to cloud
fully in cloud
26%
65%
60%
39%
36%
3%
15%

19. reporting matters
simple reporting is required
Surprisingly, the Large Vendors — who probably
have the most resources — have the least
visibility into quantifiable incentive effectiveness.
4 out of 5 vendors have limited or no insight into the
impact of their partner incentive investments.
are you able to effectively measure the impact of your incentive investment?
small vendors < $100M in revenue
no insight
limited insight
complete insights
mid-size vendors $100M – $1B in revenue
10%
71%
19%
large vendors > $1B in revenue
no insight
limited insight
complete insights
no insight
limited insight
complete insights
15%
54%
31%
total
5%
80%
15%
no insight
limited insight
complete insights
9%
72%
19%

20. channel as simple as possible
parago simplifies channel engagement for greater ROI with industry leading insights and flexible technology
through global and local incentives, marketing, and partner relationship management. At parago, we:
• serve over 20 channel clients with 3 million partners worldwide
• deliver $2 billion in rewards to 50 million people annually
• launched 29 industry firsts and hold 4 patents
• are ranked by Ad Age as the 16th largest promotional agency and the 42nd largest digital agency
Dan Hawtof
VP of Business Solutions, Global Channel and Employee
972.538.4017
dan.hawtof@parago.com
parago.com/channel
@paragochannel
© 2013 parago, inc. All rights reserved.