Challenging economic times, new technologies and new methods for selling IT solutions have contributed to an increase in conflicts between vendors and their channel partners, according to a new study released today by CompTIA.
Six in 10 IT channel companies say the incidence of conflict has increased in the last two years. Eight in 10 say conflict has affected their business negatively, including 21 percent that described the impact as “major.” The findings are included in CompTIA’s Third Annual State of the Channel Study: Channel Conflict and Deal Registration Trends.
“Conflict between IT vendors and their channel partners is not a new issue, but it’s a dynamic that ebbs and flows,” said Carolyn April, director, industry analysis, CompTIA. “Right now, the channel is roiling for many firms.”
The report also includes encouraging news: A significant number of channel firms are responding to conflict by reinventing their business.
“They’re looking inside their own organizations to get their own house in order to become more appealing to the customer,” April explained. “They’re improving their own service capabilities, specializing in vertical markets and making the move to a managed services business model, which cements them to a customer.”
April cited three factors that have contributed to the rise in channel conflict:
· A poor economy, which drove a number of technology vendors to focus more on direct sales to customers at the expense of their channel partners.
· New methods for reaching customers with technology services, such as cloud computing.
· New entrants into the market, such as telecom companies that now offer IT services in additional to their traditional voice services.
The result has been lost business for many channel firms. More than three-quarters said they lost one or more deals in the last 12 months due to channel conflict.
The most common response from channel firms to lost business is to complain to the vendor. But some firms have taken more punitive actions. About a third attempted to sell a competing vendor’s product to the same customer. Three in 10 dropped the vendor in question as a partner.
Among the biggest sources of friction between technology vendors and their channel partners are deal registration programs. When executed properly, these programs help to avoid or reduce the incidence of channel conflict by preserving opportunity rights to a particular deal for the channel partner registering it first into the systems. Vendors benefit from greater visibility and tracking into their indirect sales pipeline.
Indeed, more than eight in 10 channel firms surveyed by CompTIA say the existence of a deal registration program is a critical or important factor into their decision to partner with a vendor.
At the same time, these programs can prove challenging for both parties and cause headaches and hard feelings for channel partners. Problems most often occur in three areas:
· Poor communications, cited by 61 percent of channel partners. Examples include insufficient reporting on approvals and payout status and lack of information on incentives.
· Technical challenges (49 percent) when deal registration systems and tools are hard to use.
· Inconsistency (27 percent) when rules of engagement and adherence to rules are constantly changing.
More than a third said that a set of best practices would “make a huge difference” in improving deal registration programs.
Vendors, too, have interest in coming up with a set of deal registration best practices that spans the industry, not just an individual company (though there is concern about surrendering competitive differentiators). Areas where industry wide best practices may work include:
· Clear guidance on when a deal should be registered.
· Simplified deal registration processes.
· Compensation for partners who register a sale, but lose the deal to a direct sale or have it poached by another firm.
· Clear rules of engagement to spell out which accounts are managed by the direct sales team and which are available to channel firms.
CompTIA’s Third Annual State of the Channel Study: Channel Conflict and Deal Registration Trends is the result of an online survey of 350 U.S. IT company executives conducted in February 2013.