COVID-19 has turned the world upside down in ways we couldn’t have dreamed of six months ago. And it’s changing everything, including the way channel chiefs are looking at their businesses.
To find out how, Twenty-one Twelve Group (2112) conducted a survey among 119 channel professionals between March 18 and 20, 2020. The majority holds global responsibility and work in organizations spanning hardware, software, cloud service, and managed services companies. Canadian channel chiefs were included in the survey. Here’s a look at what the data tells us.
The second quarter is not going to be a happy time. Analysts from Goldman Sachs, Financial Times, JPMorganChase, IMF, and Capital Economics now estimate US GDP will be 12 to 24 per cent lower than their pre-pandemic figures. However, the good news is, recovery is expected to occur in the second half of the year, with 2020 ending with GDP growth estimated between -3 per cent and 1 per cent. IDC is more pessimistic; its GDP forecast as of March is for 2020 US GDP to drop by 1.7 per cent (in January, it was predicting 2.4 per cent growth).
Pre-pandemic, channel chiefs were optimistic about prospects for the year, with 57 per cent expecting the economy to be better than last year, and a further 41 per cent thinking it’d be unchanged. Not anymore – now 83 per cent expect a decline.
However, that doesn’t entirely curb their optimism about channel revenue prospects. Forty-two per cent of respondents still think their channel revenues will be within five per cent of their original estimates, and 16 per cent said they are increasing their forecasts by at least six per cent . The remaining 43 per cent expect a decline, although 20 per cent say they will lower estimates by between five and 10 per cent . Eight per cent are lowering forecasts by more than 20 per cent in anticipation of supply chain and sales disruptions.
IDC is on the side of the pessimists, predicting a 2.7 per cent decline in overall IT spending. However, while devices will suffer the most, plummeting by 8.8 per cent, it still expects growth in infrastructure and software.
Understandably, 37 per cent of vendors reported cancelled orders and cash flow disruptions in the pandemic’s early stages. Managing a remote workforce and supply chain disruptions were the next two largest issues, at 23 and 18 per cent respectively. However, some saw sales increase as they assisted customers ramp up their own work from home programs.
How They’ll Help Partners
Most of the channel chiefs surveyed don’t plan to sit on their hands. Almost half (43 per cent ) are offering free software or services, and 37 per cent are providing free or discounted technical support to partners. Extending payment terms and lines of credit, and capital investments in strategic partners are also on their agendas. However, almost one third of vendors have as yet no plans to assist their partners.
Who Will Win
Channel chiefs’ perception of partners offering most value has radically shifted with COVID-19. Prior to the pandemic and associated social distancing, the VAR was king; 61 per cent of respondents believed VARs would provide most value in 2020. Today, that figure has dropped to 35 per cent . Systems integrators and global systems integrators have also moved down in the value list, while cloud vendors, managed service providers and professional services shifted upwards.
The channel chiefs’ challenges and priorities have also shifted. Pre-pandemic, the 2020 Channel Chief Outlook Report indicated that 48 per cent said getting partners to adopt new things was their biggest challenge. While that is still a concern (now only among 37 per cent ), today they’re worried about getting partners to meet sales expectations (51 per cent, vs 35 per cent pre-pandemic). Keeping channel operations costs in check, managing distribution relationships and achieving global consistency in channel operations also increased in importance. Communicating opportunities to partners and maintaining price integrity on products sold through partners both came from virtually nowhere to each being cited by eight per cent of respondents.
“We’re in uncharted waters,” 2112’s report noted. “The COVID-19 pandemic will fundamentally change many of our assumptions about work, sales strategies, partner programs, and customer relationship management. Already, channel chiefs are looking at how the disruptions will reshape customers’ operations, technology needs, and product adoption. Accordingly, the changes will result in shifting and reshaping the roles of partners in the go-to-market equation.”
“Moreover,” it continued, “we believe that the industry is long overdue for change, and that the COVID-19 crisis will shock vendors, distributors, partners, and customers into action.” But, it concluded, what those changes will be is unclear. Today the industry is working to remain stable and viable as the current situation plays out.
The full report is available at no charge from 2112’s website.