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Is the Channel as We Know It About to Disappear?

By Phil Keenan, President of MicroCorp
When you’ve been in sales as long as I have, it’s easy to feel the winds of change from a mile away. That’s why I believe our industry is primed for the most significant upheaval it’s seen in decades, as the channel as we know it might be on the brink of disappearing. To understand why I suggest such a thing, it’s beneficial to think about the evolution of technology sales.

Humble Beginnings

I started in sales more than 35 years ago and witnessed first-hand the emergence of the channel. At the time, I was fresh out of school and armed with a degree in mining geology – of all things. I had no business experience or sales qualifications whatsoever, and the only job I was able to land was selling vacuum cleaners door to door. (Needless to say, my mother was appalled.) I briefly transitioned to selling electronic typewriters, but my first proper job was working for EMC. This was long before the company was acquired by Dell, and when EMC only had revenues of $100 million — a drop in the bucket compared to the $60 billion market cap they ultimately achieved.
Back then, EMC’s sales teams were all direct, and our margins were astronomically high. The company was making memory boards for $400 and selling them for $18,000, and we were charging $160,000 for system upgrades that only cost us $1,000. Obviously, few businesses in those days could afford such sophisticated technology, so sales were not high volume. Yet it didn’t matter because of the considerable gross margins.

Enter: the PC Era and the Emergence of the Channel

Everything changed, however, when the PC came along, followed by networking, switches, routers, and the internet. Once this technology became accessible to end users, pricing fell considerably — along with margins. Yet customers were still in need of service and support, so the modern channel emerged, bringing with it value-added resellers to supply those functions. Manufacturers understandably fed into that channel out of necessity; they simply couldn’t afford to provide direct sales and support any longer. So the channel matured into the multibillion-dollar marketplace the majority of manufacturers now embrace.

Enter: the Cloud

Fast-forward to today, when everything is delivered from the cloud, and consider how the role of the channel has changed. Cloud providers can address almost all issues remotely, and if anything needs to be installed on the customer’s premises, providers simply ship the hardware to end-users to install themselves or use smart hands. The traditional functions of the channel simply don’t exist anymore. So what does the channel of the future look like?

The Core of the Channel is Consultation

One thing that hasn’t changed is that customers still require true sales consultative services. They need someone who understands their business to put a solution together. And now that there are so many options in the marketplace, channel partners can choose any solution they like because they’re all delivered from the cloud. Therefore, the role of today’s channel is much more centered on consultative and professional services that weren’t accessible to most businesses in the past. Such consultative engagements have moved down the value chain from the traditional big guys, so the new channel is evolving into one that’s purely based on business consulting.
Compared to the specialists of the past, modern channel partners need to know a little bit about a lot rather than the other way around. They need to know about disaster recovery, data centers, colocation, UCaaS, and contact centers as a service. But many of them understandably lack that knowledge because the technology is changing so rapidly, and it’s nearly impossible to keep up. So how can today’s partners expect to survive in this environment? It’s all about leveraging ecosystems, which is what MicroCorp and any serious master agent master should help them do.

The Role of the Master Agent in Today’s Channel

That’s truly the role of a master agent in today’s marketplace. It’s about connecting expertise in meaningful ways and bringing different levels of service together so partners can leverage those resources. In my estimation, the new channel is a consulting channel built around specific ecosystems, and MicroCorp is creating environments that cultivate this mindset.
The evolution we’re seeing in today’s channel is on par with the changes I witnessed more than 20 years ago. Today’s telecom companies are under the same pressure as networking and PC vendors were in the 1990s. The price of networking has dropped drastically as convergence in the industry continues to drive carrier costs — and end-user rates — down even further. Providers can’t afford to do this directly, so they have to adopt a new channel strategy whether they want to or not.
Many providers are reluctant to give up direct business and go down the channel, but more and more are beginning to do so. Some providers are further ahead than others, however, and they have more robust channel programs than others. Yet all of these providers, whether they’re rooted in traditional telecom or based in the cloud, are now recognizing the value of the channel and realizing they need solid strategies for their channel programs. For channel partners, it’s time to grow up and mature with today’s technology. And if you don’t believe me, just look at what happened to the datacoms industry two decades ago.
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