2014 Channel Strategy: Simplicity Drives Success

2014 channel strategy study

simplicity drives success

partners incentives cloud reporting insights

table of contents

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

do something different: simplify

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 [email protected]

parago.com/channel@paragochannel

executive summary

Senior Manager or Manager 45%

Senior Director or Director 24%

Vice President 16%

Executive or Senior Vice President 10%

Other 5%

vendor annual revenue

respondents’ titles other respondents’ titles

•CEO•ChannelConsultant•Analyst•GlobalKeyAccount

Manager•GlobalChannelProgram

Manager

methodology

Small Vendors 52%< $100M in revenue

Mid-size Vendors 22%$100M – $1B in revenue

Large Vendors 26%> $1B in revenue

survey participants

good thoughts

channel investment is growing

today’s goals, tomorrow’s vision

increased or maintained their partner incentive participation in 2013.

will increase or maintain partner incentives 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.

currently gets more than 90% of revenue from the cloud.

are adding cloud services in 2014.

still offer only a legacy model.

key findings

Great news: our research shows that the channel is stronger than ever. In fact, 2014 vendor strategies include plenty of growth initiatives.

will add new sales enablement tools in 2014.

3 of

4vendors

3 in 5vendors

1 in 5vendors

#1

75% over

of vendors95% of vendors

1 in 10vendors

only

partner ecosystem

The most common partners across all vendor revenue profiles.

Rank of Managed Service Providers by

Large and Mid-size Vendors.

VARs #1 Distributors #2

System Integrators#3

large vendors > $1B in revenue totalvalue-addedreseller(VAR)directmarketseller(DMR)

distributormagaged service provider

hosting-service providersystemintegrator(SI)

other

value-addedreseller(VAR)directmarketseller(DMR)



other

small vendors < $100M in revenue




other

76%38%54%24%33%

9%14%

mid-size vendors $100M – $1B in revenue




other

100%38% 54%54%31%77%0%

100%63%92%71%

42%88%

0%

90%49%72%49%35%55%

5%

who are your partners? (Please select all that apply.)

#4a diverse partner base is important

partner engagement


large vendors > $1B in revenue total


increase incentives decrease incentives

offer new sales toolseliminate sales tools

introducebusinessplanning










67%5%

62%0%

29%

62%15%

69%0%

23%

57%7%

75%0%

32%

50%0%

92%0%

42%

of all vendors will invest more in partner enablement tools.75%

70% of Small Vendors will increase partner incentives.

60% of all vendors will increase partner incentives.

how do you see your channel engagement model changing in the next 12 months? (Please select all that apply.)

90% of Large Vendors will add newpartner enablement tools.

channel investment is increasing

engaging new partners

is the most important 2014 initiative, especially for Mid-size and Small Vendors. vendors

want help shifting partners from legacy to recurring revenue incentive models.

partner identification




identify new partnershelp shift to recurringshiftincentivebudget

narrowpartnerbase


narrowpartnerbase


narrowpartnerbase


narrowpartnerbase

4.53.62.92.3

3.94.02.82.5

4.33.82.72.6

4.53.62.92.3

please rank, in order of importance, the changes you anticipate in your channel in the next 12 months. 5 = Most Important

partner recruitment is essential

partner ease

No vendors rated their own partner incentive programs as “very easy.”

discounts

MDF, points and rebate incentives needstobeeasier.

partner engagement




MDFpoints

rebatespromotions

discounts

MDFpoints

rebatespromotions

discounts

MDFpoints

rebatespromotions

discounts

MDFpoints

rebatespromotions

discounts

3.03.23.03.64.2

3.02.93.23.73.8

3.22.93.23.73.8

3.13.03.03.63.9

how easy do you think it is for partners to participate in your incentive programs? 5 = Very Easy

promotions

partners want simple-to-use programs

incentive participation


large vendors > $1B in revenue


total

i don’t know

participation increased

participation same

participation decreased

no answer

key

15% 38% 24%38%

25% 58% 17%

18% 47% 28% 5%

2%

10% 43% 38% 10%

> 75% of vendors maintained or increased their partner

incentive participation in 2013.

58% 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?

10%

partners want more incentives

incentive preferences

Acombination of all incentive types is essential for 2014 strategies. Vendors think all partner incentives impact the bottom line equally.

MDF and Discounts leadbyaveryslimmargin.




MDFdiscounts

rebatespromotions

points

MDFdiscounts

rebatespromotions

points

MDFdiscounts

rebatespromotions

points

MDFdiscounts

rebatespromotions

points

3.33.32.82.72.9

3.23.43.1

2.92.4

3.43.43.02.72.5

3.83.32.92.72.3

pleaseranktheincentivesprovidedtoyourpartnersinorderofimpacttoyourbusiness. 5 = Most Important

all incentives make an impact

#1 is the top financial focusforallvendors.Itbeatsdealregistrationandleadgenerationcombined.

shifting to recurring revenue incentives

driving training and certificationis the top financial focus for Mid-size Vendors.

refocus incentive




49%31%10%0%

10%0%0%

34%26%

9%18%9%4%0%

36%21%15%13%11%2%2%

23%0%

31%23%15%0%8%

whatisthenumberoneshiftthatyouplantomakeinyourchannel?

recurring revenuedeal registration

drive trainingdrive MDF

lead generationdrive case studies

other




other




other




other

create recurring revenue models

incentive challenges




transitioning recurringreporting

partcipation budget

other


partcipation budget

other


partcipation budget

other


partcipation budget

other

29%26%26%14%5%

62%8%

22%8%0%

43%30%18%9%0%

43%22%21%12%2%

what is the greatest challenge to your incentive program in the next 12 months?

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.

2XSmall and Mid-size Vendors are focused on

incenting partner participation

budgets are not a problem

cloud revenue

2 out of 3vendors expect >11% growth in their

2014 cloud revenue.of Large Vendors expect

> 20% growth.

hybrid modelsare what all vendors must develop to maintain legacy business while managing transition to recurring revenue programs.


large vendors > $1B in revenue

no growthincrease 1% – 10%

increase 11% – 20%increase 21% – 30%

increase > 30%i don’t know




24%5%

14%5%

52%0%

0%20%25%38%

4%13%

total




increase > 30% i don’t know




10%14%22%23%23%

8%

0%19%27%27%19%8%

please estimate how much you expect your company’s cloud services revenue to increase/decrease over the next year.

40%over

60%

60%

60%

60%

0%

0%

0%

0%

the cloud is growing

driving the cloud

Half of vendors expect to get up to 30% of revenue from the cloud.

=vendors

are aligning cloud budgets to expected cloud revenue.




0%1 – 10%

11 – 25%26% – 50%

51 – 75%76 – 100%

i don’t know

0%1 – 10%

11 – 25%26% – 50%

51 – 75%76 – 100%

i don’t know

0%1 – 10%

11 – 25%26% – 50%

51 – 75%76 – 100%

i don’t know

0%1 – 10%

11 – 25%26% – 50%

51 – 75%76 – 100%

i don’t know

19%24%10%10%14%19%4%

0%29%33%

4%4%8%

22%

7%23%22%

7%8%

19%14%

0%15%23%

9%23%15%15%

whatpercentageofyourchannelbudgetwillbefocusedondrivingyourcloudbusinessinthenext12months?

Half of vendors will dedicate up to 25% of budget on servicing their cloud.

25%

30%

40%

40%

40%

40%

0%

0%

0%

0%

vendors need hybrid models

cloud services

1 in 51 in 5 3 in 5vendors have

fully migrated to the cloud.

vendors focus only on legacy

model.

vendors are adding cloud

services.butthe channel is still in transition.

the cloud is coming,




product only modeladding cloud services

selling some cloudprovide cloud

offerhybridmodelmigrating to cloud

fully in cloud




fully in cloud




fully in cloud




fully in cloud

31%54%46%31%23%

0%15%

18%71%7%

52%34%

3%13%

26%65%60%39%36%

3%15%

25%75%50%25%63%

3%25%

describeyourproduct/salesmodel(Please select all that apply.)

plan your cloud transition

reporting matters

4 out of 5 vendors have limited or no insight into the impact of their partner incentive investments.

Surprisingly, the Large Vendors—whoprobablyhave the most resources — have the least

visibilityintoquantifiableincentiveeffectiveness.




no insightlimited insight

complete insights


complete insights


complete insights


complete insights

10%71%19%

5%80%15%

9%72%19%

15%54%31%

areyouabletoeffectivelymeasuretheimpactofyourincentiveinvestment?

simple reporting is required

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 [email protected]

parago.com/channel@paragochannel

channel as simple as possible

© 2013 parago, inc. All rights reserved.

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2014 Channel Strategy: Simplicity Drives Success