Home » INSIGHTS » Are We Witnessing a New Low in Vendor-Partner Relations?

Are We Witnessing a New Low in Vendor-Partner Relations?

The market has changed, business models are changing and emerging technology means a constant re-evaluation of product and services offerings. Definitely, these changes are impacting the vendor-partner relationship. At a time when several thorny issues are stoking partner ire, we probe the health of vendor-partner relations in its current phase

By Amit Singh

After their marriage, a channel partner’s relationships with their technology vendors are probably the most important, and long-standing relationships in their lives. And not unlike a marriage, a strong vendor/channel relationship requires nurturing, give-and-take and mutual respect.

Given the strategic nature of these partnerships, there are a host of requirements to ensure there is a ‘win-win’ approach to the business. While businesses are undergoing a transformation, the relationship between crucial components of the IT ecosystem – vendors and partners – are also up for transformation.

Where is it heading towards?

Jordon De Leon, Senior Analyst, Canalys

While vendors are transforming their businesses rapidly, most of the partners are finding it difficult to cope up with the changing trends. This is adversely impacting their businesses as well as their relations with vendors. “Vendors are moving from the product-led model to IT-as-a-service model. While the tier-1 and large partners find it easier to transform by investing in new skill sets, the vast majority of channel partners are still product-led. This means that many partner businesses remain transactional in nature,” elaborates Jordon De Leon, Senior Analyst, Canalys.

Vikas Diwan, Director, Strategic Marketing

With the emerging new technologies like cloud computing, mobility, analytics, AI, and blockchain, vendors are more inclined towards engaging with a new set of highly-specialized solution providers. This is complicating their relations with the existing traditional partners (system integrators and solution providers) who operate across various domains. Partners contend that they must be provided first right of refusal. “We feel that traditional partners must be given equal focus and first right to refuse. We should be given a priority to move to the next level by specializing in newer technologies as we are willing to invest and further expand our relations with vendors,” shares Vikas Diwan, Director, Strategic Marketing.

In addition, many partners complain of thinning vendor presence and personal touch in their regions. In this era of self-service portals, peer-to-peer communities, and social media, partners still find it critical to have someone who represents their own very specific needs.

Ajit Mital, Managing Director, Acme Digitek Solutions

­“Most of the vendors have reduced manpower resulting in scarcity of pre-sales and sales support in upcountry locations. In fact, vendor resources are now limited to metro locations only. This has resulted in a low level of interaction and communications from the vendors,” details Ajit Mital, Managing Director, Acme Digitek Solutions.

Adds Diwan of Strategic Marketing, “Vendors are much focused on metro cities, hence, partners in upcountry locations don’t get the requisite pre-sales and sales support, which is hampering our business. While we have developed our own pre-sales team to support and manage almost 80 percent of our pre-sales requirements, it has increased our operational costs.”

Kabilan D, Founder Director, Cetas Technologies

Further, personal touch with the vendors is missing as the interaction has gone down to a transactional level only. The downsizing of channel resources has also resulted in overburdened channel managers who don’t give due diligence to the channel issues and challenges, reveals Kabilan D, Founder Director, Cetas Technologies.

While vendor-partner  conflicts are not new, most of the market experts opine that the emerging technologies, as well as business transformation, will bring in major turmoil in the ever-inflicted relations.

Are vendors going more direct?

Vendors acknowledge channel conflict as a persistent challenge in their partner relations, but they don’t recognize the problem as severe as solutions providers do. While vendors shrug off the issue of vendors bypassing channels as a sporadic and insignificant phenomenon, partners are alleging increased instances of vendors dealing directly with the customers.

Rajiv Kumar, CEO, Proactive Data Systems

“We have witnessed many of the channel-focused vendors like Cisco, Dell, Tyco, and Commscope increasingly approaching customers directly; a lot more than ever before. In fact, they are trying to limit the role of partners in the sales cycle by increasing their direct sales force substantially. This might be a temporary trend but that’s what it is right now,” highlights Rajiv Kumar, CEO, Proactive Data Systems.

Rajesh Goenka, Director, Sales and Marketing, RP Tech India


“With the increasing level of competition and abundance of vendors, they have formed dedicated sales teams spread across the country. Increasing direct business is a reality,” supports Rajesh Goenka, Director, Sales and Marketing, RP Tech India.

Jiten Mehta, Magnamious
Jiten Mehta, Director, Magnamious Systems

On a basic level, vendors create channel conflict when direct sales team either intrudes on a partner’s account or sales opportunity with a direct pitch or when competitive partners are brought into an opportunity. “In my view, it is important for the partner to have a strong relationship with the customer. If you don’t, customers may prefer to deal directly with the OEMs, as they believe they will get better pricing from them,” explains Jiten Mehta, Director, Magnamious Systems.

Prarthana Gupta, CEO, Cache Technologies

Partners recognize this as the most severe point of friction as they have to compete with their vendors who are approaching customers directly. “While we operate at lower margins as compared to the vendors, we don’t have the level of specialization and expertise that vendors have. Moreover, partners can specialize in 2-3 domains only and vendors offer a higher level of specialization by the virtue of scale of resources and funds,” details Prarthana Gupta, CEO, Cache Technologies.

She further adds that many of the large and mid-sized customers are demanding solutions on opex-model where partners face challenges due to limited capital. OEMs are better equipped to cater to this demand with their financing arms.

Kumar of Proactive digs into the reasons behind the phenomenon. He reveals that over the last few years, OEMs increased their channels substantially to target the next level of customers. In the process, they inadvertently added many partners who were not competent enough to close and execute deals on their own. “This resulted in vendors negotiating deals in most of the cases as they feel that many of the partners are not competent to close the deals. The problem is now going out of the gear where vendors are relegating channels as fulfillment agents.”

The missing equilibrium between vendors and channels

Vendor-partner relations over the years have been more skewed towards and dominated by vendors through partner programs, deal management, and special pricing. Partners allege that vendors force their terms and conditions on the channels.

“Vendors take partners for granted in pursuit of higher sales and profits. They dictate how the relationship will work if you enter into a partnership. This is a rampant problem among the channels as their business is highly dependent on vendors,” shares Diwan of Strategic Marketing.

In addition, many of the partners highlight that vendors make frequent changes in channel structure and staffing, which is resulting in increased resentment among the channels. “OEMs readily hire newer people, which are inexperienced and don’t understand the kind of investments certain partners have made with the vendors. Most of their decisions are transaction-oriented and many a time they favor incompetent partners who have little knowledge of the domain,” highlights Kumar of Proactive.

Partners allege that while vendors pretend to support/embrace partners through partner programs and deal registration, however, in reality, they just want to reach customers. They regard deal registration as a necessary evil.

Solutions providers are often suspicious of deal registration because many have experienced rejected applications that get flipped to direct sales or competing partners. Some solution providers say deal registration gives vendors an opportunity to approach a customer for a secondary direct sale.

“Deal registration is often broken or manipulated for smaller partners. This behavior is generally not the same for larger partners that have more influence. We’ve had experiences with vendors either changing loyalties or outright betrayal in the engagement taking a deal we had worked on for a long period of time and then handing it off to another partner who had contributed nothing at all,” discloses a Dell partner on condition of anonymity.

While holding vendors responsible for most of the channel conflicts, Gupta of Cache, adds, “I think it would be a great learning experience for some of the senior executives of the OEMs to come and work in their partners’ businesses for a week; they may learn a lot about what it is like to deal with OEM’s rules, processes and staff.”

Are newer business models taking a toll on relations?

With vendors insisting channels to adopt opex- and subscription-based business models, partners face double-edged sword of losing customer accounts and becoming dependent on vendor policies.

“This is true to a certain extent. The biggest fear with the cloud is that it goes directly to the customer, which can potentially cut partners out. But we’ve seen that the big three cloud vendors – AWS, Microsoft Azure, and Google have built out their partner ecosystem, so partners are still relevant,” says Leon of Canalys.

However, Vipul Datta, CEO, Futuresoft Solutions, contends  that for partners who resell cloud solutions, there is a perennial threat of losing the customers to their cloud vendor. “Moreover, subscription model further strengthens vendors’ dominance over partners’ business. Vendors force their policy changes on the partners without even consulting, which leads to a major shuffle in the partner business model. However, most of the partners have little choice but to fall in line.”

“The cloud has changed the mindset of customers consuming and paying for things up front. They want to be able to scale up and scale down, which further strains partner revenues. Hence predictability is also missing in this model,” highlights Gupta of Cache.

However, many of the partners opine that a solutions-focused approach can tackle the challenge from changing business models. “Partners who build SaaS offerings and some innovative solutions on the cloud by being vendor agnostic are hugely benefiting. This approach will offer high margins,” reveals Mital of Acme.

The company has developed a portal for UP RERA and various city authorities on the cloud to manage workflow including complaints and grievance management. “We are offering solution built on the cloud in an opex model wherein we get Rs 1-3 lakh per month from each of the portals.”

Sanjiv Krishen, Managing Director, Iris Global Solutions

With newer technologies coming in, newer applications and skills have to be embraced. “For channel partners to be relevant, they have to act fast and develop skills in newer technologies like AI, analytics, and blockchain. But it doesn’t mean that traditional channel partners will disappear. They will get business, but if they transform themselves they will gain additional business with higher profitability,” advises Sanjiv Krishen, Managing Director, Iris Global Solutions.

Growing league of defiant partners

The ever-increasing channel conflicts have led many partners to be defiant and shun dominating and partial vendors. “We have witnessed growing trend of partners defying vendors due to their troubled relations. Favoritism and vendors going direct are the most prevalent reasons for partners to disassociate from the vendors,” reveals Gupta of Cache.

However, most of the time, partners don’t end the partnership but stop doing active business with the vendor by decreasing its focus. Partners highlight that vendor loyalty and trust has gone down to an unprecedented level. “Despite the fact that we worked with Samsung on a case and had a long-term relationship with the customer, the vendor breached our trust and gave preferential pricing to another partner. While we grabbed the deal because of our relations with the customer, we completely stopped focusing on Samsung. Most of the vendors now fall in this category where they are not loyal to any partners and the relations are transactional,” elaborates Diwan of Strategic Marketing.

Another partner defied a leading security vendor by converting a number of opportunities to a competing vendor. “We lost sizable deals as a security vendor favored and offered preferential pricing to another partner to help it liquidate the inventory that the vendor had prodded it to stock,” shares Tushar Parekh, Managing Director, Silicon Netsecure.

It is imperative for partners to expose such unfair practices at various forums and in media. What is expected from vendors is transparency and fairness in deal registration. Secondly, escalations need to be taken seriously to ensure that wrong practices are corrected in time and not repeated in future, he adds.

Road ahead

Developing effective business relationships require to give and take. No one can shut their eyes to problems – real or perceived – by upstream or downstream partners. “Channel management is essentially a focus on fundamentals – and most of the problems and conflicts will remain there as these are people-driven. The key thing that vendors need to do is to have effective rules of engagement, show transparency, and have a business model that sets rules and boundaries for direct sales and partners to follow. This will be driven by leadership and commitment from the top,” advises Leon of Canalys.

Further, partners should be ready for newer challenges, gain new skills, and must not hesitate from taking risks. In the current circumstances, it’s beneficial for partners to be highly specialized in specific domains rather than remaining a systems integrator, who operates in various domains, concludes Kabilan of Cetas.

Check Also

Make in India Succeeds in ERP?

Make in India Succeeds in ERP?

Indian ERP Vendors like Tally, Marg and Eazy ERP are gradually gaining marketshare   Digital …

Do NOT follow this link or you will be banned from the site!