By James Sandoval, CEO and Founder of MeasureMatch
According to former Procter & Gamble Vice President for IT and Shared Services, Tony Saldhana, 70% of digital transformation initiatives are failing. This is serious stuff, especially in light of the critical importance of e-commerce, CRM, analytics and the breakneck pace of SaaS and enterprise software adoption, which has been thrown into sharp relief by the pandemic.
So, how can digital transformation initiatives be more successful?
Perhaps part of the answer lies in the relationship between technology vendors and service providers. As the solutions engineering, the execution and ideas layers between software vendors and their business customers, service providers – including consultancies, agencies, systems integrators, plus independent specialists – are critically important partners to both sides of the software buyer/seller equation.
The SaaS and enterprise software vendor ecosystems, impressively catalogued by HubSpot’s Scott Brinker, FirstMark’s Matt Turck and others, are the product of an explosive growth in cloud-based digital services. So it’s no surprise that a burgeoning industry of professional services consultants and consultancies has risen to the challenge to capture, as Salesforce puts it, the $3 to $7 in ancillary business products and services for every $1 spent on software.
Microsoft, for example, sees thousands of channel partner applicants each month, the HubSpot Solutions Directory lists nearly 5,000 service provider partners, and Forrester’s Jay McBain expects Amazon’s cloud computing platform AWS to be the first to have one million partners in the coming decade.
MeasureMatch research, conducted in Q3 2020, reveals a continued demand for partnerships from specialist service providers. Around two-thirds are either actively expanding their partnerships (42%) or want to start partnering (23%) with software vendors for product sales and/or to augment their services revenue. But holding them back, they say, is a lack of the tools and platforms to do it.
The study also found a clear disconnect in the ecosystem, with 60% of technology vendors rarely or never introducing their customers to services partners.
Could this gap be one of the reasons digital transformations often fail?
It would certainly make sense. Good service providers possess the skills and experience to work with businesses to plan their digital transformations, determining the software products, licences, etc needed to execute successfully. This is important because most businesses will not have these skills in house. After all, it’s no secret they are in short supply right now. A disconnect here is bound to impact the digital transformation process.
So what needs to be done to remedy the situation?
- Close the service provider/end customer gap
Software vendors need to go well beyond zombie directories on their websites to support and engage service provider partners. Referring software vendors’ customers to service provider partners, to demonstrate not only their skills but the capabilities of the software, is a 1+1=5 scenario, creating enormous digital transformation value and increasing the likelihood of success for all stakeholders.
- Boost service providers’ product knowledge
The MeasureMatch survey also showed that service providers want more training and insight from their software partners, along with more direct dialogue to remain closely aligned to product functionality. Service providers have a clear hunger to learn, but vendors aren’t stepping up to the plate to provide the opportunities as readily as they should. More knowledge means better digital transformation opportunities.
- Take a more services-oriented approach
Currently, software vendor channel partner leaders are centrally tasked to generate, and are rewarded on, net new revenue growth. As such, they are under significant pressure to maximise sales through agency and consultancy partners. What is the role of a channel partner to a software vendor if net new revenue is not a substantial outcome? The answer lies in the moniker “service provider”. Software vendors will be better served when playing to the core strengths of consultancies, agencies and SIs – services and influence – especially when software vendors need to re-win customer loyalty every 30 days, right? This will ultimately help SaaS and enterprise software organisations to get their products deeper into their customers’ businesses, driving long-term revenue growth.
- Broaden channel partnerships
Vendors tend to focus on striking partnerships with larger service providers because they believe they will drive more revenue than their smaller counterparts. However, the MeasureMatch survey showed that 40% of small to mid-size service providers actively sell tech with their services. Ignoring these partnerships means losing revenue and missing out on closer, stronger, more loyal customer relationships, which small to mid-sized providers tend to forge. Close customer relationships also mean better feedback, helping to inform software product development and, importantly, customer organisation digital transformations.
There are more than 55,000 agencies and consultancies in the UK, Germany and France alone, according to BCG. Most of these firms include services to advance the use of SaaS and enterprise software, and to derive greater value from the data these systems collect. The majority of these services firms are “channel partners” to Salesforce, Google, Microsoft and many others, but no more than 10% have transactional relationships with them: i.e. less than 10% of agencies and consultancies actually sell software products with their services.
This is not an imbalance – it’s a strategy. The value from professional services providers is in the digital transformation services they provide, including the influence to adopt and integrate new solutions. Software vendors would be well served to make the most of this opportunity.