Transcript

Jay McBain (Introduction):     The most important thing is How do you co-sell and co-market with this new set of capabilities? How do you amplify your brand? How do you get to more places and have more conversations with customers than you’ve ever had in the past?

Announcer: Welcome to the Software Channel Partner Podcast where you’ll hear leaders of partner programs talk about their greatest challenges and most successful solutions. And now your host Louis Gudema, the President of revenue & associates.

Louis Gudema:            Welcome to the Software Channel Partner Podcast where we talk with leaders in software partner programs to learn about what’s working today. I’m Louis Gudema, the President of revenue & associates, where we help companies grow faster by helping their channel partners grow faster. Today I’m talking with Jay McBain, principal analyst for Global Channels at Forrester. Before Forrester, Jay was co-founder and CEO of ChannelEyes, a SaaS channel Tech Company; SVP for community and channel development at Autotask; director of SMB in the Americas for Lenovo; and national sales manager for SMB for IBM Canada.

Jay, welcome to the podcast.

Jay:      Well, thank you so much for having me, looking forward to it.

Louis:   You’ve had quite a career and obviously it’s far from over, but I learned that maybe the most remarkable thing about you is that you have four children and yet you’ve been able to travel to over 80 countries.

Jay:      I’ve got, interesting, I’ve got four girls, two of them are finishing college and two of them are in diapers. A little bit of a mix there. And my younger daughter has been to 35 of those countries. So we travel with the kids, and someday she’ll probably write a book about that because it’s a little bit challenging.

Louis:   That’s amazing. She’s already been to more countries than I have. I’ve been to 20 or 25. I thought I was doing pretty well. But nowhere close to 80. So let’s cut to the chase in terms of partner programs. You talk to channel leaders all the time and you’re doing research on results. What do you think it is that the best software partner programs are doing right? What separates the leaders from the rest of the pack?

Jay:      Yeah, it’s a great question. We’ve seen probably more changes in partner programs in the last 18 months than we’ve seen in the last, I’d say, 37 years. Today we’ve got 175,000 software companies and I predicted 10 years from now that’ll be a million. But there’s probably around 30,000 of those that have set up some type of channel program. In terms of maturity level, there’s probably 10,000 that I would say have dedicated people and have built out the 90 parts of the program. But the big change, and really where software companies, you know, fueling this growth. 10 years ago we only had 10,000 software companies. So fueling the growth to 175,000 has really been the new buyer, understanding where tech dollars are being spent, how they’re being spent. And then those software companies being able to bring in the right kinds of partners, not just traditional IT type partners, but all of the different kinds of influencers that are out there in the marketplace today.

Louis:   So you’re saying there’s a 175,000 software companies and that 30,000 have partner programs?

Jay:      That’s obviously not exact to the decimal point.

Jay:      Sure, but roughly?

Jay:      Yeah, we have a pretty wide aperture of that. And the great thing about my job is I get to speak with hundreds of these companies per quarter. And I travel quite a bit to  probably 50 different shows per year. So I get to speak in front of even a wider audience than that. So yeah, that’s as far as I can tell the state of the nation in terms of size. And really interested in their programs themselves and we’ll get into much more detail about some of the winners out there and what they’re doing.

Louis:   Yeah, that’s interesting because I think you have a statistic or a prediction that in six or seven years, well already the World Trade Organization says 75% of all commerce is through channels. And you were predicting that in a few years, 90% of tech sales would be through the channel?

Jay:      Actually slightly different than that. The actual transaction level revenue that goes through channels, I believe is going to decline.

Louis:   Really?

Jay:      The actual participation in the channel in terms of guiding a customer through the first part of their journey, you know, that part that we talk about that they research and inform themselves and in many cases get to vendor selection — it’s the first 68% of the journey today, it almost looks like a consumer. The level of partners, they’re inviting upwards of five different partners during that stage. There’s obviously the transactional stage, but then every industry is going into a subscription as a service type of model. Which means that the point of sale is just the start. You have to retain that customer and renew them, each month, each year forever. And the amount of partners that are necessary to be able to do that and drive good customer experience, all of those things are growing pretty significantly. But the actual transaction itself, just recently a lot of our surveys are telling us that the future buyer and the current buyer, the line of business executives who spend 65% of all tech dollars, 73% of them would actually prefer to buy more direct. And you know that may be direct to the manufacturer or OEM. But in many cases it’s going to flow into these massive marketplaces where they can buy the seven layers of the cake, the seven layers of the solution they need in one place. They can provision it, they can do the monitoring and measurement and management of that, for example, cloud ecosystem within that marketplace. As opposed to going to Larry in the white van to have him or her do that transaction on their behalf. So that’s an interesting change in terms of our thinking and how partners actually make money and how they add value to the customer.

Louis:   Yeah, well I had been thinking that SaaS really made direct sales very, very possible, but was also seeing a lot of indirect sales of technology, of software. As you know, my first interview in this series was with Rob Rae from Datto and they’re 100% channel. They sell totally through MSPs. But you’re saying that less than a fifth of software companies are using partners at all?

Jay:      Or have formal programs. You know there might be alliances, there’s obviously some level of connection from a technical point of view inside their ecosystem. So a traditional software company obviously has to have the connections with other layers of the stack and the integrations necessary to survive. So that is kind of a rudimentary channel, but it’s not really a sales and marketing channel as we would define it.

Louis:   Microsoft, I think, 95% of their sales is through partners. So these very large number of software companies that don’t have formal programs, do you think that they’re missing out? Are they making a mistake or do they have it right?

Jay:      No, I think they’re making a mistake. I spent a couple of days at Microsoft last week. The interesting thing is that number’s dropping. So if you look at the press releases over the last year, Microsoft is starting to steer more of its Office 365 revenue to the marketplace. It’s starting to steer the Microsoft 365 offering, the Dynamics offering, the Azure obviously — all of those are starting to actually be repositioned depending on the market and the geography as more direct relationships with the customer.

But the need for partners has never been more at Microsoft. So they understand that, for example, in their partner program they run the biggest channel in the world. They have 400,000 channel partners as part of the program, which are more of the traditional partners going back to the late Eighties and early Nineties to the big swing of the world to Wintel type of boxes. But they’re actually bringing on 7,500 partners a month. If you can imagine the scale of being able to onboard 7,500 new partners a month. What’s interesting, though, is I am guessing, and based on some analysis, that 80% of those new partners that are coming on board, are non-transacting. And we can get into detail what that means. But they are definitely partners in the program, they’re definitely contributing to Microsoft revenue and helping fuel their growth. They’re just not there at the point of collecting a credit card or collecting an invoice for the customer. That’s a major nuance in terms of what they’re doing and we’re seeing the same things at AWS and Google. We’re seeing the same things at Salesforce and Marketo and NetSuite and Workday and as we go down the list, there is a big move away from the traditional reseller and that transactional part of their role.

Louis:   So they’re influencers, but they’re not actually closing the deal?

Jay:      Yeh. So they’re influencers, they’re advocates they’re alliances, they’re a number of different things, but they’re definitely involved in that first 68% of the journey with the customer. If you look at what the customer, for example, is reading where they go and the people that are following to help them solve their problems or do the transformation that they’re going through, partners are very much there. And then again, after the transaction, you look at the downstream opportunity, the ability to install, implement, integrate, the ability to secure that environment, make it compliant, if you’re Rob Rae to make it business continuity long-term. These are all the very important pieces and there’s 17 more, by the way, tech services that are very rich in margin.

And if you’re a partner, why would you focus on that 20% which might be the resale margin? And then have to get involved with collecting money and doing that piece of the business? When you could have resources deployed on those tech services, which today are somewhere between 40% and 75% margins. It’s a win, win, win. It’s a win for the customer. It’s a win for the partner. It’s a win for the vendor to streamline that transactional part of the business.

Louis:   Yeah. Well, I know that you’ve mentioned that at Salesforce it’s like $4 of revenue for partners for every dollar for Salesforce?

Jay:      Yeh. It’s actually crazy that I go back a long time, 25 years doing this, and I would never stand on stage and tell my customers what the total cost of ownership is to the penny. But there you have Salesforce, its $4.14 and interestingly enough, five years from now it is going to be $5.30. It’s going up. So basically what they’re doing is saying that if you’re a customer sitting in the audience, if I have a 100K deal with Salesforce, I’ve got to be thinking to myself, I need $414,000 of extra money just to make this thing work. And it’s going up not down. It’s going up to $5.30 so, I better buy quick because it’s getting worse, not better.

I’m thinking as a partner now, tell me again about those 17 tech services, list them out for me. List out what the margin opportunity is. And I know that every time a customer is thinking CRM, for example, why would I get involved in the 100K at 10 or 20% margin, depending on where I am in the Salesforce program. They highly dissuade partners now, just in the last 18 months, from actually doing the transaction. It’s actually tough to do in that environment now. And what they’re trying to tell you is go after that 400K downstream and try to get as much of it as you can at high margin. The same goes for the ISVs that, the six or seven thousand of them that sit on the AppExchange. The customer’s going to buy six other things from a software perspective on top of Salesforce. So you need to be with us, but there’s no reason that anyone needs to do that transaction. It just doesn’t make sense. The AppExchange is the right place and 73% of our customers agree.

Louis:   So when I was doing marketing work with Lotus about 20 years ago, both before and after they were acquired by IBM, they were actually using the number with their partners that there was $8 of revenue on the services side to every software license dollar. And there were many partners who would give away the licenses to get those $8 of services.

Jay:      Yeah, absolutely. You know, back in the Lotus Notes days and everything else. And this is back to the client-server and this is why the cloud, for a couple of reasons, but I mean you know, the cloud became the next phase because of some of those big TCO. At the same time I was with IBM and then Lenovo. So TCO was something we never talked about. But buying the PC for 500 bucks or $1,000 was the beginning of your problems. Downstream there was all kinds of opportunity and this is how the channel flourished over the last 20 or so years, and they became a 600,000-company force around the world is on the back of that TCO. The opportunity still exists, but it’s slightly different than it has been in the past. And like you said, it might only be half of the opportunity that it could have been 20 years ago.

Louis:   Right. It’s a very different calculation when it’s on-premise or when it’s in the cloud. And obviously all the tools for integration and everything else have become much faster and much easier to use, so it’s not as complex or it’s not as difficult, it doesn’t take as much time, whether it’s the company itself or the partner doing it to do those sorts of integrations and supports.

You’ve listed 90 competencies that a channel program needs to have from partner compensation to account-based marketing to software and tools and 87 others. So if a channel leader wanted to focus on getting the most bang for their buck, are there some of those 90 that are especially strategic or critical that the best channel programs get right?

Jay:      Yeah. And if you kind of look into the 90 I have them categorized in six different areas. So as a leader of a channel, or if you’re in a small software company and you’re doing this in your spare time, you’ve got to basically focus in six areas. One is your go to market, route to market strategy and design. How is your organization going to work with indirect channels? What’s the culture going to be like? How are you going to do the coverage mapping and capacity planning, and that piece always comes up front.

But once you get to the point where you can start to define what your ideal partner profile looks like — which kind of maps to your ideal customer profile — you start to look at then How do I find these type of partners around the world? Again, not only the 600,000 but you’ve got millions of companies flooding in what I call shadow channels. How do you recruit them, onboard them, educate, train, and certify them? How do you enable them and then develop them? Obviously incent, motivate, and drive loyalty. The most important thing is How do you co-sell and co-market with this new set of capabilities? How do you amplify your brand? How do you get to more places and have more conversations with customers than you’ve ever had in the past? And then in the end, how do you manage, measure and report all that, which is the technology underpinning to it.

But if you think broadly across those six categories, you don’t have to check 90 boxes. You just have to have a partner journey mapped out. And in each of those areas, you got to find them and you’ve got to educate them enough to be dangerous. And incent them enough to not want to sell your competition over you. You want to give them the tools and the love to be able to find new customers and to build their company and build their brand. And in the end be able to make sure that this is the right motion for your company from an affordability perspective, ROI Perspective.

Louis:   Well, you were saying how critical the sales and marketing part of those six major categories is. You’ve also written about, and everybody that I’ve already interviewed on the podcast has agreed, that there’s a real marketing skills gap among partners, especially among the small and midsize ones. And this isn’t partner marketing, this is fundamental marketing knowledge. Is it the role of vendors to help address that marketing skills gap? How can they do that?

Jay:      It’s two ways. It’s the partners themselves that have to realize this on their own, but it’s, yes, the vendors need to obviously help in those cases. And this is something we study that 66% of all partners are in the category of Do it for me or Do it on behalf of me. In other words, they don’t have the time, they don’t have the resources, they don’t have the money, whatever it is, the skills. They don’t have the necessary abilities to go and effectively market themselves. So yeah, in 66% of the cases, I think vendors need to step up.

What I’m calling this is the third stage. And one of the reasons I think that partners haven’t lifted their game because for so long they’ve worked on a referral type business, there’s been enough business and we’re now in a $5 trillion IT market around the world. There’s been enough business to go around and you didn’t have to be a good marketer. Kind of like if you’re a plumber or an HVAC professional and stuff: it’s just enough business and you can pay your mortgage. And you never really had to figure out Google or social or email campaigns or syndicated content or inbound marketing. I mean that’s all stuff that you didn’t need to make it in your business. And to make it, I mean just like paying your mortgage, not growing to be a multinational corporation.

But what I call the third stage is 20 years ago, every company around the world in every industry really locked down from a sales perspective around CRM and sales automation, salesforce automation, locked down the sales mechanism, the direct sales mechanism. And you know, before that you would have VPs of sales that did it all with their gut. And you know, you’d hear people say, you’ve got to be born to be a salesperson. You don’t hear that anymore. Everything’s done to the seventh decimal point. It is a science.

Well, 10 years later and 10 years ago, you had marketing automation do the same thing for marketers. Before that you used to hear things like, wow, 50% of my marketing dollars are wasted, I just don’t know which 50%. People spending way more time on branding than they should have. Well marketing automation changed that, gave the levers and dials where now the VP of marketing or the CMO is in the boardroom at the seventh decimal point of accuracy asking for investment, showing the power of marketing.

So that’s now 20 years that basically every company has been investing in direct sales and marketing, which represents about 25% of world trade. We think that now in 2019 people are waking up to this third stage, which is the last mile to your customer, which is this through-channel marketing automation: marketing to, through, and with partners at every stage of the customer journey. Again that first 68% through the transaction and then obviously long-term for renewal and retention. And that third stage I think kicks off now. I publish a channel software tech stack that has 106 companies that build channel software and I get a lot of calls now from venture capitalists, private equity, Wall Street asking me who the Marketo is, who the Eloqua is on my 106 logo chart. Trying to figure out this third stage and where the money is to be made.

Louis:   Yeah, I was very interested in that graphic because you may have seen Scott Brinker’s marketing technology super graphic that he’s been putting out for the last, I guess seven or eight years on marketing technology companies in over 40 categories. And there’s over 7,000 companies on that. It finally got close to leveling off this year, it had been growing very rapidly over the last five years, almost doubling every year. So the 106, considering how, what a huge part of the economy the channel is, 106 seemed low to me. And you wrote a couple of years ago, “the channels in need of advanced and integrated purpose-built tools based on the latest technologies such as cloud mobility, social predictive analytics, and big data,” And you even founded a channel tech company, is indirect underserved on the software side. Are there gaps that haven’t been addressed yet, both in terms of actual software or the quality of the software?

Jay:      Yeh, I think there’s some huge gaps in terms of serving. One is that almost 80% of channel programs, and this is in every industry — finance, insurance, pharma, tech, manufacturing — about 80% of channel organizations are siloed. They set off on their own and whoever runs that organization has finance, operations, sales, marketing people underneath them. So it’s kind of like a mini-organization in itself. And it’s been quite insulated. You know you look at traditional marketing and CMOs and VPs of marketing, they know very little about the channel organization because in most companies they’ve worked for, it’s been off on the side. And it’s really been kind of a go-to-market, fulfillment, supply chain kind of organization that really wasn’t brought into the sales, marketing, customer experience, customer success. Like it’s very few times it’s been brought under the CRO, which is an embarrassment. And this is what this third stage will change. It will break down the silo. The channel chief has to report to the CRO. The channel chief has to be in the boardroom representing 75% of the company’s revenue. They have to be able to manage their business to the seventh decimal point.

When the CFO is offering up, let’s say $1 million of investment and you’ve got the sales marketing leaders there aggressively competing for that investment, in most cases, the channel is actually the better investment for that million dollars. It’s just the channel chief is viewed, first of all is buried three or four levels deep in the organization, viewed as somebody that’s off in the Caribbean drinking with their partners. And just viewed as somebody that doesn’t have the answer to where they’d spend the million dollars and what the exact return would be. But I think the CFO would expect or would actually welcome a lower response to that investment but one that’s more predictable. And that’s where the software has to step up is that there’s so many moving parts. And the problem is a channel is time delayed. You know you might have to go through multi-tiers of distribution and wholesale and then through a channel. And then at some point of the transaction it’s not as clean as measuring direct sales and marketing is today. But it doesn’t mean it can’t be done.

And the amount of data is massive and all of these different aspects. So when I was at Lenovo, for example, we have 50 different sources of data around our partners and around our customers. And bringing all 50 of those pieces together, get a 360-degree view of it was critical. And to be able to compete at the boardroom level and to get recognition within an organization, the technology and the ability to deploy technology by these channel leaders, everyone needs to step up.

Louis:   Often the cost of sales is much lower through the channel than it is direct. You know when I look at all those 90 competencies and those six different areas that you’ve talked about, running a channel program is really like running an enterprise within an enterprise. You know you’ve got the whole everything from go to market to sales, to marketing, customer experience, and everything right in there. And so in the biggest, the most sophisticated channel programs, it really does, it is critical and it’s a real enterprise within an enterprise.

You know back to that question of the need for more or better channel technology, in another episode recently I talked to Sheryl Wharff from Micro Focus. And they just rolled out a big global update to their global partner program with the new partner portal and they had to kind of develop it themselves because they needed it customized. I’ve talked to people at other enterprises who have said that they, when looking for channel technology for an enterprise, that they found it hard to find enterprise-ready solutions.

Jay:      Yeah. I don’t know if I would go that far. You’ve got major players like Salesforce and Oracle and IBM that build partner technology. You’ve obviously got some leaders and it’s highly dependent on the industry. If you look at tech and manufacturing as an industry, you’ve got three or four big leaders in that space that have pretty impressive horizontal platforms.

The fact of the matter though is if we go back to our early conversation on software, this software takes $4.14 as well to get it working and to get it really adding a lot of value. And I’ll say that the channel has been this redheaded stepchild inside the organization. It doesn’t get a lot of investment in terms of dollars, whether, you know, today the CMO spends more on technology than the CIO. And in this third stage, it’s really the channel leader needs to rival the CMO who’s buying those 7,000 pieces of software on Scott’s chart. Scott actually wrote a nice three-page blog on the channel software tech stack as well. So he liked the fact that all these other tech stacks are starting to layer in as well. And he obviously understands the power of the channel and indirect sale, so he’d be a great future guest for you.

Louis:   Yeah, I actually know Scott. We’re both in Boston. I’ve written a guest blog for his, guest post for his blog and he’s spoken at an organization I lead. So, yeh, I should talk to him about that. So what about partner experience? We talk a lot about customer experience, but what do the best companies doing around partner experience?

Jay:      Yeh, this has probably been one of the biggest changes. And now every week if you follow the 54 channel magazines that are out there, you start to see vendors announcing ecosystems. And what that means is, for 37 years we’ve had these gold, silver, bronze pyramid schemes, precious metals programs. And I’m not sure, unless you’re a true reseller and coming in as bronze, selling more, becoming silver, selling more, becoming gold, that’s just an artifact of the way things used to be probably in client-server when you’re selling a lot of stuff.

Today everything anchors around the customer and it should. And that’s how other parts of the organization is, everything anchors around the customer. The fact that the partner organization hasn’t yet got to that, is a little bit of an embarrassment and another big driver of the third stage. And so what that means is there are partners out there that are today in your long tail because they don’t fit in your gold, silver, bronze, because they’re just not into that real business model. But if you look at it more celestial, the stars out there are the customer and the planets rotating around it are all the different kinds of partners.

You know it’s not just traditional partners anymore, but there’s shadow channels. There’s non-traditional partners. If you’re in the tech space, for example, every company in every industry is becoming a tech company. And they’re coming in, these are accountants, and they’re architects, and they’re legal companies, and they’re digital agencies. There’s all kinds of new types of firms that are rotating around that customer. And if you build your program that is anchored on those stars, anchored into this celestial view, which is to dedicate all of these different — your content, your messaging, your support for partners, the drive of their partner experience — around the customer. You’re going to find that you don’t have a long tail of partners; you have a set of partners today that are just not that in to you.

So what we tell vendors is that they have to understand their partners business model, but then there’s five vectors that they have to understand underneath that. One is Who they specialize in terms of the buyer. Again 65% of decisions are outside of IT now. Which line of business executive do they specialize in? Second, it’s not a vertical play anymore. Ten years ago we used to build these partner programs that try to get you to go after one of the 27 verticals. Go read healthcare, high tech, Hipaa, and become a health care expert. Today it’s a sub-industry play. There’s 297 sub-industries below those 27 majors. And instead of just being a health care expert, be a midsize clinic with 50 doctors specialist.

Third is geographic, obviously which region of the country, which region of the world, which country? Where’s your focus? Fourth is the sector, size, and segment of the customer. You know a midsize clinic with 50 doctors is very different than a large dentist office or a small hospital. And the customer expects that level of expertise on your resume. And then fifth, what used to be maybe 10 levels of a tech stack, today is 40. And you have to understand where your partners play in the different levels of the tech stack that they play in. When I mentioned, you know, security and compliance and continuity and all these different layers, you have to understand where they play.

So if you understand how your partner makes money. And then understand those five vectors, you’ll then be able to plot them successfully out in the constellation where they belong. And if you start to build your program around supporting them and those things, you’re going to find that there is no long tail anymore. You’ve got all these partners now recognized in the right place and the right area of their business.

Louis:   Well, it sounds like the shadow channel is much more complex and challenging for vendors to produce results from. I think you’ve said it requires much more flexibility and customization from the channel managers?

Jay:      It definitely does. So you know when I mentioned Microsoft bringing on 7,500 partners a month and 80% of those non-transacting. It’s now up to the channel managers at Microsoft to make sure that that partner has the ability to join that appropriate part of the ecosystem, gets wrapped around the right customer opportunities, and  whether somebody goes to the Microsoft partner locator and types in that I’m a head of marketing at a midsize ambulatory care clinic in upstate New York and I’m going to get fired next week if I don’t bring in more patients. That should not just default to Larry in the white van who lives two miles away from that clinic. It’s got to default to the people — and I’m going to say five different partners perhaps that have that on their resume — that’s what they do for a living and now Microsoft can bring that group of people. It’s not partner-to-partner anymore. It’s partner to partner to partner to partner. It’s five different partners that they’re going to bring to the table to say, Here are the people that will stop you from getting fired. Here’s the last three they’ve worked on with us and here’s their results. And you’re going to be very, very happy with what the seven-layer stack, the seven layers of the cake that they’re going to bring in and solve your problem with. And you’re going to be happy to pay them $4.14 or whatever the number is at Microsoft. You’re going to be happy to pay them. Because you’re driving in more patients, because you don’t get fired, and because they’re going to be there for the long term tweaking your environment to be the best in class midsize clinic.

Louis:   Yeah. So you were talking about the decline of the IT in terms of the decision-making, although I guess they’re still involved in something like 71%. You know usually in businesses it’s a buying team. There’s line of business people, there’s IT people, there’s CFOs, there’s end users, there’s lots of people involved, which can make the purchase of technology a very complex sale from the part of the vendors or the part of the partners. So with this shadow channel, are there different parts of that shadow channel influencing different parts of that buying team?

Jay:      Absolutely. And you know the average buying team today is you know 5.5 people. Where that 71% stat comes from is, think of two kinds of buyers today, if you’re thinking in the technology world. There’s an infrastructure buyer and they may go by the title of CIO, CTO, CDO, CSO kind of titles and they’re buying a lot of the hardware, software, and services to run the organization, to run the network, to run the security, things like that. It’s a critical part of obviously thousands and thousands and thousands of vendors. But there’s now this non-infrastructure buyer, which is spending 65% of tech dollars. It’s the head of marketing, sales, operations, finance, HR, all the way down the list. And they’re spending the majority of the money today and understanding what that buying group looks like. In that group by the way, 29% of the time they avoid IT because they don’t want the due diligence, they don’t want the time delay, they don’t want the oversight, whatever it is. But in a third of cases, they’re off doing it really in a shadow IT role world, and that number is growing because they have to move fast. Again, I’m getting fired next Thursday. I don’t have the time for a two year IT project and a procurement involved RFP. I spend 68% of my time researching my problem. Fifty-eight percent of the time I’m going to actually hire my own channels. I’m not going to ask who IT uses. I’m not going to ask who’s actually allowed in from a governance perspective. I’m just going to go bring people in the door, on average five different firms. And I’m going to go solve this problem by next Thursday and guess what? I’m taking ownership of this because this is my transformation.

Louis:   Yeah, I mean in my experience where IT usually gets involved where they’re the gatekeepers, they have access to the crown jewels of the company, the enterprise data. And if what you’re doing needs to integrate with other systems, that’s an area where they’re going to get involved also. If you’ve got a stand-alone solution just for a department, then you may be able to avoid them.

Jay:      Yeah. And what ends up happening is all these departments have gone rogue and got all their own stuff plugged in. I think I read the average mid-market SMB organization has hundreds of SaaS tools now running in their organization. It’s back over to the IT and some of those C level executives that I mentioned to actually start stitching everything together. Doing the integrations and the implementation so that the company can take advantage of this level of data. And then perhaps start using some AI, machine learning, predictive, prescriptive, and pull together the security story and the continuity story, and it’s gone a little nuts now for 20 years, it’s their job to pull it back in.

Louis:   And I’ve heard that from companies where they don’t know what they have, and they may have five different implementations of the same software in different departments and things like that going on.

So let me ask you about one other area and then, you know, this has been great and I could talk to you for hours, but I know you have a job to do. The area of low code and no code software and that’s been growing in the last several years. Do you see that as an opportunity for partners because even though it’s low code/no code, often companies it seems don’t have either the time or the skills or the people assigned to it and so to make more advanced applications they still need a partner or they still need someone to work with them on it.

Jay:      Yeah, I’m really glad that you brought that up because for me it’s actually the number one recommendation. If I’m one of the 600,000 traditional partners, you need to codify your IP. So the workflows and the value that you’ve added for years and years and years to customers, you need to figure out a way — and this is a no code/low code environment — you have no way of going to hire a bunch of dev ops people and data scientists, you just don’t have access to that talent pool. Nor do you have the skills to start a software company. But in the new world where marketplaces and Forrester’s predicting that 17% of all B2B transactions in five years — and that’s beyond tech, that’s paperclips and forklifts and everything — goes through marketplaces and online commerce, and that’s huge. That’s trillions of dollars. Amazon for Business and Alibaba and all of these major marketplaces like the AppExchange and Microsoft and AWS and everyone is going to play in that 17%. But to get noticed in that marketplace type of idea, you know you can be one of the millions of consultants and service companies that are listed on there. Very hard to differentiate yourself.

But if you use these no code/low code tools — and for example in Salesforce, go build some lightning bolts — that you are layer seven of that solution at that midsize clinic, you’re the last mile that glues all the other six layers together with some of your unique workflows and logic. You’re now showing up as a product, much easier to be found on Google, much easier to be found on a marketplace, and much easier to get a lead in terms of every midsize clinic in the world.

So when I say that RPA as an example of an industry is the fastest growing channel on the planet. And UiPath, which is one of the larger companies there, grew 5614% last year. Just out of interest, the fastest growing enterprise software company in history used to be Microsoft, it got replaced by Salesforce. It then got supplemented by Slack. And guess what? UiPath is now the fastest growing enterprise company in history. It’s an RPA company, its workflows, it’s no code/low code and it’s a place where partners should be diving headfirst into in terms of building out their brand, building themselves into an ISV and getting access to the future buyer. There’s nothing more critical in my mind than that.

Louis:   Okay. So what should I have asked you that I didn’t? What’s keeping channel organizations up at night? The leaders of channel organizations up at night that you talk to?

Jay:      Well, there’s a few things. You know, if you hone in on this third stage, you know, you’ve got to get, as a vendor organization, you’ve got to get yourself into the boardroom, getting into the competition for investment. So you’ve got to build the people, processes, and technology that allow you to have that level of accuracy, that level of trust built with the CFO and the CEO and the board to get and compete. That’s first and foremost. It’s hard because every day you’re doing 90 different things. You’re putting out fires and in the end you do have to kind of drink with your partners to keep that relationship going. So it’s one of the hardest jobs in the organization today: to do that, plus get that recognition is tough.

The second thing is you’ve got to get almost fanatical, obsessed with that 68% of your customer journey. And what you’re going to find is going to shock you. What they read, where they go, and the people they follow during that first 68% are likely not your partners today. Because your traditional partners, probably 80 or 90% of them are struggling to not only get in front of that buyer, but to get earlier on in that cycle, which we talked about this, the digital capabilities of doing that. It’s not a face-to-face game here, it’s a digital capability. You’ve got to be on page one of Google to do that, and your partners just aren’t there. So a vendor has to get obsessed about that 68%. And when a customer gets to the point of vendor selection without ever talking to you or talking to one of your partners, that should scare the heck out of every company from very small SaaS companies, right up to the largest of large fortune 50 technology vendors.

You know, once you get obsessed on the 68% everything changes. Your partner program changes. You start to move into an ecosystem view instead of a tiered program. And you start to welcome in these new kind of shadow channels. And you start growing your own program probably by 10x of what it is today to make sure that you’ve got the relationships and those alliances built for those people that are impacting your customer.

Louis:   Yeah, and that’s what I often talk with companies about in terms of why they need to put more emphasis on marketing. Because it’s in many cases, you know, marketing that’s going to get them noticed in that first 68% of the customer journey.

Jay:      Yeah. And keep in mind that during that stage, Google and Facebook and other digital platforms favor the local business. So they’ll always put Larry in the white van higher on Google for a cheaper per click price than anyone else. So if you’re thinking you’re going to do this on your own and get on page one of Google through the millions of customer conversations, you’re just not. But if you elevate all of your partners and many of these new partners to get that content, you’re going to win the geographic, local distributed marketing game. And I think that’s going to be one of the key things going forward in this next third stage, over the next 10 years. The vendors who win are going to be the vendors who win this distributed marketing through channel marketing automation game.

Louis:   Okay, Jay. So this has been great. How can people contact you?

Jay:      I’m all over. So I’m on Twitter @jmcbain. You can hit me on LinkedIn, contact me via email, JayMcbain@forrester.com. I handle a lot of inbound traffic and happy to help anyone with their program and offer up some advice on how to take advantage of the next decade.

Louis:   Well, you were certainly very accessible to me and as soon as I suggested doing this you said, let’s set it up and I’m glad that we did. So thank you for joining us today Jay.

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