Major Industry Players switch to the direct sales/service model: a Myth or a present Reality?

Over the last few years, there have been many rumours about an increased risk of the “direct sales model” with launch and domination among the companies that form the UC&C backbone worldwide.

Headlines from the most respected publications in the industry feed the readers with such things as:

“The … Cloud business will be driven by a new end-user-focused engagement model”
“Resellers Beware: More Companies Now Selling Direct
“Are Cloud Vendors cutting out the Channel”…etc

However, as this is still a new model for many Vendors, many Channel Partners are living a calm life in their “Bubble” feeling the relationship that they have with their customer was safe.

News articles started appearing a short time ago when some Traditional UC Vendors started adopting a new business approach, namely the direct B2C business model — a trend that is largely being driven by the new wave of hosted VOIP providers.

Some of the leading players are still refusing to acknowledge that the B2C approach will harm the Channel Partners position, but will only help to maintain and refresh the sales processes, and develop better Brand awareness and recognition for the End-Users!

Will the Channel Partners still stay in “the game”?

Let’s look further into the situation and figure out:

  1. WHY so many Traditional UC Vendors are switching to the “direct sales model”;
  2. WHAT  impact this is having on the Channel.

For the Vendors that follow the Amazon model and cut out the middle man, the vendors that want the market to become disintermediated,  those that decide to go “direct” and cut off the Channel completely, the profit is obvious!
They no longer have to share the income: they receive the freedom to act when and how they want, all this without having the partnership expenses.

  • Now having achieved success with the new sales model (bypassing the Channel Partners), the Vendors maximise profits through retained revenue: much higher revenue will speak for itself, and will definitely move the scales from the “channel partnership” to the “direct-to-customer approach.”
  • Vendors are free in their actions. It is no longer an issue if there is a price increase or a change of a strategy; they don’t need to take into account the Channel Partners and mutual agreements; Vendors are free and deliberate.
  • Vendors are reducing partnership expenses on meetings, technical and sales trainings, webinars, etc, but in return, invest only in their products marketing and PR, so, it will become a one-party activity.

For you, Channel Partners, the situation will look quite the contrary:

  • Your Vendor has become your Competitor
    The former partnership has become competition as you cannot guarantee that your Vendor will not try to reach out to your Customers directly. So, your database can be used against your best interests.
  • You lose Money
    In order to compete with your Vendor, you will now have to lower the price, which has, in turn, lead to lower margins.
  • You lose Investment
    Partnering with a Vendor was a huge investment — you, as a Channel Partner, invested time, money, and resources into selling a Vendor’s product. Now that the vendor is your competition, this investment has now been lost.
  • You suffer from extra expenses
    You now have to convince Customers to buy from you but not from the Vendor, which means extra expenses on additional marketing campaigns, sales, and PR actions in order to attract your own customer back to you.
  • You sell for the vendor
    You sign your customers to a directly billed service of your vendor, in the future, as their model is more widely accepted, how will you retain the ownership of your customer. Where is your value in this relationship?

So, what can you do to reduce this effect?

My answer is — reach out to the trustworthy Vendors, partner with those who meet the Channel Partnership requirements and are channel focused!
But, ultimately, you must become the product — your services, your skills and your experience have kept the vendors in profits for many years.

Wildix does not follow the “hot market tendencies” and stays true to its initial business model, keeping the focus on the support and development of the Channel Partners relationships worldwide. We are 100% Channel Focused and will always remain so!

If you, as the Channel Partners, want to maintain healthy and fruitful Vendor relationships, here are some tips from my colleague that might become a great help to you and give several really influencing insights — 5 questions to ask when managing vendor relationships, check them out!

Edited by Ian Rowan, Wildix UK Channel Manager 

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