The coronavirus outbreak has impacted nearly every aspect of the global economy, from supply chains to air travel to tourism. And the IT industry is feeling the effects as well.
Enterprises across nearly all major vertical industries will cut IT spending in the coming quarters and year as revenue shortfalls limit their ability to refresh systems and fund digital transformation initiatives. IDC just cut its IT spending forecast for 2020, expecting to see a “significant slowdown” in hardware along with software and services spending as the coronavirus pandemic continues to spread across the globe.
Channel partners, depending on their business model, are experiencing this economic depression in distinctly different ways. While some actually see revenues increase in the short term (think hardware resellers of laptops and communication equipment and software for remote workers), many suffer from acute cashflow problems due to canceled subscription fees and from losing clients in the most hard hit industry sectors such as aviation, hospitality, events, etc. As the number of unemployed workers keeps climbing on a state-by-state basis, MSPs across the country are bracing for reduced seat counts and a hit to their recurring revenue as a result of the measures taken to stop the spread of the deadly coronavirus pandemic.
To demonstrate how the current crisis is affecting solution providers in different ways, those with clients in the financial sector and insurance will do OK. Solution providers with law offices are not. The courts are shut down, so law offices are at a standstill. Solution providers with most of their clients in the hospitality and travel sectors are going to be devastated.
On the other hand, communication solution providers have been rapidly expanding the number of videoconferencing and collaboration licenses for existing customers, in some cases jumping from 100 licenses to accommodating 5,000 users that all must now work remotely.
Technology vendors must adjust their programs and services for partners to get them through the current crisis. A growing number of IT vendors are offering COVID-19 relief measures to help support partner businesses during the pandemic. Those include offering financial incentives, extending certifications, or providing free training during this period.
- Lenovo has launched a “Partner Stimulus Package”, designed to enable more predictable earnings for partners as well as faster payouts and extended financing terms. As part of this package, Lenovo will be removing all target-based programs, so that partners will not be required to hit a certain threshold to earn back-end rebates. This will result in more predictable, flat-rate incentive program that the partners will earn from dollar one every thirty days compared to the previous 90-day terms. The Lenovo Stimulus Package also includes financing with a 30-day extension for qualified partners through the Lenovo Partner Financing Program which should free up cash for partners. In addition, Lenovo has launched work-from-home bundles that are available for resale, as part of helping solution providers to meet the surging demand for remote work deployments
- Cisco Systems has been coming to the aid of partners and customers with free access to its security and collaboration technology. The company launched its Business Resiliency Program to extend $2.5 billion in financing to help businesses invest in the IT solutions they need to keep their businesses running which also benefits Cisco partners
- Extreme Networks updated its partner program, expanding its virtual training offering. The company is also providing free remote cloud technical certification training and financial deferment options for resellers
- SAP has a dedicated COVID-19 business task force and has implemented several business resiliencies measures. Those include a protected SAP PartnerEdge program level and market development funds extended until Dec. 18. In addition, there are subsidies for the SAP Learning Hub and Solution Editions to increase consultant capacity. Furthermore, partners can get 20 free hours of SAP S/4HANA consultant training
- HP announced a more predicable flat-rate incentive program for partners. In addition, the tech giant relaxed compensation models for those needing COVID-19 relief
Distributors have also launched partner support programs:
- Ingram Micro extended $110 million in additional credit to approximately 2,000 channel partners across North America through two new programs: KickStart Financing and Future Funds. The distributor is temporarily waiving any fees associated with most aspects of its partner financing program
- D&H created SMB product bundles to assist MSPs with collaboration solutions, including a remote student/teacher bundle and a telemedicine bundle
- Tech Data is working closely with its customers to determine the right credit and payment solutions and has extended and increased its lines of credit with partners
There are measures each technology vendor can take to support their partners during this crisis. An important aspect is regular communication with as many partners as possible through virtual and digital platforms. In addition, organizing digital events with top partners (in lieu of in person partner advisory board meetings) will help maintain a two-way flow of information.
Demonstrating flexibility in planning and targeting during this time will go a long way with partners. Consider suspending quarterly business reviews and other planning sessions for the time being. If vendors still expect specific quarterly targets to be met, they should reflect a lower demand environment and limitations to product availability.
Vendors should consider removing short-term sales targets and moving to linear rebate payments. Removing complex and admin-heavy processes for other areas, like MDF, will also help partners through a challenging period. Extending certification requirements is another example. Vendors can also provide more low-interest, or 0% financing offers to partners and extend payment terms for the channel. In addition, sharing sales and technical headcount resources with their key partners can help with business continuity in the channel. Finally, think about extending free usage rights to partners, as well as customers, for specific software or cloud-based technologies, supported by online demos and tools.
In the end, partners will remember those vendors that went the extra mile in reaching out and supporting channel partners during these challenging times. Those vendors no doubt will reap the benefits in the long term in terms of greater mindshare and continued loyalty.