Episode Transcript
[00:00:21] Speaker A: Welcome to this episode of metrogy's Metro site. It's a podcast where metrogy's analysts are digging into the data behind technology decisions shaping customer and employee engagement.
My name is Matt Craig. I'm the senior director of product development here at Metro G. And today we're going to have a discussion asking, so what do partners want from vendor and why is margin not at the top?
So if you've, if you're a vendor who works with channel partners, you've probably heard the conventional wisdom, pay partners riches margin and they'll put your product in front of the customers.
Metrogy's newest research said that's not really any longer the top criteria for when you decide who to partner with.
When we asked channel partners why they represented the platforms they do, technology, innovation and AI expertise came out on top, where profit margin was near the bottom of the list.
The pressure on partners is real, too. About two thirds of enterprises who participated in our research expect to buy their next communication technology directly from the platform vendor itself. And half say a has changed in how they they're picking vendors.
So what do partners need from the vendors they represent? And what should vendors really do about it? Joining me today is Robin Garris, CEO and principal analyst at Metrogy, who led this study of more than 200 companies across North America and Europe, along with the channel partners who, who sell through them.
Robin, welcome to the show.
[00:01:52] Speaker B: Great, thanks, Matt. Happy to be here.
[00:01:56] Speaker A: So jumping right into it, partners told us they represent vendors for technology innovation and AI expertise, and they ranked margin as eighth out of the nine options that we gave them. So did that surprise you?
[00:02:13] Speaker B: You know, in some respects, yes.
Because, you know, you think, okay, why does any business do anything? Well, to get margin, right? So you'd think that would be at the top of the list. But I think what they're really saying here is in order to get that margin, they need to be working with vendors who are very innovative when it comes to their technology and who have that AI expertise, especially in the communications space. So when we looked at the data, the top three were technology, innovation, AI expertise, and customer support. Like, those are the three things they really want from a company. And when you think about it, they put profit margin at the top. And a particular a platform provider didn't have good AI expertise or their customer service was terrible. What's that going to do to their margin? So you got to kind of look at it in two ways, you know, like, okay, what do these things?
Because I really do believe that the margin is going to be number one, no matter what. But there are other things that are going to affect the margin. So now, given that, when they look at all the vendors that they could drive margin with, which ones are going to help them to drive the most margin? Well, the ones that are really innovative, the ones who have that AI expertise. If you look at what the customers are saying now, AI expertise. Ortiz is guiding so many decisions, particularly in CX and in the contact center. So surprised in some respects. But when you kind of dig into it and, you know, unwrap it a little bit, you kind of see what they're thinking when it comes to how they're making those decisions.
[00:03:41] Speaker A: So essentially what I'm hearing is it's not that margin is unimportant. It's just they don't see that as a main reason. But the other things that. The driver for that.
[00:03:53] Speaker B: Yeah, yeah, kind of. Yeah. I think that's a good way to put it.
[00:03:56] Speaker A: Okay, so what does technology innovation mean to a partner in practice? Is it about what they can sell or about what keeps them, their customers, from leaving? What is that?
[00:04:07] Speaker B: Yeah, I mean, I think it's almost like a security.
Security net in some respects. So it's definitely about what they can sell, for sure. You know, because if I've got more innovative technology with this partner than I do with another, that's obviously going to be a good thing, and it's going to help me to get more margin. Right. And get more custom.
But I also do think it's a safety net in that you have a lot of companies who are looking at the pace of innovation. The pace of change in technology is going so fast now, nobody can keep up. And I think one of the good examples of that just of late is personal AI agents. All of a sudden, they emerged kind of out of nowhere. And I'm talking to the biggest vendors in the world right now and the biggest enterprise organizations in the world who are all saying, we're not sure what to do. We're not sure how to really identify when there's a personal AI agent. We're not sure what to do for our custom, if you're a vendor. So I'm just using that as an example that everything is happening so fast now because of AI.
I talked to one major vendor, said, I really wish we could put the brakes on a little bit with AI because it's starting to just go too fast. Customers can't keep up, we can't keep up. But that's just not going to happen. Right. We're going to keep moving forward.
And so I think that technology innovation, like if you're a partner and you're working with enterprise organizations, they want to know that you're on the cutting edge. So that when they're ready to make a move, you know, they may not even be bleeding edge companies. Right. But they want to know that when they're ready to make a move or when their customers are ready to make a move, that you're there to support them, that you, you know, that you're going to be on top of things. And so I think that that's kind of what that innovation really means. Yes, it gives me more to sell, but it also tells my customer that I'm working with companies who are very innovative who are going to help you to, you know, maybe leapfrog some of your own competition, meaning to my, my enterprise customers.
[00:05:54] Speaker A: So when partners are comparing potential CX provider options, they're using that as kind of one of the decision factors in that is one of the primary decision factors, possibly.
[00:06:10] Speaker B: Yeah. I mean, I think it's one of the factors that they're looking at, but I think more so it's like implementation speed and AI and also integration capabilities. Those are some of the big things that we see when, you know, when partners compare the options that they have for those primary CX providers.
Definitely AI, like I said, they've got to have AI expertise if they are looking at a partner and they're like, you're not really keeping up. I mean, everyone's got AI expertise right now, don't get me wrong. But now it's a matter of who's got more, who's keeping up faster, who's coming up with the most innovative technologies. Which again, is kind of hard because once I come out with something today, all my competitors will have it within a week, if even that.
But it's knowing that they have that expert, it's knowing they have the people with the, you know, the experience and the degrees, you know, to really move forward with that. So I think, you know, AI is important, but I also think implementation speed comes in pretty high as well.
Because if I have customers that want to be implementing, they want to get up and running quickly, I need to know that you're able to support that as a vendor.
And then I also think integration because right. You know, these days you never. I know everyone's goal is always to buy everything from one provider. Nobody does it. You know, in fact, a lot of companies, I think it's a little over 40% of companies plan to even increase more providers this year, about the same number staying flat and very few decreasing providers. Although that's everyone's goal. But the fact truly is that integration is always, always, always going to be needed. So if you don't have that integration, you're going to end up with.
I mean, obviously from an enterprise standpoint, if you don't have a company that's really able to do all that integration, you're going to run into problems. But from a provider standpoint, if I' if I'm a channel partner, I want to be able to work with a company that's got a really good ecosystem. You know, like, yes, I can do some APIs on my own as a channel and bring other providers into an ecosystem. But if I can work with a vendor that has a big ecosystem already of a lot of, you know, companies already linked together and, you know, integrated natively, I mean, that's a big plus,
[00:08:25] Speaker A: right? That's a big value add for the, the providers because they don't have to do that legwork and they can give you the technology expert to do that legwork and probably in a better way than they could themselves.
[00:08:40] Speaker B: Yeah, yeah.
[00:08:42] Speaker A: All right. So looking at the buying side of things now, the majority of enterprises are already buying direct and about two thirds are saying that they plan for their next purchase to be direct as well.
So what does that mean for partners and why should the vendors care about that?
[00:09:00] Speaker B: That was some interesting data because for so long most companies did buy through partners. I think a couple things are happening there.
Platform providers, so the vendors themselves are opening up more to direct purchases, especially for those smaller and small mid sized companies just go on a website or just buy direct. So that's happening. And of course there are more smaller companies and bigger companies. So you could see why would be saying they're buying direct. When you look at the larger companies, they're more apt to either buy from a channel partner or buy from both. So maybe they'll buy direct from the platform provider but use a channel partner to help with maybe a systems integration or maybe some services, carrier services. So they'll buy from an MSP or something like that.
But it's kind of interesting when you look at the data. About 62% of companies buy unified communications capabilities, like workplace collaboration capabilities directly and fewer. About 55, 56% of contact center buyers buy direct today.
And you know, when we ask about their next purchase, about 67% say it's going to be definitely or probably direct versus about 14% with a partner and so, you know, we're seeing a lot of change going on there. And you know, I think from a, I think you asked me about what it, why should the vendors or the partners care? I mean, there's, there's shifts going on. So I think from a platform provider's perspective they should care because do they have the support to support those companies? You know, yeah, great, it's great to take the direct sale, but do they have the professional services and the integration capabilities to do that? Or do they just say, yeah, you can buy from us, but we're going to partner with, you know, we're going to give you a choice of these partners to work with to help with your integration or your implementation or your migration or whatever it might be. So I do think you're going to have some, you know, some companies working with both. And then from the, you know, from the partner's perspective, I mean, you know, they like to control the customer just as much as a platform provider does. So I mean, for them, I think it's really going to be a matter of, okay, getting out there and saying, yes, I've got the AI expertise, I know how to handle X, Y and Z better than the, you know, the platform provider might be able to handle that. I think the problem is there are like, you know, thousands and thousands of channel partners you can select. You know, as far as platform providers, there's dozens. So they're, they're better known, you know, they're more, they're out there, they're advertising more, you know, that you feel that level of comfort or at least the enterprise does. So I think we're seeing a lot of, you know, shifting going on there.
[00:11:40] Speaker A: Yeah, absolutely. And it's, you know, I've been thinking about this since the data has come out and you know, it's like, it really does have kind of like a marriage of capabilities when they do work together. Because on the vendor side, like you mentioned, it's, yes, they can go the direct to sale route, but they're focusing on developing the technology themselves. They're not necessarily always focused on servicing the customer on the day to day.
And what we've seen in a lot of research in the past is that day to day service really impacts the reputation of a vendor.
So you're risking losing your reputation on that.
And then on the provider side, you're offering a service that with how fast everything is changing and how many different companies are out there doing different things, especially in this day with all the AI implementations, you can be kind of A source of knowledge about these, to be able to go to the, the potential customers and say, hey, I know your environment.
This and this and this work for you. This and this don't. And be able to kind of sort through that and see and, you know, provide or go to the vendors that work best.
[00:13:03] Speaker B: Absolutely. Yep. And that's how you see, I mean, platform vendors spend a lot of time and money and hiring and stuff on getting their channel right. You know, because you're exactly right. Those partnerships can be golden. They can be working so well, but also see many instances where they don't. And the channel partner can completely ruin a vendor relationship or the, you know, the vendor, the platform provider themselves can run a relationship with the partner. So I do think that those are, you know, like, really, really key relationships. And that's why you see companies spending a lot of time and attention on them.
[00:13:34] Speaker A: Absolutely.
So half of enterprises now say that AI has changed their vendor selection requirements. And AI expertise, you know, was the top reason why companies switched how they buy.
So how fast is this really reshaping the channel?
[00:13:52] Speaker B: You know, it's happening a lot faster than I thought it would, you know, So I think in our research, just over half say that AI changed their selection requirements. I think AI expertise drove about two thirds of purchase changing methods, and that was ahead of integration and pricing. But interestingly, like when we look at, from an enterprise standpoint, why they select providers and why they leave providers, like, we asked this question in a few different ways and a long list of drivers or reasons. AI expertise, integration and pricing were kind of always the top three in different orders, but those were always the top three of how they were looking at things. And it is changing quite a bit because I think so many companies realize that AI obviously is not only the future, it's here, it's now.
And if I really need to go with someone who I feel comfortable is going to have that AI expertise. In fact, when we asked companies in a separate study who their primary provider was today for customer experience, it was actually CRM providers. We asked them about two years from now. It was overwhelmingly what they considered to be AI specialists. Now, AI specialists, you could kind of consider to be like the Crestas or the Decagons or the Parloas of the world, the true AI companies.
But it also could be other companies, like a nice Cognigy that has both the CCAAs and the, you know, the AI from Cognigy or, you know, Cisco, that kind of plays in all these different areas. For example, you know, I Mean, I could go on and on. There's, there's tons of companies in that space, you know, or you could look like a dialpad who's a, you know, a, you know, certainly a contact center provider. But they've really increased their visibility on being an AI specialist. Same thing with, like ujet. So anyway, there's so many companies out there that, you know, that serve this industry. So it kind of depends on what's the buyer's perception of you as a vendor. Like, do they look at you as a CCAS provider or do they look at you as a CRM provider or do they look at you as an AI specialist? Moving forward, you want people to look at you as an AI specialist, you know, over a CRM vendor, over, you know, CCAS vendor. That's why you saw, you know, look at all that Salesforce has done recently, you know, to really be an AI specialist more so than a CRM vendor, even though that's probably still how so many people look at them.
But yeah, I think it's happening, happening pretty quickly and I think those are some of the reasons why.
[00:16:15] Speaker A: So with, with that AI specialist kind of growing importance really rapidly on the partner side, are partners at risk of being displaced or should they try to become the AI specialists themselves?
[00:16:28] Speaker B: I think they need to become the AI specialists themselves. I do think without that AI expertise, I think they absolutely risk being displaced by competitors.
So. And there are a lot of channels, you know, VARs, MSPs, you know, systems integrators and not so much systems integrators. But there are a lot of channels out there right now who are just kind of saying, I'm not getting into this AI. I'm doing fine with phone systems and contact center, you know, acds and ivrs. That's not going to last. So if you're in that space now, I don't think, you know, you're not going to be able to move forward without having that AI specialization. So even those, you know, even if you're a partner, channel partner, you have to be known as an AI specialist as well as I would say an integration specialist. I think that's very, very important for partners is to be able to do that integration and migration from one provider to the next and do so with a lot of knowledge of AI and how that can help. For sure.
[00:17:26] Speaker A: Absolutely. Absolutely. So there's a lot of great findings in this research that you did.
We could talk all day about
[00:17:34] Speaker B: it,
[00:17:35] Speaker A: but I did want to, you know, leave everybody with some advice as we wrap up here. So if you are a vendor's channel chief right now, what is the one thing you know that you would change, say, in the next quarter or next year based on this data?
[00:17:51] Speaker B: Oh, that's a good one.
You know, I would say probably more than anything, it's right. Sizing your channel. So there are many companies that have thousands and thousands of channels. And I think moving forward, vendors are going to have to focus more on their channel relationships and help train those channels if they want to be true partners. So make sure that they have the AI expertise that aligns with what you're doing, make sure they have the integration expertise, and just to be able to kind of coach them along on a lot of the things that they may need to do, that they understand what you're doing with products, that you can share success with customers. And I think that becomes a lot harder when you have 8,000 channel partners. So I think some of what you need to do is really right, size your channel to where you need to be geographically, from a product standpoint, from a capability standpoint, and maybe make some tough decisions to let some of them go.
But I think being able to give the partners that attention is really going to be vital. They need to be AI experts in order to work with you if you, in fact, are an AI expert, which every platform vendor should be at this point.
[00:19:03] Speaker A: Now let's, let's flip that around and talk to the partners. So if you're a partner, what's one move that you need to do to stay relevant? Relevant, especially in the AI specialist era and customers moving to purchasing direct.
[00:19:19] Speaker B: Yeah, I don't know if I have one. I could think of a couple. Definitely relationship management. Because if they're buying more from the partner, you want to be the one in there. I'm sorry, if they're buying more from the platform provider, you want to be the partner that's in there saying, okay, great, they've bought from you, but let's work together to help this customer, especially larger customers who know they need partners or are willing to pay for partners. So, I mean, I think it's that relationship management, not only with the platform provider, but also with large enterprise organizations, for sure.
The second thing I would say there is definitely, as we've been talking, get your AI training up to speed, not only being able to advise your customers on how to use AI, where it might make sense for them and so on, but also how are you using it internally. Because if you're trying to sell it to organizations, what we talk to enterprises about A lot is ask your provider how they're using it. That'll tell you a lot about how advanced they really are. You wanna be able to use it internally. I know one vendor I talked to said we're paying flat out cash bonuses to our employees who come up with innovative ways to use AI. That's impressive to me. So stuff like that, you wanna understand how they're using it, but just making sure that you, that you've got the AI expertise and capabilities, but you also don't lose sight of your nuts and bolts. You know that you do know how to do the integration and migration work that are so important when companies work with partners.
[00:20:40] Speaker A: All right, and like I said, this is just kind of the tip of the iceberg of everything with this research. But where can people go to get more research like this or talk with Metro G about it?
[00:20:53] Speaker B: Oh, yeah, of course, you know, you can obviously go to the website www.metrogy.com. you can see all of our research there.
In some cases you can just buy it online. In other cases, you know, if you want to talk to us about a relationship, you can just fill out a form on the website or just reach out to salesmetrogy.com and we are very low pressure, you know, just reach out. We can tell you what we do and if there's a, you know, a reason for us to be working together, great. You know, if not, we still always like to hear from people and stay in touch. We also post a lot on LinkedIn, so if you look at our Metro G LinkedIn channel or our own individual anal analyst channels, we post a lot there. And then we also have a newsletter. So if you go on the website, you can register for our newsletter and you'll get a lot of, a lot of research and data and links there.
[00:21:37] Speaker A: Awesome. And
[00:21:37] Speaker B: the newsletter's free and it's, you know.
Yep.
[00:21:41] Speaker A: And. And it's, it's very. It's a very good and thorough newsletter with a lot of research in it.
[00:21:45] Speaker B: Yeah.
[00:21:46] Speaker A: So.
Well, Robin, thank you for walking us through this.
So that's going to wrap up this episode of the Metro site. If you want to dig in more like Robin said, you can head to the Metro G website and see what we have posted there around it, or you can reach out to anybody on the Metro G team and we'll be happy to talk.
If you found this useful, make sure to subscribe to the podcast or share it with a colleague.
So thanks for listening, everyone and we'll talk to you next time.
[00:22:15] Speaker B: Thanks, everyone.
