Mastering Partner Success in the Modern Partnership Ecosystem with Jay McBain

Show Notes

This week's Investible Partnerships™ podcast episode features Jay McBain, Chief Analyst at Canalys, discussing the importance of addressing challenges such as Partner Success collectively at an ecosystem level. This approach is crucial for unlocking a $4 trillion industry opportunity and securing sustained profitability for all stakeholders. The episode delves into the Modern Partnership Ecosystem, exploring topics such as shifting buyer demands, developing partner value propositions, and marketplace economics. Tune in to gain insights from Jay McBain on strategies related to recruitment, skill enhancement, and building reliable teams that leaders in the channel and ecosystem can implement.

Key Takeaways

00:00 - Introduction

00:04 - Buyer Demographics , the shift in understanding the buyers journey and behaviour.

12:23 - Partner Value Proposition , the impact on deal value with a focus on margins.

12:39 - Partner Types and Specialization, who is serving and surrounding the customer that vendors need to work with.

17:46 - Partner Expertise and Buyer Teams, the categories buyers use to choose a trusted.

25:19 - Platform Models , how the shift to platform models is changing vendor behaviours.

29:34 - Platforms Drive Innovation , not consolidation.

36:43 - Marketplace Economics, how marketplaces are shifting the partner and buyers behaviours.

43:13 - Partner Credential Checking, buyers want to know can you do what you say you can do, today.

45:04 - Partnership Leadership Structure, the 6 roles that define true leadership and success in the ecosystem.

46:49 - The Importance of Strategic Alliances, scaling platform models by working with large companies.

47:53 - The Partnerships Fast Five ( what is on my guests mind)

"A platform is really a degree of gravity, where you are, you know, you're having demand of services partners that have this multiplier opportunity."

“We've been talking that way since August, the 12th 1981. Were the leading companies, the ones that are growing the fastest, the ones that are valued the highest on stock markets are speaking at a multiplier language for every dollar that we sell, and again, it doesn't matter how it's sold.”


Des Russell  00:00

Hey, Jay, welcome to the investable partnerships podcast. It's so good to have you here.  It's a busy time. I know you're on a plane all over the world, busy time in our industry. And I think it's taken about five months for us to actually link time zones and calendars. I'm certainly appreciative of you being here and sharing this conversation with our audience who are channeling ecosystem leaders looking to be drivers of partner impact. So for our audience, I don't think I need to give an introduction to Jay but there is a respect that I'm going to pay to Jay . Jay McBain is a leading analyst at Canalys. And from Jays perspective, what I love about Jay and what he's putting,  through for our community is the thought leadership , visionary thinking, grounded by data and insights. And I think it's the data and insights that really illuminate the visionary thinking and what's actually going on in our industry.  So Jay, thank you so much for being part of our industry. And I'd love to give the the opportunity for you to tell our audience a little bit about yourself. But I want to do it with a little bit of a twist. And that it's really about share with us what you've been most passionate about, that you're working on lately.

Jay McBain  01:26

Sure, so just about me, I've been around the channel partnerships for 30, over 30 years now, I look at them from all angles, but there's two altitudes that really fascinate me and wake me up in the morning. One is, you know, the predicting the future, declaring the decade of the ecosystem, watching as the platform economy takes shape.  Watching as our buyer changes demographically this year, watching the end of the cookie really, you know, ground shifting trends that all come together to make or break kind of winners and losers in this industry. The other one is landing the plane, I don't really do much in the middle frameworks, templates and stuff that belong on PowerPoint slides with, you know, smart people, building these as consultants. Landing the plane is let's surround the buyer, let's figure out who the seven trusted partners are.  Let's figure out the millions of companies that are competing to get into those seven spots. Let's look at the 10s of millions of people that make up the partner channel in total the ecosystem. And look at the 10 million people who work at vendors and distributors and work and figure out how all 20 of million of us work together, what we read where we go, who we follow the underlying influencers, the underlying technology, the programs, the processes, there's just so much to dig into as names, faces and places and how this whole system works to drive $4.94 trillion in tech and telco this year. Yeah,

Des Russell  03:07

It's an absolutely unbelievable opportunity in front of us that we all that we're all actually a part of. And I know that you've been super busy lately, I think I counted seven different blogs that you've given, there's so much rich data, there's so much rich insight that you've provided for us since the beginning of the year. That's seven. So that's more than one a month. So keep it going.  But I know that there's a massive team behind you at Canalys that you work with that are also visionary and thought leaders in their own right in their own segments.  But when you think about what you're actually working on right now. And you think about what's the most exciting thing that you see happening in our industry right now?

Jay McBain  04:04

Well, the most exciting thing is a different buyer. By the end of 2020 for the majority buyer of tech and telco the $5 trillion businesses and governments will be a millennial born after 1982 different psychology, different buying behavior, different journey, you know, a completely different animal that we need to think about and question.  You know, how they go through that buying cycle, how they build a team around them, the seven people that really influence and support them through the different parts of that journey, how they execute, really, for everything else rotates around the end client.  And for the first time in 43 years when you go through a major demographic shift. You know, we have to shift ourselves and switch gears. Make sure that obviously what's worked with baby boomers what's worked with Gen X, you know, continues to work but I'll say that there's an absolute 180 degree turn, in many cases in terms of how this new buyer thinks and how they work.

Des Russell  05:10

Yeah, it's something that I've definitely, definitely seen with the customers that we work across vendors and distributors. And you know, recently, I think the past three, four weeks, I've also been on the road a bit. We've had the AWS summit that's moving across APJ. At the moment, it was in Sydney a couple of weeks ago. Then we've had the Microsoft AI innovation roadshow, which has been a roadshow  around a and ANZ. So there's a lot of happening. There's a massive amount of, well, there's this, we call inflection points. But and I like to talk about this. But when I think about what's actually going on, in our particularly industry, we've got these macroeconomic conditions, we've got a complete change in how we are viewing the way technology, as you say, is bought, the way we engage with our customers. But what about things like AI that is probably the biggest green light that is being shone on everyone in our in our particularly industry, as well.  You're seeing people like Stripe Kajabi, all these SaaS vendors starting to bring a massive amount of AI capability into into this market. And if we look at our traditional distribution game, we look at our traditional Buy-Sell relationship that we have with with within the channel. I think, what's top of mind for me and what us what I've heard back from Channel and ecosystem leaders that I've been talking to you on the road is that there's this theme of partner success.  There's this theme of how can we be more successful with our partners. And I think if we start to break that out, partner success means a tremendous amount of things to everyone. But when we think about partners, success, and I think about this as this is actually not just a vendor problem, or a channel leader that sits at a cybersecurity vendor, it's actually an ecosystem problem. It's an ecosystem problem and addiction, it actually stands in the way of our success in that $4.3 trillion opportunity that that you talk about as well.  So when you think about what's happening, and you know, you've been on the road about what is happening in the in the channel and the ecosystems landscape right now, what are people struggling with? What are people actually double clicking on, that you've seen in the on the road right now?

Jay McBain  07:57

Yeah, so I mean, we've got to engage, obviously, the big ones you mentioned AWS, Microsoft, and Google at their biggest events that are bringing partners in from around the world. We've got to engage at the sales forces, ServiceNow workdays, Marketo is hub suites, etc, that, you know, from a SaaS perspective are bringing in, you know, their biggest partners, we're working with the biggest cybersecurity companies are 6500, security toolmakers.  But this is the year of the platform. And we've been working with the top 20 of the largest in terms of forming these platforms, and how that industry is going to progress. But suffice it to say, there is a whole partner success partner experience element to this.  And we've been on this early, we've been watching companies make changes. And these changes are something as simple as the language used with 35,000 vendors in the world competing for partners, mindshare. 99% of them are still talking through the lens of margins, resell my product and make, you know, whatever percent margin, front and back in margin and here's your market development funds. And by the way, if you sell enough of it, you'll be a gold or silver.  You know, we've been talking that way since August, the 12th 1981. Were the leading companies, the ones that are growing the fastest, the ones that are valued the highest on stock markets are speaking at a multiplier language for every dollar that we sell, and again, it doesn't matter how it's sold.  Today, our industry has 73.2% through the channel to through and with the channel. The fact of the matter is, whether it's sold on a marketplace, whether it's sold direct, doesn't matter. There's a whole new economics that we can talk about in terms of how that works. But forget that for a minute. Forget about making that 3% margin and start talking about how you can make 300% of the deal. Working on a $100,000 deal, figure out as a services partner and an integration partner, how you can go win in the 5,6,7 time multipliers, and I'd rather be making three times the deal at 75% margin, and not really spending too much time. You know, navel gazing over what margin we're going to make if we happen to collect the customers money on behalf of that vendor.

Des Russell  10:17

Yes, and I think we're looking at the multiplier that you're talking about. And it's quite, it's quite rich in the hyper scale ecosystems, there's some very clear multipliers that we talked about, I think Canalys,  at AWS reinvent, we talk about the $6.3 dollars per revenue from an AWS perspective, I think from a Microsoft perspective, it's closer to $10, give or take a couple of dollars around there.  But there is a significant opportunity, right there for partners across the ecosystem. A question that's always been on my mind, though, is when we talk about the addressable market, and we talk about how many, we kind of start to take our  450,000. channel partners or IT technology partners, and you can correct me if I'm wrong. Yeah. Because I'd love to get a little bit more insight.  Which is your we've got this massive wash of technology providers, you've got MSPs, you've got different business models, you've got ISVs. When we think about this, in terms of the collective opportunity that sits across cybersecurity, artificial intelligence, cloud, disaster recovery, infrastructure, you name it. Are we all is every vendor actually working with the exact same pool of partners?  Or do you see that there, there is an actual uniqueness around the types of partners that vendors are working with because that the mindshare, the attention seems to be very, very wide from vendors, and not enough focus on a very subset or specialize it specialization of the partners. I'd love to get your your view on that.

Jay McBain  12:18

Yeah, just to close up the last question, Microsoft is $7.63. If you're an ISV, you can go over 10 AWS is $6.40 Salesforce is $6.19, HubSpot $5.80. We've done the work for snowflake and VMware and HP. I mean, we could kind of talk about that multiplier.  But that's we're down to the penny in terms of where the opportunity is. And that gets to your next question, which is, today, there are 20 business partner types. If you're seeing this on video over my shoulder, there's a Venn diagram. And yes, that Microsoft channel that grew in the 1980s with IBM, and then Compaq and Cisco. And, you know, that's almost a half a million partners, Microsoft, they'll say they have 470,000 partners today.  But one interesting nuance to that group, which is right in the middle of my Venn diagram, is that there are now 335,000 companies, partners in the world that have at least one manage contract. Managed Services is now like a $548 billion industry. One out of every more than one out of every $10 that businesses and government spent are on a managed contract.  And if you look at the amount of MSP activity and those bars moving into MSP land, there's a major shift and that's coming out of telco that's coming out of professional AV it's coming out of, you know, the retail point of sale channel. It's coming everywhere in terms of recognizing a different business model, a different way to surround the customer, and add value every 30 days forever. But there are millions of other partners, digital agencies, there's 200,000 digital agencies in the world. 78% of them are now tech services companies.  There are 300,000, accounting and CPA firms. And 81% of them are now tech services companies. So every professional services company in the world, regardless of which 27 industries they're in, or what they're focusing on in terms of a buyer, they're about 80% over now, in terms of now tech services, they'll do the rest of the stuff they used to do, you know, on page four of their website, they're lining up that's on the right side of my, I guess on this side, left side of the Venn diagram, but you mentioned ISVs, there's now 250,000, ISPs.  And because generative AI is now creating code, no, we're not we're past the no code, low code stage. We're at the literally here's my idea, go write me an application. You and I could create a new company today and then by Monday, habit life and selling so that 250,000 is quickly going to a million. If you look at emerging tech, IoT and AI automation blockchain quantum 3d printers. Metaverse, whichever future you want to talk about, there's 800,000 companies there. Hundreds of 1000s of board in the cloud consultants. So there are 20 different partner types competing. So that's millions of companies competing for the seven slots around every buyer that makes up this $5 trillion industry.

Des Russell  15:22

Yes, when you know when you start to, to kind of like there to kind of go, there definitely seems to be a massive amount of opportunity. But I think when when we work with our customers, I think that we'll check in on where that opportunity lies for them, bringing in their customers bringing in their, their, their skills, their capability around their particular partner channel, bringing them where they are with their, their particular partner channel.  I think that that kind of that to me is where, where the challenge, but also the opportunity is for them. So let's kind of shift gears a little bit, because we're competing for mindshare, we're competing for attention. We know their channel and ecosystem leaders are really wanting to be these a driver partner, in fact, at the at the end of the day, so what are you seeing? What are you seeing that some successful ecosystems and channels?  What are they adopting, when it comes to trying to deal with these particular channels surrounding the buyer, bringing the right motion of partners with the right capability to help deliver a value add? Because I think that that's important, the partner role is a value add to the product or solution that our vendors are positioning, and not just a deployment or not just a transactional piece. So what are you seeing that successful ecosystem leaders are starting to adapt in this particular area?

Jay McBain  16:59

Now, or you could say that the products the hardware and software products are a value add to the services that the channels providing? Yep, yes, reverse. Today, for every dollar of hardware and software in the world. There's $2 of services. And those services are outgrowing products.  So the biggest partners are outgrowing the vendors that they represent. So I didn't really exactly answer your last question. So I'll do that now. And then it links to this answer. The answer is, if you look at the seven people that surround the customer that they trust, there is no single throat to choke anymore. There's no trusted advisor, it's a group, it's a team sport. When you look at the team, they're not looking for seven bars, or seven MSPs or seven, have something. They're looking for people that have different expertise.  And here's how it works. I need somebody with expertise. In my buyer type. I'm in marketing, this is my role. This is what I'm kind of doing. This is my know what I need to get accomplished, or I'm gonna get laid off. I need somebody that's an expert with me. And by the way, that could be a digital agency that understands they've been with me for 50 years, they built my website, 20 years ago, they put me on the front page of SEO Google, you know, 10 years ago. And now I need them to, you know, with the 13,080, Mark tech and ad tech tools, and the end of the cookie that we're facing off right now, I need that agency to help me through this. Now, I happen to be in a certain industry, I might be in one of the 297 sub industries in Australia.  So I need somebody that's an expert there. There's compliance, there's governance, there's regulation, all kinds of differences. I need somebody that's an expert in Australia, because it's very different from New Zealand, it's very different than Singapore, it's very different than Japan. I need a geographic expert. Again, for those compliance reasons, make sure that me or my boss doesn't end up in jail. Yeah, I need somebody that understands my segment. If I work with 200, colleagues, it's different than working with 2020 1200 1000. And it's very different than working with two colleagues. So SMB alone has six different segments.  So I need somebody that understands the particular challenges that I have on resourcing, and what I can get accomplished. I need somebody that understands the 2000 categories of hardware, software and services. You know, I need to bring in perhaps a cybersecurity expert, I need to bring in an expert on business and disaster recovery. So I need to, you know, build a room with somebody that's deep, deep, deep on the product side. And then finally, I mean, all the models that are swishing around, you have subscription and consumption models, your product lead growth models, you have managed models and perpetual model, there's 20 different models. So am I going to consume this? Am I going to buy it on a marketplace?  How, how is this all going to work? Is it going to be at the edge? Is it gonna be hybrid? Is it going to be in the cloud? How's Gen AI going to layer into this? So in that there's just six segments right there in terms of how these buyers choose their teams. And that six or seven or the seven people that surround them don't compete. They're all after that multiplier dollar. But it comes to multiplayer comes down. And this is to your next question. The multiplier is very specific services. If you participate with the customer before the point of sale, you might be doing marketing to help them get educated. You might be doing consulting, you might be doing configure price quote, you could be doing design and architecture work.  I mean, there's 50 services that you could be providing that you could be building for. At the point of sale, they're gonna buy a seven layer stack today, they don't buy one product. I used to work at IBM where you couldn't get fired for buying IBM, and we're trying to be all things to all people. Well, today, the average deal size is seven that the hyper scalar level out the SAS layer at the security layer. It's always seven distributors. I f you go talk to Dicker, if you go talk to NEXTGEN or Ingram. I mean, there's selling seven things on every invoice. Yeah, it's a stack, and then integration first buyer who's now the millennial, you know, this millennial buyer. That's what they ranked number one and their criteria. So you're you're in this world of stacking together seven things with seven different people and orchestrating all of that. That's a very different role for a partnership leader than what we would have had only a few years ago.

Des Russell  21:22

Yeah, absolutely. Absolutely. So when you think about what are some some, what, what are you seeing a wave, you're seeing some successful ecosystem models that are being that are being adapted to or moving towards trying to deal with this challenge or not being successful? What comes to mind for you?

Jay McBain  21:45

Now, what we're, you know, we've been confused a little bit, because, you know, 10 years ago, we write might or wrote, read a blog, that was software's eating the world, we might have been running around and telling people that, you know, every company in the world is trying to become a tech company. And I'll tell you that all the pharmaceutical companies and the banks, insurance companies, auto companies that I've met, aren't really kind of becoming tech companies.  They're digital transforming to serve this new buyer. But they're still selling for pharmaceutical drugs, they're still selling cars, they're still selling insurance products. That hasn't digitized. So the fact of the matter is, they're actually not trying to become a technology company. They're trying to become a platform. Wall Street has been very specific for all global companies, that if you want the big valuation, you know, that big trillion dollar valuation, if you're now Microsoft is larger than Apple, if you want that big, you know,  Google or AWS, you know that one of those big big valuations. But if you're a SaaS company, and you want to be valued in the hundreds of billion dollars, now you get into the snowflakes of the world. And the service now is and obviously, Salesforce has gone well beyond that. But if you're in this mode, there's a degree of platform that you're trying to achieve.  And everybody answers platform differently. We wrote a 91 Pager earlier this year with HubSpot in partnership leaders, defining what this really means tactically, even last week, I wrote a 5000 page 13 part dissertation on what it actually means to be a partnership leader and build a platform company. But your people think it's just a big UI UX single pane of glass, your CFO, you know, is looking at the private equity or the public, you know, favor that the share price will get your, you know, a CEO kind of thing somewhere in between those two, they everybody thinks something different. A platform is really a degree of gravity, where you are, you know, you're having demand of services partners that have this multiplier opportunity, people who could make two or three or $4 for every dollar you make, they're lined up out your door, because they recognize that opportunity.  You have another lineup of people who are tech integration partners, using you to get into that seven layer stack using your marketplace to get tagged onto a deal using your future credits for their revenue. That's what's happening. The hyperscalers right now there's $341 billion of future credit sitting there, that every company on the planet, whether you're a product or services can take advantage of that.

Des Russell  24:32

When you think about this platform piece, you know, there's there's, there's definitely I think cybersecurity. This is probably one of the biggest areas where we've seen a real shift in this platform thinking towards what you've just described as well.

Jay McBain  24:49

This is the year of the cybersecurity platform. Starting this year. We have 6500 Security toolmakers vendors around the world. And by the end of this year, we're going to have Four to five platform players, much like you haven't hyperscalers, much like you have in the lines of business with SAS, you're going to have these super powerful platforms that run marketplaces that run the integrations that help customers into the seven layer stacks that get these trusted things put together.  Again, integration first buyer, you know, wants that first, they'll buy a product 80% as good as the next one, if it works better in their environment. They're looking at these platforms. So what's happened in security is, you obviously have the slots, like, you know, we believe Microsoft is going to grab one of those platforms, spots and security. You know, with the Splunk acquisition at Cisco, they're absolutely looking at taking one of those slots. Look at the success, for example that CrowdStrike has had Down Under.  And, you know, the growth numbers that they put up, they partnered with Z scalar and Okta to fill out the zero trust kind of sassy model. But they're absolutely gung ho on getting one of those platform spots. All Palo Alto is talking about now in the last three to six months is platform this and platform that and they're eager to get one of those slots. I was at a fortnight event, you know, a week ago in Vegas, every sign had platform written on it. So that's the talk. But you either get the platform spot, and everybody works with you and the demand the gravity comes into you. But at the same time, Palo Alto is going to have to work with Microsoft and Cisco, and Google and AWS and other platforms where they're not, it's a parent child thing. Yeah.  Biggest platform of their CISO buyer. In the larger federal government CIO purchase, they might be a one to one click on one of those marketplaces behind consumption of infrastructure. So the channel leader has to be bifurcated in building this platform around the 6000 others, ISPs and the customers, but at the same time going to figure out how to work with these trillion dollar companies. And be in that one to one click.  And you're already have companies like CrowdStrike, you have companies like Palo Alto, and Splunk, and snowflake who have issued press releases that they're already selling a billion dollars. So AWS alone, yeah, yeah. us now to be in the top 10 list of distributors worldwide.  And they beat that prediction we made two years ago, by about a year. These things are happening faster than we can kind of track. But the changing the economics of partnering, it's changing how buyers consume and subscribe to technology. And the partners that are on the front end of that. And the vendor leaders, partner leaders that are on the front end of this are having unbelievable, like double and triple digit success, serving this new era of computing.

Des Russell  28:00

So we kind of go platforms is where we're thinking or where we know the industry is heading in terms of consolidation in terms of the changing ecosystem model, because the platform and ecosystem piece, but let's talk about this double click on this around this innovation piece, because there's one piece that's going to bring all of this together.  And this is ecosystem management. And I know that you spend a lot of time you've also got a couple of lovely infographics behind you there around ecosystem management, because we've got in a platform economy or platform, platform economy, we've got revenue on the one side and then the other side, we've got this from a channel point of view, which is finding the revenue opportunity, but also then enabling partners to go after that particular revenue opportunity.  And when we start to think platform within consolidation. What are you seeing is happening in the platform on the ecosystem management space, which is absolutely critical for any channel and partnership leader that's looking at a platform type strategy.

Jay McBain  29:18

Yeah, so one thing you said platforms do not mean consolidation. Every time we've seen a platform established, the level of innovation and the level of planets surrounding that gravity that sun explode, exploded.  Okay, platforms are created and marketing like Eloqua and Marketo, and Pardot, and HubSpot. Those four platforms became the first layer of the seven layer stack. Every year we've added one to 2000 Mar tech and ad tech companies to the point now we have over 13,000 of them.  No consolidation. It's a bigger seven layer stack soon to be an eight layer stack soon to be a nine layer stack. It's the opposite of concern, you know, we're going from 250,000 to a million ISPs. AWS, same thing is happening at that level and security, the same things gonna happen there, there's going to be another couple 1000 toolmakers, in the next couple of years, thinking they can be layer seven or layer eight of a zero trust sassy deal. So it doesn't mean consolidation, it means the exact opposite. It drives innovation.  So this is happening in the channel tech stack over my shoulder is for 40 years, we were building technology to kind of measure monitor, manage linear tier one tier two channel models, which are kind of distribution led channels of distribution strategies, you know, people who collect money on behalf of us and how to make sure that all the 100 elements of education and training and, and motivation, incentives, loyalty, and long going you know, co marketing through to in with channel marketing, all the things that plumbed this industry for 40 years, and today is 73% of our industry.  I mean, it's a critical component to every company's town is to make sure you've got the resell part of it figured out. But now the six of the seven partners who don't resell, either co sell co market, they co develop they co innovate they co something, but in that they don't trigger a transaction, which doesn't trigger money. So looking to support a partner that doesn't transact is a completely different mindset.  And there's nowhere in 99% of the vendors that are out there, that there is money available to invest in those co innovation partners and CO development in front of a new technology integration buyer, which is absolutely ludicrous. But you ask like what differentiates a winner from a loser, you know, stronger, they've invested in these non transaction transacting modes, they've invested in cosell and CO marketing, all these things that will take us there. The other thing is that you kind of look wider on the peripheral and understand how these partners engage, where they engage how they, the more you learn about how this all works. And you share data, there's five new islands of innovation that come for non transacting partners.  If I want to measure those 28 moments before my customer makes a decision. Well, in the past, I would go buy the data from Facebook, Cambridge Analytica and go buy the data from Google, where the products on the internet, everything we do, including talking to our wife in our kitchen is recorded by Alexa, everything is there to be bought. That's why you see an ad for whatever you were just talking about, you know, five minutes later on social media. Well, that stops soon. Google's just kind of finishing that off and being nudged into doing that. So in those 28 moments, you're going to have to go partner with each of those 28 moment owners, and plot twist.  These are potential partners of yours that you've never considered as partners before. They could be affiliate affinity advocates, ambassadors, influencer, this is the Kim Kardashian isolation of the channel. If you wrote an e book, that could nudge my customer forward, if you recorded this podcast, it could nudge my customer forward. If you ran a Chamber of Commerce event that nudges my customer forward, I would like to partner with you. I'd like to share that data, compare data.  So when they come to me, and when they come to you, we're going to see these moments. And if we do that effectively, earlier in the journey, you win more deals, if you see them earlier in the journey, the better we orchestrate, digital or digital only moments, the better we integrate all that through the 28 are going to be the winners going forward. So there's five layers of technology already available to serve those 28 non transacting moments.

Des Russell  33:54

That's, it's, it's absolutely and then we kind of, we start to think about well, we're going to we've got to touch on marketplace because I think platform marketplace and what's happening in the ecosystem is absolutely paramount to to reaching those customers and bringing in bringing in their buyer experience.  So but there's there's mindshare in the tension, this mindshare and attention that we're constantly trying to draw from, from this ecosystem, from channel partners, to see the opportunity to see these moments and line up behind these moments.  And I kind of feel like what's happening in the larger vendors, let's talk about the AWS or the world and the Microsoft's and the Googles. That is actually this line in the sand is this this is this is the line in the sand in terms of what we're prepared to invest in to now move this platform economy to now move towards marketplaces.  And there is a huge unwash, have partners that just aren't ready to either take that step forward or just are not  relevant. They're there either. So in your opinion, do you see this as a cleansing out of the next wave of the types of technology partners that we're going to see service that service this opportunity? Or do you think that there is a way in which these partners can come through as well?

Jay McBain  35:30

Well, I think all good entrepreneurs make the moves necessary, make the pivots necessary. Right now, they're facing a pretty extraordinary time in economics of partnering. And it was driven up the marketplaces.  So first of all, marketplaces are growing at 86% compounded, it's unbelievable. I talked about AWS and a few of the big things, you know, reaching the levels of top 10 distributor worldwide and things like that. So what's happening between that is the new buyer, digital first digital only, subscription consumption based so when you're actually transacting today, it's only for the first 30 days.  And then 30 days after that is kind of a renewal or upsell, enrichment opportunity. So it's not really buying the million dollar thing anymore. It's it's $9,000 a month forever. And you don't you know, buy Netflix from your cable guy in the white van.  You don't buy Spotify, you don't buy subscription, your toothbrush, like you buy it in a digital marketplace. The interesting thing about digital marketplaces, though, at Microsoft at Google at AWS 30% of the deals that go through there are actually partners clicking buy on behalf of the customer.  So one thing that marketplaces did, Microsoft did at first Google did its second AWS just followed is dropped the fees to 3% or less. The cost of working through a marketplace of changing money for a vendor, the cost of resale has finally been answered, is the same as a credit card swipe at a restaurant, no Visa or MasterCard will charge you 3% or charge the restaurant 3%.  Well, Microsoft, AWS and Google will charge you 3% or less. So if you happen to be a pure reseller, the act of taking money on behalf of a vendor taking on the risk that that customer is not going to pay, you have to be a Microsoft partner taking on the risk that you're gonna have to pay out the rest of their contract.  Not only are they not paying, but you have to pay it out. Also taken on the time value, cost of money, net 30, net 60. Net 90 waiting for them to pay these interest rates and inflation, everything else like cost of money is growing as an expense. The cost in the end of not collecting and having to go hire Biff to break knees, that entire cycle in the 1980s, we thought was 40%. In the 90s, we thought it was 30.  Now, it's kind of maybe 20. Unless you're you know, kind of a niche, it's higher. But that entire gross to nets, you is now being offered a different way only 3% of that has to go to the actual changing of money 20% In private offers multi partner offers and a whole level of technology now that you can still pay that out, but pay it for the non transactional moments.  That consultant brought that deal home, the design architect that brought the deal home that early stage marketeer like go pay them five bucks for that ebook, start spreading the money like peanut butter, and you're going to have the tools available in the marketplace to successfully do that. When you kind of extract from that point of sale. That's what's happening.  Microsoft was the first to the point system. And we're working with dozens of other companies right now rolling out their point systems to say that, you know, the whole point of sale the 43 years later, we kind of know the answer. And if you happen to be only a reseller today, just understand that every vendor that you have is on course over the next 10 to 15 years perhaps to roll whatever margins you have today to three, that's going to be it's going to be a road to three. Yeah, yeah, absolutely.  For resellers, when you when you're making 40% margin, you gave away the consulting for free the implementation for free, you gave away so much for free because the richness was in the deal. When the richness isn't in the deal, you're gonna have to go figure out how to be a mini Accenture and charge for that consulting charge for that implementation. And every time you roll a truck every time you pick up the phone, everything you do with that client, and by the way, this new buyer is okay with it.  They understand you don't work for free, you got to pay your mortgage and you have kids probably go to the same school as their kids. So in the end, though, they want just a digital way to see that. You know, this is how much you work per hour. This is how much the contracts cost is how much the managed services are. I just want a good picture of everything at a detail level dope.  Give me this whole big number anymore. Yeah, yeah. And this is where distributors have to start playing in that as well, they have to come out of hiding. There's a wonderful value behind the scenes, but the new buyer hates white labeled stuff.  New buyers really smart, they can go on LinkedIn and see as a partner, you have seven people, not only that, they can read the resumes of all seven people. So your website is talking about zero trust and all those wonderful MDR and XDR? You know, that's great, I know that none of your employees are staying up 24/7 Watching my network. So bring to the table who's standing behind you?  If products don't just show up, drop, shipped and configured, bring to the table who made that happen? That's the Group of Seven. You know, I want I don't want anybody to be behind anybody else white labeled in an ecosystem. No one hides? And the marketplace is the place that's breaking down that menu for them. To the penny.

Des Russell  40:35

Yeah, absolutely. And it's, it's the role of, it's this role of the channel pot, the traditional channel transactional channel partner in this marketplace, which I absolutely see as critical to be able to serve us the opportunity with the buyer. But there is a, there is a lot to be done in this traditional channel model of understanding that the economics of the marketplace, the buying patterns of the marketplace, and how they actually deliver value in that marketplace. And I know from an AWS research that Canalys that AWS customers, was 83% in terms of specializations, they look for their specialization, who is not just standing behind me, but who's actually got the skills and can do what they say they can do as well.

Jay McBain  42:02

Yeah, there's two numbers that went to that. The second one's more surprising than 83, 83 was the How important are certifications competencies, really working with your vendors program, and to show your success. And, you know, one of the place one of the spots that really exposed this was generative AI, because there was a year ago today that it became a consumer trend.  And we all quickly had to go get really smart because our friends and neighbors and clients started asking, Well, I'll tell you, when no one in the world has a university degree in generative AI. No one has, you know, 10 years of experience in generative AI because other than working on Watson beating Jeopardy, you know, 15 years ago, unless you were on that particular team, you don't have that kind of resume.  So now customers with all these new technologies, new security, new managed services, New gen-ai , all these things are happening, I understand that we're not going to have master's degrees in this, I show your people and see the skills that so not only the 83 now have this is a trump criteria, the most surprising thing to the research was 73% go back and check more than once a year.  So we thought you know, it's important, you're gonna make a decision, and then you kind of set it and forget it. No, I'm gonna go back every six months, because some of these things are so new. Make sure that you're updating your skills, make sure you're the latest version.  I see you got certified for ChatGPT version 3.5. Well, you know, 4.0 has been on the market now for three months,  3.5, you know, pass the bar exam and the bottom 10% 4.0 pass the bar exam and the top 10%. And the latest version of champion GPT is now writing the bar exam.  So in that version, I don't need your skills from two months ago. I need your skills now. So the customers are literally on AWS to cite Microsoft and others, Salesforce, checking your credentials, and making sure you're going back to school to make sure that you're just up and up to the latest level.

Des Russell  44:08

Yeah, absolutely. And so So let's kind of, kind of bring this together from we've got we've got a lot of trends happening. We've We've absolutely got this, this platform, economy marketplaces driving a bunch of differentiation, but also come competition as well. Let's look at the leadership traits.  So when you think about partner, channel and ecosystem leaders that are playing in this economy right now, what are some of the leadership traits that you see really important? Let's call them leadership traits or mindsets that partnership leaders should be thinking about in general and ecosystem leaders should be paying attention to to be able to make the shift and And turning this into a unbelievable opportunity for them.

Jay McBain  45:04

I mean, from a leadership perspective, the modern company, and I'm not talking a small security company, now we're talking, you know, enterprise level vendors right up to the fortune 100 should have a chief partner officer in place, that chief partner officer should have six, at least six vice presidents at this point, they should have a vice president of channel marketing, the 28 moments and putting in a tech stack that can work together with partners to unearth, you know, MQLs earlier and get them over to the sales team, you should have a traditional channel chief that has, you know, 20 or 30 years of hitting their numbers every week, every month, every quarter, gold, silver, bronze driven, an absolute tear on the sales side, making sure that you're driving those numbers.  The third executive is the head of customer or partner success, which is every 30 days forever to make sure our retention rates 108%, which is the magic number to get the big valuation, make sure that for every customer, we lose, we're doubling up every other customer where enriching, we're upselling, or cross selling, we've got a channel built the seven people built around a customer for life. That's my third executive.  My fourth one's the Head of Technology integrations. So I have an integration first buyer, I want you know, if I'm a martec, I want 13,000 integrations. 30. I want 6500 integrations. And I added 100 or 200 new ones each month as new ones pop up. I need that grab. That's my fourth executive, I need a strategic alliances, who's out playing with, you know, the bigger players, because again, you'll be platform to your buyer, but you'll be participating with AWS and Microsoft and others at a galactic scale.  So I need somebody that understands those ecosystems, understands the marketplaces, understands our positioning there. Then my sixth and final executive is a business alliance leader. So I need to walk into the doors of Accenture and Deloitte and cap and KPMG, I need to EY, I need to walk into the doors of the major ISPs. I need to craft these cosell and CO marketing. That's six vice presidents. Only one of them is focused on resell.

Des Russell  47:22

Some big companies but we're also trying to and I suppose that's why some organizations like partnership leaders exist because there needs to be a place for people that aren't in organizations that are just early early stage as well. Building and formulating those six,  roles that you talked about. So maybe

Jay McBain  47:47

And maybe it should be like IBM, and they should only hire Australians in those roles.

Des Russell  47:53

Yeah, maybe, Jay, it's been an absolute pleasure having you on the investable partnerships podcast. You know, I think just the data and insights that ground your thought leadership that you bring to this industry is something that I think, for my listeners, and for everyone in our industry.  Absolutely super grateful for you, and what you do and the team at Canalys as well. Unbelievable. So I like to end the podcast a little bit differently. And we call this the partnerships Fast Five. So it's really simple, really easy. I'm going to go and give you five statements, five questions or statements. And I just want you to think about the first word that comes to your your mind, when I say the statement as well. You don't have to give me a reason at all about about that as well. Okay, cool. So first one.

Partnerships thrive on...

Jay McBain  48:54


Des Russell  48:56

Partnerships embody...

Jay McBain  48:59


Des Russell  49:02

Through partnerships, you can...

Jay McBain  49:06


Des Russell  49:08

Partnerships, spark...

Jay McBain  49:11


Des Russell  49:13

Partnerships succeed through...

Jay McBain  49:24

Joint success.

Des Russell  49:27

Partnerships, Fast Five, done. Jay again, thank you so much. I've really enjoyed the conversation. I know our listeners and our grown listener base on the investable partnerships podcast. Absolutely.  will and for our listeners who aren't yet following you, what is the best way they can get these rich insights from you and the broader Canalys team as well?

Jay McBain  49:54

Yeah, so I mean, LinkedIn is probably the first you said seven major reports. We're talking like 5000 Word reports. every day or every other day, I'm sharing research from around the world. That is more transactional type of research. So there's a daily conversation, but there's a newsletter that goes deeper into these daily trends there. But if you want to send me a, you know, X (formerly Twitter) if you want to get me on Facebook, you want to send me an email. I mean, I've got 20 windows open here, so probably can get way.

Des Russell  50:27

Absolutely I think, you know, you're definitely someone who gives a lot back to the industry as well. I've loved the conversations we've had outside of outside of what we're doing every day. And are you going to be at the Canalys forums Events? Am I going to see you in Bali later in? December?

Jay McBain  50:52

I will be in Bali and December, I'll be in Berlin in Cober. I'll be in Miami, my hometown, also in October, but like everything else channel futures , channel partners Expo is our sister company under Informa so I'll be there.  Black Hat is also our sister company now. So we got all kinds of places that that we're going to be going and telling this channel partner story.

Des Russell  51:17

Love it. And thank you so much for sharing that with our audience today. Really appreciate it.

Jay McBain  51:22

Alright , take-care.


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