Vendors can help partners overcome escalating economic challenges related to Covid-19 through a commitment to three types of support packages.
Following off-the-record briefings with more than 80 partners across Asia Pacific, the delivery of financial aid unanimously tops the list of requests, followed by shifting all end-user business through the channel and offering increased programmatic flexibility.
“From where we’re sitting, it’s pretty clear that the vendor community is proving no better prepared than any party throughout the supply chain to effectively deal with the unprecedented and sudden economic shock associated with Covid-19,” one Auckland-based partner in New Zealand observed. “What we’re not seeing is any form of coordinated effort to ‘manage’ the situation through the supply chain.”
The channel call to action comes amid widespread ecosystem criticism of how vendors have so far managed the fallout of Covid-19 in the supply chain, with the majority slammed for being “missing in action” as economic realities start to bite.
On the flip side, some vendors have been criticised for moving too far in the other direction, spamming the market with information overload yet offering nothing more than “surface-level” incentives which lack real commercial substance.
Featured providers predominantly serve the markets of Australia, New Zealand, Singapore and India, in addition to Malaysia, Indonesia, Thailand and the Philippines. With a focus on tier-2 partners, responses span value-added resellers, managed service providers (MSP) and system integrators, alongside born-in-the-cloud players and specialist consultants.
A decision was made to ensure all partner and vendor names remained anonymous to ensure the overriding issues were highlighted and addressed. While some vendor response efforts were applauded, the majority verdict signalled a channel in need of intervention.
Below is a highlighted summary of partner responses to the question of: if you could request one thing from vendors in terms of added support, what would it be?
From a financial standpoint, one national cloud specialist in New Zealand cited cash flow support as “far and away” the biggest need for businesses currently, especially at the smaller end of the market.
“Recovery of the ecosystem requires two distinct approaches; support while we’re all in lockdown and support when we’re all working to climb out the other side,” the partner outlined. “The combination of measures we see as key are relaxed payment terms right now, coupled with cooperation through both the event and the aftermath.
“This will help spread the impact of failed businesses (and there will be many) across the supply chain while developing new approaches to supply chain management that take account of the likely protracted economic recovery timeframe.”
Other suggestions from partners include deferred payment schedules to soften the cash flow impact, approved by vendors across the board rather than case-by-case at a local level.
“Our customers aren’t in a rush to pay and we can’t finance the gap,” added one mid-tier service provider in New Zealand.
Meanwhile in Singapore, the channel has called on vendors to be more understanding of the situation facing partners, outlining the need for extra credit terms at distribution level to pass down through the supply chain.
“Delivery is being delayed to the customers, especially from a professional services perspective meaning the maintenance support can be extended for a few more months,” advised one Singapore-based system integrator.
“Some vendors have pre-paid services which cannot be delivered at this moment, added to the fact that we are unable to collect money from customers. If the office is closed, how can delivery take place?”
Staying in the city-state, one ASEAN-focused cloud specialist believes vendors should prioritise; fixed currency rates, free cloud credits to the most impacted customers and prolonged payment terms. This is in addition to a 100 per cent partner attachment rate in opportunities, financing of customer deals and management-level meetings to discuss the partner situation.
“Not one vendor we work with has reached out to ask us what this survey has asked us,” the partner added.
According to one Chennai-based partner serving the enterprise space - following a briefing with Yogesh Gupta as executive editor of IDG India - the channel expects extended credit periods to be delivered from vendors by the end of this quarter to help meet fixed expenses during the lockdown period.
“Cash flow is a big challenge,” the partner outlined. “So is payment uncertainties of billed invoices from the customers and uncertainty of back-to-back support for these bills from distributors and vendors.
“We’re also challenged from a new business credit perspective. We're saying no to customer requests for extended credits and making changes to proposals submitted asking for fresh payment terms unlike in the past."
As one Australian-based enterprise resource planning (ERP) provider observed, some vendors are already offering increased flexibility in pricing and payment terms; "initiatives such as get started today, pay in 90 days would make the decision to defer or proceed easier for some businesses given the current downturn and uncertainty in the market."
Operating as a national system integrator and service provider, one Mumbai-based partner acknowledged difficulties in managing on-site support, despite 80 per cent of tasks currently being run remotely.
“The health and safety of our employees is our utmost priority and challenge,” the partner accepted. “Our inward cash flow has also completely dried out with no visible concrete forecast on the realisation of overdue receivables. During and after this pandemic, partners with the mere intention of surviving humbly appeal for support in the form of extended payment terms from our vendors.”
With most businesses currently focused on preserving cash, one trans-Tasman cloud partner cautioned that a move by vendors to extend terms wouldn’t solve the real issue facing the ecosystem.
“If a vendor changes terms to 60 days, the only upside is one period of 30 days, then the customer still has a monthly payment to make and in the future a double payment to make, when they can probably least afford it,” the partner warned.
“For big vendors with strong balance sheets, now is the time to work with your regular finance company and underwrite a proportion of loans to finance the purchase of your products, with deferred terms. This is especially relevant for customers that buy subscription licensing and spend a fair bit each month. This will provide the breathing room to get over the worst of it.”
For one Australian national provider based in Sydney, financial support for the channel will be dependent on how long the crisis lasts.
“Vendors should get creative on how to support the channel,” the partner advised. “Whether that be through different uses of MDF programs or changes to rebate programs given that partners will most likely fail to hit targets already set, as well as stability of pricing.”
‘Feed the channel’
According to one Australian-based MSP, when assessing the support mechanisms currently in place, now is the time for vendors to step up and “feed the channel”.
“Vendors have a duty of care during these trying times,” the partner said. “Now isn’t the time to take leads direct, keep partners busy to ensure they are still around when we finally reach the finish line of this fiasco.
“This also includes putting re-certification on hold. Right now, the common theme is survival for a lot of organisations. The channel must focus on delivering critical projects without the anxiety of certification. Vendors have to be flexible, this is key.”
Staying within Australia, another partner observed that vendors often engage directly with end-users via marketing campaigns but don’t always carry the relationship on-the-ground, especially at mid-market or SMB levels. Instead, this falls on the shoulders of value-added resellers, system integrators and MSPs.
“When things become tough for the customer, they ask the partners for help because they don’t always have a relationship with the manufacturer of the product,” the partner said. “The significant problem we have is cash flow because while we must continue to invoice, it’s often the case that we are unable to collect.
“Licences may not be in use but the commitment is still there meaning vendors must be proactive in designing support programs which address this issue directly. If not, the partner will lose money.”
Across the Tasman, one leading tier-2 partner in New Zealand outlined that the channel is in desperate need of vendor leadership, backed by deeper engagement and investment levels.
“Vendors have to become 100 per cent channel focused during this time,” the partner advised. “Vendor sales teams need to enable the largest asset they have and that’s the local channel, it’s the best ecosystem available to the industry.
“It’s time to push all business through partners and have no direct customers, this will only help to grow and strengthen partnerships now and in the future.”
Meanwhile in India, one data centre modernisation specialist cited “uncertainty itself” as the leading challenge facing partners currently, in addition to managing cash flow and ensuring business continuity.
“But despite all these challenges, I have faith that IT will be able to recover faster due to an increase in technology requirements for all businesses,” the partner added. “Each business will invest in IT to ensure disaster management and to access information from anywhere.”
For one New Zealand partner however, the issue of precedent has also come into stark relief.
“It's well known that a standard modus operandi for, in particular, large multinational vendors is to avoid bilateral arrangements that could create a precedent that is subsequently leveraged by more customers,” the partner said.
“In this sense their primary focus appears to be to make as few concessions as possible and as slowly as possible. My assertion would be that this will not ultimately be a good thing for the channel ecosystem - a whole lot of goodwill is going to be both created and destroyed through this crisis.”
As one Sydney-based MSP explained, flexibility with financial commitments also ranks highly on the list of requests to vendors.
“Holding partners to costs of a digital product that the customer may not be able to use and cannot pay for is unreasonable in the circumstances,” the partner added. “We need to have the support to be able to share the burden across the channel.
“Remember, it’s the end customer that is hurting the most in this. The rush for technology we have seen is a temporary need based on a lack of preparation by traditional businesses. Don’t be fooled into thinking we are immune from the economic shockwave that is coming.”
Across the Tasman in New Zealand, one specialist consultancy firm backed such a flexible approach from vendors, insisting that “strategic goals have been parked, now it’s about survival”.
“You cannot even attempt to sell in this environment or at least you shouldn’t - just look on LinkedIn,” the partner warned. “You must demonstrate immediate value, even a three-month return on investment isn’t enough in this climate.
“Vendors driving end of quarter timelines and deals is taboo so don’t ask partners for updates, the deal has to wait to see if the customer is still in business first."
In response, the Auckland-based partner insisted that the ecosystem retires the vendor and partner labels during the crisis, instead thinking as customers to help navigate the stormy waters ahead.
“We all need to find ways to ensure the customer doesn’t have to pay up-front,” the partner suggested. “Build it into the long-term cost of the solution; this isn’t new and what cloud is about after all but there is still plenty of on-premises activities going on. Finance models have existed forever but they usually have nasty hooks.”
Another suggestion, by a fellow Kiwi partner, is for vendors to actually bypass distribution and engage with MSPs to truly assess the state of the market; "vendors need to get a real view of what is happening on the ground and how customers are being impacted."
For one trans-Tasman system integrator, partner accreditation requirements are also being challenged at present, with the certification process traditionally requiring spend and pipeline quotas to be achieved; "this is a challenge at the current time given our focus is on annuity-based services rather than net new or growth."
With new technology project requests around limiting human-to-human contact hindering progress for partners, the scaling down and cancelling of orders continues to add more weight to shoulders of the ecosystem.
“We expect both vendors and the government to provide more information on delivery delays and shortages,” outlined one India-based data specialist. “This is in addition to longer payment terms, payment flexibility and target adjustments.”
Staying in India, and echoing such comments, one Pune-based system integrator said that at the close of the second quarter - or the lockdown period - vendors should revise targets to ensure improved payment term flexibility for the partner network.
“The biggest challenge as of now is sales,” the partner confirmed. “Cloud is now in and working from home is also going to increase meaning a major technology shift is happening. We need to upgrade ourselves to these technologies otherwise we will be out of the race.”
To assess the most mission-critical challenges facing partners in relation to Covid-19, visit part-one - Partners to vendors: Time to step up on Covid-19. To understand how vendors responded through support packages and current incentive schemes, visit part-three - Vendors to partners: Support packages are available.