Those failing to use the channel are missing out on growth

The likes of Dell, HP, Lenovo and IBM know the value of the channel all too well but there are plenty of tech companies that are failing to take advantage of the benefits that resellers can deliver.

The consequence of ignorance around the channel is serious and is causing the UK tech sector to miss out on growth, according to research from Investec.

The financial specialist has taken a close look at attitudes in the UK tech sector towards the channel and made it clear that more education is needed.

“Too many tech companies only view the channel as a means of distribution, and this is seriously damaging opportunities for revenue growth," said Junya Iwamoto, associate director, TMT corporate finance at Investec.

"There needs to be a cultural shift of listening and taking action on the advice that channel companies provide," he added.

The problems were not just caused tech firms failing to use the channel but also among those that did, with many blaming partners for failing to deliver results when they had not invested in the relationship.

The Investec report found that some firms did not see it as a two-way partnership and the transparency, strategic alignment and mutual support needed to deliver real sources of value.

"We know from working with technology leaders that they spend time and energy building a vision, developing intellectual property and getting viable products to market. Once they have that laser-like focus on strategy, it can be hard to shift their mind-set and accept feedback from third parties. That doesn’t just hamper scale-up opportunities – it can hurt existing business. Having a dedicated research and development team hardwired into the channel programme is essential," said Iwamoto.

On the flip side when working with the channel is done right it deliver significant revenues. The research found that those firms with strong relationships saw their top five partners delivering £50m in revenues, compared to just £16m from unsuccessful programmes.

Those with a successful channel approach told researchers that they understood the value of partners that could help them identify opportunities and give the feedback on product development to make sure it hits the sweet spot with potential customers.

“The impact of a successful channel programme can be significant. Our research showed that when successful, IT companies can capture over three times more revenue from their largest partners when compared to unsuccessful channel programmes. Culture change, getting better at listening and to treat channel companies as genuine partners are probably the most significant steps a tech leader can take if they dream of achieving scale-up growth," said Iwamoto.