Forrester's Jay McBain: 'Only a third of tech spend will flow through the channel by the end of the decade'

McBain suggests ten trends that tech companies must take advantage of this decade

clock • 8 min read
Forrester's Jay McBain: 'Only a third of tech spend will flow through the channel by the end of the decade'

Forrester's principal analyst, Jay McBain, told a recent Channel Partners expo that he believes only a third of money in the tech industry will flow through the channel by the end of the decade.

Speaking to channel partners at the event, he said the rise in marketplaces and direct selling meant less would flow through the channel but nonetheless predicted huge opportunity for partners this decade, with worldwide technology spend expected to reach $7 trillion.

McBain, however, warned that buyers of technology are changing, telling partners that future buyers "look a lot like consumers" and that it is no longer just those involved in IT that companies are selling to, with marketing and sales now having a greater influence on the market.

And these ten trends and predictions, McBain said, would be "the most impactful thing in the next decade" and that the companies which take advantage of them "will be the ones growing at triple digits"…

10. Customers are changing

"There's a demographic shift happening for the first time in a long time. The majority of your buyers are going to be millennials within four years.

"On top of that there's a different journey, psychology and behaviour they're on today, driven by the pandemic. Its digital or digital only.

"If I take you back to the time you bought a car and I walked through every moment you had from the time you thought you needed a new car to when you set foot in the dealership, on average there are 28 of them.

"You watched a video, you read a magazine, you spoke to your neighbour, you went on social media. There's companies that are tracing all those steps.

"But the point is that as technology buying becomes more consumer like, they are also going through those 28 moments."

9. The end of cookies presents new opportunity

"Something happened a couple of months ago when Google and Apple announced the end of the cookie - the end of targeting, the end of tracing, the end of the internet having you as a product.

"Two companies that own 99 per cent of mobile share and 86 per cent of desktop browsing share have decided to stop tracking you between your 28 moments, so that BMW or Toyota or whoever can't watch you bounce around before you hit the dealership.

"Now, the conversation completely changes. CMO's that I talk to today who have invested so heavily in the last decade of marketing in this type of tech stack, now have new budget, because all of the things they've invested in by watching you on the internet has now been neutered.

"The question is, who now owns those 28 moments? I've got to go and create a partnership and start moving them through a partnership type programme.

"Those 28 moments become everything, and guess who owns those moments today? Its people in this room."

8. CEOs think their current business model will be unrecognisable in five years

"Accenture went and asked CEOs in every type of company, every industry, every geography, every one of your customers, and 76 per cent of them think their current business model will be unrecognisable in five years.

"If they're a public company they're getting pressure externally, if they're a private company they're getting pressure from the board, to think about subscription and consumption models, to think about recurring revenue.

"This is coming from the top down now, and the number one reason they said for this was ecosystems - that in the next decade whatever business or industry I'm in, I can't do it alone. I have to build a team and a set of partnerships that's going to take me forward."

7. Growth of as-a-service

"Everyone is going all in on subscription and consumption, which changes a lot of the focus of the customer journey. Getting the customer to the dance, getting them up on the dancefloor, and now in a subscription economy, getting them dancing forever.

"These are three unique motions that every company is starting to think about investing in, and the transaction itself - getting the customer on the dancefloor - is only the first 30 days.

"If I don't drive adoption of my product, I'm not going to get renewed. If I don't drive deeper integrations and stickiness, I'm not going to get renewed. If I don't drive upsell, cross-sell enrichment of other parts of my portfolio or other innovation I'm going to come out with in the future, I'm not going to be able to grow.

"Things like the revenue, the profit, the customer satisfaction, things that companies live on, are going out and being replaced with how many subscribers you have, how many new logos you picked up this quarter, what's the churn rate? Every company is moving into this model now."

6. The embedded world

"In an embedded world, we're not product sales companies anymore. All future innovation, none of them are products. AI is inside every other product. The automation, the IoT, the blockchain, everything I listed is not actually a product you sell.

"Ten years ago, IBM tried to create a product you could buy - Watson. ‘It cures cancer, it predicts nuclear explosions, it predicts the weather, it's a product, go and buy it'.

"Ten years later and a bunch of hospitals are pushing Watson out because it didn't fulfil its promises. If IBM ten years ago went and sold it to Salesforce, Salesforce wouldn't have to build Einstein and its in all of our products.

"Watson would be in your Tesla, inside the software we use, inside our toothbrush. That's the embedded world that we're going into and that most companies don't get, because they're still product sales companies."

5. Marketplaces are accelerating the decline of resell

"The fact is that marketplaces are changing pretty radically. Right now, my prediction is at the end of the decade there are going to be 20 winning marketplaces that take 80 per cent of the marketplace opportunity out of the market.

"One third of seven trillion dollars will go through marketplaces, and eighty per cent of it will go through those logos.

"Each of those companies are radically shifting in the last couple of quarters where all their salespeople and executives are paid on enterprise credits. They're building out capabilities for you to get into the marketplace.

"And whether the customer decides to buy direct, through a marketplace or through you, it doesn't matter anymore, that's the first 30 days. What they're focused on is that entire journey through the marketplace.

"20 per cent of this marketplace opportunity is going to go into a niche area. It's run by companies that are going to look at the 35 million opportunities to build a marketplace and build out the thousands of marketplaces that are going to be successful and sustainable.

4. Marketplace taxation becomes a bigger focus

"Microsoft, a few months ago, lowered taxation from 20 per cent to three per cent, so participating in Microsoft's three different marketplaces now looks more like a credit card swipe.

"Google, 30 days later, was forced to match the three. AWS is at five but there's ways to get to three, so the hyperscalers are now at a new level of taxation.

"We're just in the mode now of getting to what marketplace taxation ought to be and what the cost of working through that one third of the economy will be for all of us, and I think that we're settling down."

3. Distribution disruption continues

"There's a lot of headwinds in this space, there's a lot of consolidation. A couple of months ago TD Synnex became the largest distributor in the world.

"We're seeing master agents and technology solutions brokers now joining this market. This whole distribution future is interesting and there's two things they need to do - they need to become a platform for distribution and they have to come out of hiding."

2. Lots of tech workers are considering quitting

"72 per cent of tech workers are considering quitting. That's not going to happen, but it's probably going to be bigger than the great resignation, as they call it.

"People are thinking about a different future of work."

1. The ecosystem orchestrator is a trusted new advisor

"With all these moving parts - millions of software companies, millions of IoT and emerging tech companies, with millions of types of partners, with 35 million opportunities - with all these things happening at the same time, there's a level of orchestration.

"When the customer starts and goes through those 28 moments, when they make that initial purchase and renew every 30 days for life. That elongated customer journey, on today's research, has five different partners.

"The people that can take the orchestration role in all of this are going to be outsized winners in this decade. There's no single trusted advisor anymore but there's a level of orchestration that has massive opportunity for triple digit growth every year going forward."

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