The Biggest Profitability Mistakes Channels Partners Make, Revealed

March 16, 2022

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The channel margin is the difference between the price a channel partner pays a vendor for their product and the price the customer pays. And, traditionally, it’s what IT resellers depend on to generate profits.

But the business model for the IT channel has changed in recent years, making it harder to maintain sustainable profits with pricing alone.

With digital transformation, the market is no longer hardware-driven. It’s now software-first. There’s also a greater focus on services. Forward-thinking channel partners are providing managed IT, consulting, and solution development. They’re focusing on customer needs and creating services around those needs.

All of this is great for customers – and for IT companies that have been evolving with a changing market. However, there are still plenty of channel partners making the biggest profitability mistake: time inefficiency.

Cloud companies, managed service providers (MSPs), and value-added resellers (VARs) that aren’t able to save time throughout their customer sales cycle aren’t likely to have the resources left over to better understand customer needs and expand their services.

If your company falls into this group, read on to find out how you can be more effective as a channel partner, which will translate to higher profits and more time to focus on evolving your business.

How Time Is Dampening Profitability for Channel Partners

In 2017, Intermedia commissioned IPED Consulting to determine how much time channel partners spend on various aspects of running their businesses. IPED Consulting surveyed 2018 solution providers and found that most are spending far too much energy on steps that could be streamlined with the right vendor.

According to the survey, here’s how much time solution providers spend each month for each step, on average:

  • 8 hours per customer for provisioning
  • 5 hours per customer for billing
  • 22 hours each month for marketing
  • 6 hours per customer for support

When you add up all these hours, it’s clear that processing product sales can take up the bulk of a company’s time and resources. That means there’s less time for innovation and implementing initiatives that will help with business scaling.

But to live up to customer expectations and remain competitive, channel partners need to focus on higher-value activities rather than pouring so much time and energy into sales alone.

What Solution Providers Can Do to Meet Today’s Challenges and Increase Revenue

Fast-forward to 2022, and solution providers are facing pressure from all sides. For those that are ready to evolve, this pressure is helping them evolve their services, business models, and revenue potential.

With the rise of hybrid work models, customers are looking for single platforms that cater to their internal collaboration and external customer communications.

To achieve this, channel partners should shift away from a time-consuming multi-vendor approach and consider partnering with cloud providers that offer the communications tools businesses need for remote and hybrid work: Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS).

Doing this leads to higher customer satisfaction because it enables customers to increase their own revenue – companies that unify employee and customer communication platforms experience a 12.4 percent year-on-year annual revenue increase.

That’s exactly what business communications providers like White-Harris, an Intermedia Partner serving the Philadelphia area, have done. White-Harris chose to white label Intermedia’s UCaaS and CCaaS solutions, giving its customers the option to purchase one or both products through its brand. As a result, the company was able to enhance its relationships with customers and increase its own revenue.

Channel partners are rarely just IT providers anymore. Instead, they’re offering everything from value add-ons to comprehensive service management.

To remain competitive, resellers need to rethink their service approach. It’s no longer enough to sell wholesale IT products and earn profits on the margin.

To deliver a higher level of service, sales and customer management have to look different than they did a few years ago. Solution providers can’t spend hours per customer per month on things like billing and technical support. Instead, they need to work with a vendor that streamlines these steps.

That way, there’s more time to build relationships with your customers, understand their needs, and deliver an IT product and service model that solves all their problems.

Increase Your Margins with a Vendor that Boosts Your Efficiency

Intermedia makes it easy to increase workplace efficiency with our 5 Pillars of Profitability.

  1. Provisioning: Partners don’t have to juggle different portals and vendor tools. Instead, they can provision under a single pane of glass, saving a huge amount of time when it comes to adding, deleting, or altering services.
  2. Billing: Likewise, there’s no need to manage multiple bills or check billing details each month for accuracy. Intermedia Partners benefit from a single bill, which includes itemized information per customer, thus increasing billing efficiency.
  3. Marketing: Rather than investing in marketing research, content creation, and deploying marketing campaigns, Intermedia partners can draw upon a wealth of marketing resources to drive sales.
  4. Support: When working with multiple vendors, your company has multiple numbers and support queues to access to address issues. Coordinating support can be time-consuming, and the level of support might vary. But with Intermedia, you can count on nothing less than J.D. Power-certified support available around the clock, and soft transfers to product experts to speed problem resolution.
  5. Uptime: Major business systems like Microsoft Teams only offer 99.99% uptime. This can translate to over four minutes of possible service interruption a month, or about 53 minutes a year. With Intermedia, you can count on 99.999% uptime – that’s about 5.26 minutes of potential downtime a year, maximum. As any amount of downtime can lead to financial losses for the end customer, a higher uptime guarantee can be an important selling point for channel partners.

Find out more about how your business can be more efficient and increase revenue as an Intermedia Partner.

The Intermedia Team

Intermedia helps businesses of all sizes connect better – through voice, video conferencing, chat, contact center, business email and productivity, file sharing and backup, security, archiving, and more – from wherever, whenever. And, as a partner-first company, Intermedia goes to work for our channel partners to help them grow their revenue and maximize their success.

March 16, 2022

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