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Brandon Mills
Manager,
ZS Associates
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John DeSarbo
Principal,
ZS Associates
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Kyle Heller
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ZS Associates

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Is Blockchain the Channel Management Silver Bullet?

Posted by Alex Southworth on Wed, Jul 05, 2017

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The late Peter Drucker, the founder of modern business management, famously said, “If you can't measure it, you can't manage it.” And therein lies the core problem with indirect channel sales in the high-tech industry: Once a product is sold through another entity, the original vendor often loses visibility into the transaction and with it, the ability to manage its sales process, its resellers and, ultimately, the end-customer experience.

To get an idea of the size of the problem, worldwide IT spending is estimated at about $3 trillion, with at least 70% coming through indirect sales, according to Accenture. That means that the high-tech industry as a whole has little to no visibility into its end customers for more than $2 trillion worth of transactions.

This creates a huge issue for the high-tech industry because vendors that sell through the indirect sales channel often can’t adequately measure the impact of their investments and are limited in their ability to make effective, data-driven decisions around how they sell and market to their customers. As a result, vendors invest significantly in trying to get insight into their transaction data through the use of third-party data brokers, complicated reseller agreements and sophisticated programs (such as deal registration, rebates and loyalty programs).  

Here’s where blockchain comes in. A blockchain is a ledger that records digital transactions across a peer-to-peer network and allows entities to transfer digital assets without the need for a centralized third party to manage or validate it. Although most commonly known via Bitcoin for its application as a cryptocurrency for digital transactions, blockchain technology is being applied across a number of diverse use cases such as smart contracting (Ethereum), secure identity and personal data management (ShoCard), and the leasing of fractional computer storage and processing (Storj, Golem).


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Based on these existing applications of blockchain, in principle, the technology could meet the core channel management requirements to enable transactions through distributors and resellers; manage contracts between vendors and channel partners; and maintain partner profile data and status within a program.

Moreover, the technology could potentially open up the opportunity for software-as-a-service vendors to measure and manage more complicated consumption-based transactions across a network, allowing for new channel business models to develop and evolve.

In exchange for building their channel business around blockchain, a vendor would benefit by removing the reliance on third parties to provide them with data, improving the tracking of large volumes of transactions, and, ultimately, significantly increasing in the effectiveness and efficiency of managing the indirect sales channel. The open system could also start to build greater trust between the vendors and channel partners and may also lead to a more collaborative relationships across the ecosystem.

That said, change is never simple, and blockchain is a complex and nascent technology. Any adoption of the technology in the indirect sales channel would require significant investment by vendors and channel partners. There also are legal considerations that would need to be taken into account given that vendors would potentially get visibility into end-customer pricing. Finally, the increased transparency that this would provide the vendors into their channel—and the reduced reliance on channel partners and third-party data brokers to provide data—would shift the power to the vendors, which may result in reluctance from the broader ecosystem to adopt the technology, along with resistance to changing the status quo.

At first glance, it seems that blockchain has the potential to be a core component of how the channel of the future will be managed, and as vendors and channel partners adopt blockchain in other areas of their business, change may not be that far away.

 

Topics: sales, information & technology, Sales data, High Tech, direct sales, channel management, Peter Drucker, blockchain technology, indirect sales, Bitcoin

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AUTHORS
Brandon_Mills-10924_headshot_small
Brandon Mills
Manager,
ZS Associates
Jason_Bell_11099_headshot.jpg
Jason Bell
Associate Principal,
ZS Associates
John_DeSarbo_thumbnail
John DeSarbo
Principal,
ZS Associates
Kyle_Heller_thumbnail-1
Kyle Heller
Associate Principal,
ZS Associates
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