Given market uncertainties, changes in partnering, and the surge in subscription models, most companies are now considering partnership ecosystems as the key ingredient to survival and success, according to Alastair Edwards, chief analyst at Canalys, who spoke on the State of the Channel at the ESET WORLD 2024 conference.
ESET World is an annual cybersecurity conference, where experts meet, talk, and discuss. This year, ESET World was attended by nearly 2,000 people worldwide. To watch the presentations on demand, click here.
“Increasingly, vendors co-selling, co-marketing, co-developing, and co-delivering with partners are becoming more important to delivering joint value to the customer,” Mr. Edwards told ESET after the conference.
In the interview with ESET, Mr. Edwards described the current situation with emerging hyperscale cloud marketplaces, the challenges that cybersecurity partnerships face, and the role of AI in the evolving world of cybersecurity.
What role do partners play in the world of emerging hyperscaler cloud marketplaces where vendors can approach customers directly?
While the initial assumption was that hyperscaler marketplaces would cut out channel partners, in fact the opposite is true. Partners will have an increasingly important role in this sales motion, as customers procure a greater proportion of software and cybersecurity through the cloud marketplaces of AWS, Microsoft, and Google Cloud in particular. Customers are able to use their committed cloud spend with the hyperscalers to buy third-party products through the marketplaces, which can be very attractive when core IT budgets are under pressure. They can take advantage of consolidated monthly or annual billing for all their purchases, which simplifies the billing process.
But beyond the transactions, customers will rely more than ever on partners, particularly as they purchase more complex solutions through these marketplaces. A marketplace is ultimately just a catalogue of products and solutions. But end-customers need advice on the right technologies to buy, support for those technologies, integration, and management, which only trusted partners can provide. At the same time, vendors selling through these marketplaces continue to need partners to provide customer support, technical expertise, and complex services.
What do these marketplaces mean for vendor-partner-customer relationships?
These models create new dynamics for vendors, partners, and customers. But relationships remain key. Hyperscalers and vendors have recognised the importance of enabling partners to continue supporting customers directly, for example, through offering customised listings to customers through the marketplaces. The hyperscalers are investing in co-selling with both partners and vendors to drive momentum. There is a risk to the channel of course — those channel partners that don’t embrace this model will find themselves being overtaken by those that do. Even those that embrace this will need to continue showing value — and that value will change in future. But Canalys expects the share of hyperscaler marketplace business via channel partners to increase significantly over the next few years.
When preparing the latest Canalys Global Cybersecurity Leadership Matrix, Canalys worked with Channel Partner feedback collected over 12 months. What are the key lessons to take from it?
ESET’s partners are generally very positive about their relationship with ESET and the support they receive. They are particularly positive about ESET’s ongoing commitment to partners (and channel-led strategy), ease of doing business, the quality of account management and technical support, and ESET’s ability to plan centrally and execute locally. This is why ESET achieved Champion status in this year’s global Cybersecurity Leadership Matrix report.
Based on this feedback, channel partners seek to prioritise relationships with vendors that align with the transformation in their business models and vendors offering products that partners can wrap their own services and solutions around. What does it mean for security vendors? What should they prioritise to create and maintain long-term relationships with partners?
In some ways, the same things apply to building long-term partner relationships: minimising sales conflict, investing in partner profitability through effective partner programs, building trusted relationships between vendors and partners, and equipping partners with the skills to sell and support the vendor’s technologies.
But in addition to this, vendors must build greater flexibility into their programs and engagement strategies to support an increasingly diverse partner base and partners operating multiple business models, whether those are resellers, managed services, consulting, development, etc. Increasingly, vendors co-selling, co-marketing, co-developing, and co-delivering with partners are becoming more important to delivering joint value to the customer. And recognising customers will work with multiple partners throughout their technology life cycles — and that most partners lack the resources to specialise in every area — vendors must support effective collaboration between partners.
How important is it for cybersecurity vendors to bring innovations such as AI-powered services?
Of course, this is incredibly important. AI is moving to the center of a new cyber arms race between bad actors — cybercriminals that are weaponising AI to launch more effective attacks — and the cybersecurity industry that is using AI to enhance cyber defences, augment existing capabilities, and improve predictions and remediation times. Vendors must be at the forefront of this race or risk falling behind. Canalys expects AI to usher in a whole new suite of advanced cybersecurity technologies. Channel partners and customers will choose to work with vendors that are staying ahead of a rapidly evolving landscape. At the same time, there is a danger that AI becomes overused in terms of vendor product launches and marketing, which will damage credibility and add to customer confusion when most are unclear about the value of AI. Avoiding this risk is critical to long-term success.
On the other hand, there are still some people who see cybersecurity as one single product, such as antivirus, and are surprised when they get a question about how many endpoints they have and what their network looks like. How do we earn the trust of such potential partners and show them that cybersecurity is a much more complex topic?
Many customers still don’t place enough strategic importance on cybersecurity, and these customers are most likely to only think of one product, like antivirus. But they are also the most vulnerable. Cyber resilience needs to become a business hygiene factor, not a nice-to-have. Government regulations will play a bigger role in forcing that. The reality is that building effective cyber resilience as a customer means addressing a plethora of new threats and an expanded surface area that needs to be protected. For companies that understand this, the biggest challenge they face is managing an exponential increase in cybersecurity complexity. One way to do this is to work with a single managed services partner who takes on the management of this complexity on behalf of the customer. MSPs are seeing the fastest growth in the market as a result.
What are the benefits of having a long-term relationship with a leading cybersecurity vendor such as ESET?
Maintaining a long-term vendor relationship is important to ensuring consistency but also efficiency, in terms of the cost and complexity of managing that relationship … partners and customers don’t have to constantly retrain on different vendors’ products and processes, for example. But while there is a growing trend toward ‘platformisation’ in the cybersecurity industry (concentrated around a few big cybersecurity vendors), the reality is that no vendor can do everything effectively in security. So, integration with other (specialist) vendors also becomes key to success.
According to Canalys, many partners rank visibility and community involvement highest of their criteria for vendor partnership — even higher than product or pricing. Why is that so?
We are in an ecosystem-led world, in which partners differentiate through specialist skills, customer focus, and business model. Vendors who empower partners within a broader ecosystem, who promote their partners’ skills, and drive collaboration between partners will provide more value to partners than those that just focus on product or pricing.
In the current world when almost everything is cloud-based or XaaS, is it still important for vendors to maintain local offices providing support to their partners?
Yes, local support will remain key. Even in a cloud-based world, relationships still matter. Cloud and AI can be used to augment those relationships and improve efficiency and productivity. But this is a highly competitive world, and those vendors who see the cloud as a way to step away from their partner relationships will suffer from a loss of relevance and share.
Currently companies and their IT admins are battling alert and portal fatigue. How important is it for cybersecurity vendors to help their partners with simplifying alert management and what are the current trends?
Extremely important. Customers are struggling to stay on top of the scale of cyber threats and the speed with which they emerge. Finding and retaining the skilled staff to do this is a constant struggle. One of the biggest trends in the market is the role of MSPs in managing that on behalf of customers. Vendors who empower their MSPs with tools like simplified alert management or use AI to automate certain low-level support functions will benefit (through enhanced chatbots, etc.) and ultimately this should enable them to deliver a higher level of support for their customers.
Is the pricing/billing system an important consideration in a partnership? What are the current trends? Do customers favour flexible daily billing or flat rates with long-term commitment?
With the shift to subscriptions, the biggest demands from customers in terms of billing and pricing are simplicity and predictability, when the complexity of managing multiple vendor subscriptions is increasing, with different start and end points, contract lengths, and billing models. This can make it extremely difficult to manage budgets, spending, and planning. Customers as much as possible want partners to help them eliminate that complexity. At the same time, they want flexibility to consume and pay in the way that aligns with their business models. The most successful cybersecurity vendors will help to simplify these models for customers and provide this flexibility to meet the needs of different customers.