Jay McBain: From Channels to Platforms - How Partnerships Drive Trillion-Dollar Growth

Jay McBain on Inside Partnering

[00:00:00] Jay McBain: This is a era of partnering. And now you know the most senior people at every company are speaking in partner language, which is fantastic.

[00:00:13] Chip Rodgers: Hey everyone. Welcome back to another episode of Inside Partnering. Excited to be to have this new podcast starting up here. And and super excited to be joined today by Jay McBain. Jay, welcome.

[00:00:27] Jay McBain: Thank you so much for having me. I'm excited about this.

[00:00:30] Chip Rodgers: Yeah. Yeah. And gosh, Jay, you.

[00:00:33] Chip Rodgers: Practically need no introduction. But I will do a sh a short one - Chief Analyst for Canalys. And Jay, you're, you've, you're like the pied piper of the partnership industry, icon and speaking regularly all the time and and always a wealth of knowledge.

[00:00:51] Chip Rodgers: So I'm just really excited to, to to have you on Jay.

[00:00:55] Jay McBain: Absolutely. I spent, 30 years trying to figure out the system beneath things. [00:01:00] But I was once told when I joined the World Future Society that no one can predict the future. And no one is a crystal ball. But if you do recognize trends and, trains that are on the tracks, picking up speed, the best future, it's all they do is gauge, that projection that, that, that speed and try to, project at some point in the future where that train is gonna be.

[00:01:23] Jay McBain: Now if it's a train station and 10 or 15 trains, leading the station, and you can connect the dots between all of those, that's the Pi Piper. Part of this is just trying to have enough time in the day, to connect how all this is gonna shape up in the next, six, 12 months, five years, 10.

[00:01:43] Chip Rodgers: speaking of which, I think a good place to start, Jay, is, when we started working together, seven, eight years ago, nine years ago we were on this journey together talking about I'm talking about partnerships and the changing in the industry and everything.[00:02:00]

[00:02:00] Chip Rodgers: You made the bold the bold statement that around maybe five or six years ago, this is the, gonna be the, the next 10 years of the, is the decade of the ecosystems. We're halfway through that decade and very well done on the prediction. Yeah. It's one of those

[00:02:18] Jay McBain: so many trains, looking at marketing, looking at sales, looking at customer success, looking at growth of industries.

[00:02:25] Jay McBain: Subscription consumption. Obviously looking at the growth of the cloud back then. But AI Today, which is a total ecosystem play, all those trainings, would lead us to the situation that, all roads lead to partnering. And while the word ecosystem didn't really stick, it was nebulous, it was vague.

[00:02:45] Jay McBain: It, maybe isn't the right explanation for what we do. the word that is sticking is platform.

[00:02:52] Chip Rodgers: Yeah.

[00:02:53] Jay McBain: The richest, most valuable companies on Wall Street, the ones that are achieving unbelievable valuations, the [00:03:00] people that are achieving unbelievable wealth. We're gonna have the first, trillionaires minted in the next number of years here in AI and, it's all around running platforms.

[00:03:09] Jay McBain: Nobody does it alone. The alliances, the integrations, all of the partnerships around the cycle platforms is synonymous with partnering. And now we're not this side group in the company that runs dealerships anymore. We're at the board level talking about minting billionaires and getting companies to a trillion dollar valuation.

[00:03:31] Jay McBain: So it could be more exciting than mid went through this day.

[00:03:35] Chip Rodgers: and if you don't have partners and an ecosystem of partners, then you don't have a platform, right? that's, but you're right. It's,

[00:03:42] Jay McBain: yeah, there's five types, right? It's, you need those integration partners 'cause your buyer is now an integration first buyer.

[00:03:49] Jay McBain: now millennials are the majority buyer in the tech industry. You need the services and channel partnerships 'cause there's seven partners surround every one of your customers. Now, if you have any [00:04:00] cybersecurity, for example. 91.6% of your TAM is bought to through and with partners. So channels are pretty cool.

[00:04:09] Jay McBain: if, you want to grow your cyber company now you need the alliances, you need to play well with hyperscalers, you need to play well with the SaaS platforms that they excite. cyber platforms that we just mentioned, you need to play well with AI platforms nowadays. So the alliances are true, but what every company cares about is the go to market.

[00:04:29] Jay McBain: Marketing, sales and customer success. All of the cosell, co-marketing, co innovation, the co keeping, everything around the cycle map revolves around partners. So that's what a platform is. It isn't, just a bundling product and a new price bundle. It is not just a fancy UI or UX, that sits on top of the product.

[00:04:53] Jay McBain: This is a era of partnering. And now you know the most senior people at every company [00:05:00] are speaking in partner language, which is fantastic.

[00:05:03] Chip Rodgers: Yeah. Yeah, it's amazing. It really is. It really has been a transformation, I think from the old days where partnering was just purely res. Reselling is still there today but there are so many more dimensions.

[00:05:15] Chip Rodgers: I think with the capabilities and flexibilities of APIs and published APIs that companies come together build joint, build solutions together, and then go to market. And why wouldn't you? Do all those things co-develop, co-market, co-sell, co-keep. So, what what is that all, what's coming over the next five years and how should for the second half of the decade, and how should partner leaders be thinking about that?

[00:05:41] Jay McBain: It continues to accelerate, day in and day out on back to back calls, looking at every industry and looking at every category of product, hardware, software services. but in the future, maybe I'll hand it to Microsoft, which called it AI era, a six and a half trillion dollar [00:06:00] opportunity, a buildup.

[00:06:01] Jay McBain: And this isn't Microsoft's Teams. They're speaking purely in ecosystem terms, they understand that a chunk of that is Nvidia and the fastest growing company in. The winner, super winner of ai so far, they're thinking about OpenAI, which obviously they're heavily invested in. And, ChatGPT5 just came out this week.

[00:06:23] Chip Rodgers: Yep.

[00:06:24] Jay McBain: but they're thinking about all the partners, the seven partners that surround every dollar of that TAM, so that's the speak, OpenAI themselves think it's a $7 trillion bill. The fact of the matter is no one is talking about an individual company, Tam. They're talking about the amount of consulting, the amount of design and architecture work, the implementations, the integrations, the managed services, hundreds of services and layers upon technology that's gonna bring this to bear.

[00:06:55] Jay McBain: There's not one super winning company Monopoly that's gonna win the next [00:07:00] 20 year era of ai. And that's for all of us, wherever we fit in this industry. Whatever the size of our company, whatever industry, whatever geo we live in, whatever, segment that we serve, whatever way we look at the market, it's going to be partnering first.

[00:07:17] Chip Rodgers: Totally. I absolutely agree. And, both in terms of, services and also, tech technology integration data services how should partner, let's talk about ai. How should partner leaders be thinking about both in terms of, how to partner. With AI companies to provide better value for their customers, but also in terms of how should they be implementing or using AI internally as well.

[00:07:47] Chip Rodgers: I think of it as two, those, both directions, right?

[00:07:51] Jay McBain: Yeah. On the external side, AI related services are growing at 59.3% compound. The last [00:08:00] couple of years, they expect to over the next, three or four years as we project out. And that's exponential growth. And anytime you're growing north of 50%, the numbers are doubling every other year.

[00:08:11] Jay McBain: So this is a massive growth curve, but as a partner I would be much more, quantitative. There's $158 billion and that's broken down by what stage of the size the customer's in. Now there's 28 moments before the sale to sell services. Now, if you're selling consulting, if you're selling design architecture work, you could be selling all kinds of configuration price quoting.

[00:08:37] Jay McBain: You could be, you can be selling, post-sale. You're selling integration or implementation services. You're selling managed services. But I wanna break down that $158 billion in AI services. Break it down to the market we focus on. Do I focus on a particular geography? Many partners have, a 50 mile range Of how, far the trucks used to run. [00:09:00]

[00:09:00] Jay McBain: some look at an industry, there's 27 industries, or 297 sub industries. Some of 'em look not geographically or by industry. Some of 'em look by segment. we service customers of 250 employees up through 4, 9, 9. We're in the medium space, and that's where we do really, well.

[00:09:19] Jay McBain: Some service, different biotechs and we service a CMO. We serve service CX leader, some service product invoice. I'm an expert in identity cybersecurity and we just saw CyberArk got acquired by Palo Alto last week. And, those types things. Success. I'm an expert in services types. we're experts in managed services or we're experts in consulting.

[00:09:46] Jay McBain: there's six different ways to think about that. Bigger number in my own available market, below my own target addressable market. Now, when I think about obtaining that, it's where do I [00:10:00] specialize? What vendors, should I build certifications and competencies? How do I differentiate myself among a million different partners?

[00:10:09] Jay McBain: More than a million, 10 million people competing for seven spots around the customer? So I would be obsessed, first of all, with the numbers. I build myself an obtainable market, in the millions of dollars of growth in a new business practice or a new way to be born in AI and go build a really profitable, fast growing little section of the market.

[00:10:34] Chip Rodgers: I think that's terrific. And it's something that you hear all of the the cloud providers say the same thing. It's like there's a lot of noise. They're big, they've got, 50,000 salespeople, and they're like, how do you ever get attention from 50,000 people?

[00:10:48] Chip Rodgers: There's no way you're going to, you have to really segment your, and find the niche that you're. Really going after and that you're good at, and you can build a name for and then you can expand from [00:11:00] there.

[00:11:00] Jay McBain: Yeah. Here's a, here's an important thing for any company really, especially partners. when we went through the Google SEO phase, every day we woke up, think about the algorithm, how are we gonna stop keywords, how are we gonna, but that created a lot of digital sameness.

[00:11:16] Jay McBain: When you look at, Accenture, 750,000 people, and then you look down to Larry in the white van, running a small bar, everybody cut and paste the same words on their website. their eBooks started looking the same and everything. So Google had to build the algorithm, and anybody who was the same got knocked down.

[00:11:37] Jay McBain: Anybody who shouted from the rooftops that. I serve mid-size banks in Northern Scotland, and don't come to Inverness unless, as a bank, if you don't talk to me. It's, the people that hyper specialized that didn't have to buy their weight at the top of the Google rankings they got. And now with ai, here's the problem.

[00:11:57] Jay McBain: It's not really algorithm anymore. [00:12:00] It's an intelligence system that can, it's already read your website cover to cover. It's already read, every tweet and every LinkedIn post you've ever made. It knows all your people and has read their entire histories too. It knows more than their resume.

[00:12:14] Jay McBain: It knows exactly who you are. So as much as you want to say all things to all people all the time, you know the bigger hyperscalers, AWS, Microsoft, Google would rather you come in and say, Hey, don't come to Inverness as the bank unless you're ready to talk to me. You, I'm the gate, I'm the filter here. Nobody, everybody knows that I'm one.

[00:12:38] Jay McBain: And once you can do that successfully, the problem with Accenture is they'd have to say that, 700,000 times and no one now with AI can check the version five. Just go, do that. Look at yourself and say, am I winning the recommendation? Am I winning at a local level to go win that [00:13:00] consulting engagement at a midsize bank?

[00:13:02] Jay McBain: And this is just a completely different world, and it's only in the last six months that this has happened.

[00:13:07] Chip Rodgers: So Jay let's talk, let's get real tactical for a minute. One of the challenges I think that partner leaders have is demonstrating value internally for. As they're, as everybody's competing for resources.

[00:13:23] Chip Rodgers: How do you how do you show the value that you and your organization have delivered to the to, to the company? What would be your advice in terms of measurement and the things that partner leaders should be measuring and then showing back internally to, to show their value?

[00:13:40] Jay McBain: Yeah, absolutely. And you and I have spent a long time on this topic, which is, when you operationalize this, you start thinking about the processes of workflows, the business logic, and especially the underlying technology that's gonna allow you to do this. I say that there's 28 moments that come before a sale.[00:14:00]

[00:14:00] Jay McBain: it's easy to say that, look at a flywheel and understand the concept. 'cause we've all bought a car and spent those 28 moments, in the buying cycle. Until you can go and work with your head of marketing and recognize those moments and be able to quantify those moments. 'cause 90% of 'em plus are going to be partner driven.

[00:14:23] Jay McBain: And that's in the best case scenario for a company, that they're actually seeing 10% of the moments that their customers are doing one or two moments. in the worst case scenario, you're gonna lose a deal without ever knowing there was a deal. So if I'm the, the head of marketing and people are out reading eBooks and listening to the podcasts like this one, they're going to events, went to BlackHat last week, and they're out doing this, getting smart.

[00:14:45] Jay McBain: These are partners or prospective partners that are leading these moments. The earlier I can get in and work with my, head of marketing and put these moments into the system, so we recognize 'em, the salespeople we know, like the [00:15:00] earlier you see a deal, you're a better chance of winning. And then the selling moments, like when that partner is in consulting, that's when most deals are done nowadays.

[00:15:08] Jay McBain: None of them are done at the point of sale.

[00:15:11] Chip Rodgers: Yeah.

[00:15:12] Jay McBain: You don't wait 28 moments and then, be at the cash register. I'm gonna buy this pack of gum too. I'm gonna do this. This is been a consumer sale. It's a considered purchase. So the SKUs and all the marketplace and the however it is done, that was done two months ago.

[00:15:27] Jay McBain: So we're looking at this visualization now that. The partners are leading most of the moments and the better I can work with marketing, sales, customer success, wherever this is before, during, after the transaction, and I can link into the systems we already use. But I can get the recognition of more partnering moments coming into our process.

[00:15:47] Jay McBain: This is where the CMO, the CRO and the CX leader, the product leaders go back to the board and say, Hey, need more of that. we can't be running our own tech stack. [00:16:00] We can't be out running our own systems delighted by the reports that they're generating. And, delighted that on our own vanity metrics that we made up for ourselves, we're doing great.

[00:16:11] Jay McBain: We gotta have the other executives in the team out there shouting from the rooftops that they need more of us. And until we can connect those dots from a technology perspective, we can measure, monitor, and manage those moments. Yeah. And make those data points more reliable. Repeatable and more scalable.

[00:16:30] Jay McBain: This is the career path of channel leaders, partner leaders as well. you're gonna take that every 3.1 years into a new job and you're gonna be walking in with these tech stacks, driving it to the next level.

[00:16:43] Chip Rodgers: Terrific. We've talked about the future of partnerships where things are going measurement, what do you what should you be looking at? Let's talk about incentives and where how. How, as a partner leader, the [00:17:00] kinds of incentives that you should be considering or putting in place for partners to get aligned on the, so that their objectives are the same as your objectives, or they feel like they're aligned with your they're supporting your objectives.

[00:17:14] Chip Rodgers: I think it's. For years, it was the gold, silver, bronze. I think there've been a lot of changes to the more of a points system and looking at full lifecycle incentives. Talk a little bit about what you're seeing, Jay, in terms of incentives for partners.

[00:17:32] Jay McBain: Yeah. There's two angles to this conversation.

[00:17:34] Jay McBain: One is that for 44 years go back to August 12th, 1981, the formation of the First Tech channel around the, introduction of the IBM PC. For 43 of those years, every time we survey partners around the world, tens of thousands of 'em, the number one thing they want from vendors is more leads.

[00:17:54] Jay McBain: And this year something changed. The number one thing they're now asking vendors [00:18:00] is to be recognized for more than just be in a cash register.

[00:18:04] Jay McBain: incentivize me around the customer journey. If I'm doing that early ebook, I'm doing the consulting gig. If I'm doing design work, if I'm doing implementations, this adds more value to your company.

[00:18:16] Jay McBain: Yeah. It's about time you recognize that, quantify that and pay me for that. So it's now the number one thing. They're pushing vendors. So yesterday I posted that out of the top 1000 vendors, about 400 of them now have point systems. Some of 'em have hybrid, they still do some gold, silver drawings on the retail side.

[00:18:34] Jay McBain: Some of 'em like Microsoft and Cisco and yesterday AvePoint have gone a hundred percent into points, basically doing what partners are asking. We've never just been in character. We've always added value. You've just never seen that. Now you have to survive. it's about time to move around the economics of partnering and to highlight, if I'm doing that consulting engagement, that [00:19:00] wins you the deal.

[00:19:01] Jay McBain: That's worth more than 10% margin that you might have paid in resale.

[00:19:06] Jay McBain: So the economics, your competitor might pay 20 or 30% of the deal for that winning moment. So now it's measuring all these things that we've never measured before, and recognizing the partners for what they really are is delighting and serving the customer before, during, and after the transaction.

[00:19:24] Jay McBain: But that's the future of incentives. All the incentives companies are building muscles. On how to attach, and again, you're talking with CFO, it's gotta be reliable, repeatable, scalable, like this has to pass muster. We can't be overpaying these, we can't be paying on faulty, type of connections. The second thing, into that point system, it's just a, it is just a future in terms of how ecosystems themselves will be funded.

[00:19:51] Jay McBain: Now we know because the big marketplace is the hyperscalers. Only charge 3% or less for a transaction.

[00:19:58] Jay McBain: Makes a lot of sense. 'cause that's exactly the [00:20:00] amount that the MasterCard or Visa charges You when you go to a restaurant, that's the cost of moving money. Now the average vendor up there in this $5 trillion industry holds back about 20% in growth nets.

[00:20:13] Jay McBain: What they used to pay is front end margins, backend margin, spiffs, market development funds. So you start to ask, 20 minus three to 17%. Where does that money go? Do they just take it back as profit margin? no. None of the companies have, they recognize they have to go and redeploy that 17% in all these moments.

[00:20:34] Jay McBain: By the way, Microsoft, you'd think that they'd buy up all the consulting and stuff. They're already outgrowing AWS for 26 straight quarters. They've taken two thirds of all that money into retention. They wanna renew customers at 108% upsell across rich and copilot and other things. They went to Wall Street and said, we're actually moving the money, so we're now a cash engine.

[00:20:56] Jay McBain: Every dollar that comes in, we're gonna spit up a dollar [00:21:00] eight. And that made them more valuable than Apple. It's just an absolute, utility based or consumption based cash engine. Every company's looking at these metrics now going as much as I want to get more customers to the dance, obviously get more of those customers on the dance floor.

[00:21:17] Jay McBain: Everything in a subscription consumption economy is about keeping them dancing all night long, every 30 days, getting that extra 8% of enrichment. And that's where I can invest in partnerships 'cause it's not gonna be me, my 1-800 help desk, enriching that customer and keeping them going.

[00:21:37] Chip Rodgers: Jay, this has been fantastic. Thank you so much for for sharing your thoughts and and your deep, deep knowledge, both your personally as well as the research that Canalys, does on a regular basis and that you're your sharing with everyone. This has been fantastic.

[00:21:53] Chip Rodgers: Thanks for taking some time today.

[00:21:55] Jay McBain: Yeah, absolutely. Glad to be here and, and good luck on the, podcast. [00:22:00]

[00:22:00] Chip Rodgers: Terrific. So thank you all for joining again and we will see you next time. Thanks everybody, and thank you, Jay.

[00:22:08] Jay McBain: Thank you.

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