Craig Patterson: Welcome to the latest edition of Aryaka’s Dreamers and Doers podcast series, where we bring together industry experts and business technology leaders for a very candid conversation about the trends they're seeing, best practices, and lessons in leadership.
By the way, I'm your host, Craig Patterson, Aryaka's Channel Chief. And with me today is a very special guest. A multi-award-winning channel influencer, 2021 Channel Influencer of the Year, by the way, renowned speaker, author, innovator, channel ecosystem expert, and currently, the Chief Analyst at Canalys. He's renowned for his shrewd insights and predictions, and oh, by the way, he's a fellow hockey fanatic. I'm delighted to welcome the one and only, Mr. Jay McBain, to the show.
Jay, my man, thank you so much for joining me here today on the Aryaka Dreamers and Doers podcast. I’ve got to say, my man, it's an absolute honor to have you on here today. And, looking at your background and experience, it's very hard to fit all that into the intro. You've got a wealth of experience. Do you mind kicking it off, just sharing a little bit about yourself? And then, looking at the title of the podcast here, it's all about dreaming and doing. So tell me what you're dreaming about here today and what you're currently doing to help the channel.
Jay McBain: Well, thank you so much for having me. This is exciting. So, I've spent 28 years in the channel, every waking moment since college, with some channel-related job. I got to be on the vendor side running channels, I got to build a software company from ground one, raising money around channel artificial intelligence and some cool things there, working with data scientists, for five plus years now I've been an analyst, so I don't really have a day job. So, talking about dreaming, I get to wake up every day and connect dots that other people just either don't have time to do, or they have a full-time job and things like that. So, it gives me a lot of flexibility, and a lot of real time, which a lot of us don't have to kind of look at all the different things going on and try to make sense of it all.
But from a dreaming and doing perspective, this is how I kick off. I probably say this half a dozen times every day, that there's only two values that I try to bring to the market. One is, I call it altitudes. At 50,000 feet, where are we going? Not only next year, three years, five years, maybe even 10 years, which, you know, gets very hard to predict. But of all the trends that are on our way, and, I'm watching the top 10 trends literally every day, in every industry around the world, and trying to figure out what the end game is. But between 50,000 feet and then landing the plane, there are a lot of analyst firms, there's a lot of consultants, there's a lot of people making the five Cs of channel Incentives Reports, and things like that. I do none of that. You'll see me jump from 50,000 feet to doing. So, when you read my blog, it'll be: here's the 143 social groups people are in, here's the 59 magazines they're reading, here's the 24 associations they're in, 100 podcasts they're listening to, here's the names, the faces, the places, here's the top 100 people you need to know in the space of… I love getting to the ground level and rolling up sleeves in front of either a whiteboard or today, a virtual whiteboard, and just talk actions and tactics.
Craig Patterson: I love that. I mean, you talk about a perfect guest for the dreaming and doing podcast series, right? I mean, it falls right in line with who you are. So, let's kind of double-click into what you talked about there. You talked about the altitudes and the 50,000-foot view. And those key trends that you're seeing over the next 3, 5, 7, 10 years, give us some insight there. What are those key trends that you're seeing in the market relative to channel?
Jay McBain: Yeah, I'll mention a few of them. At the top, almost every company in every industry is transforming into a subscription and consumption business. So that every 30 days, forever, the usage-based value-based, you see product-led growth companies today - but a while ago, Accenture did a survey, and 76% of CEOs - these are all our customers around the world - 76% of them think their current business model will be unrecognizable in five years, and ecosystems and new business models like subscription, consumption, are the number one reason why.
Yesterday, you had Ford, which just came out with the F-150 lightning electric truck, announce that 50% of their company that's now EV will sell direct-- which is causing all kinds of interesting dealer conversations today in The Wall Street Journal, who are pretty powerful people in themselves, but every industry is going through this right now. And that's at 50,000 feet. So, you jump down and go at ground level, preparing for this type of model. And you've got companies like Dell with APEX, HPE with GreenLake, you've got Lenovo with TruScale, you've got Cisco with Cisco Cloud. Every company is falling over each other to try to announce this full subscription model. But at the ground level is, "What does that mean? What does that mean for our partners? What does that mean for our programs that are currently in place? And most of them are just gold, silver, bronze transactional programs. How do we start to put in new processes and new automation, new technology to make that work?" Microsoft just came out with a point system that supports this new subscription model. Is every company going to go to a point system?
These are kind of the ground floor conversations that are happening. I'll use one other example; Marketplaces. Again, back up to 50,000 feet. I think by the end of the decade, a third of our industry, which today is at $4.5 trillion will flow through marketplaces of some type. That's huge. And a third will flow indirect, a third will flow direct. But that's a large change to where we are today. And in marketplaces, again, that's the outcome long-term prediction. What do you do today? Well, there's about 20 marketplaces today that are going to take on 80% of that. That's trillions of dollars.
And, what is your strategy today on the AWS Marketplace; the Microsoft marketplace? The Salesforce AppExchange, the other marketplaces around the world? There's only about 20 of them. And we have to have that conversation about each one of them. What are we doing about the other 20% of the market? Companies like AppDirect, and Miracle, and Vendasta, all the way down-- the top five now raised billions of dollars last year in private equity. So, we kind of know how to build a marketplace that isn't one of those top 20 that serve a particular type of buyer industry, et cetera. But let's get down to the doing part of it, and what conversations do I need to be in? What do I need to know about these marketplaces? What do I need to know about my buyer, and how do I get out in front of my competition? If I'm a partner, how do I succeed in marketplaces where maybe I don't actually get the indirect sale, but there's a number of partner assist functions? And every dollar of that sale may throw out upwards of $6-$10 of opportunity.
Craig Patterson: That's awesome. I love that response. There's so much to unpack there. You gave a lot of insight-- first off, when we talk about Ford, I've been following that myself. I think it's fascinating as they pivot to this Direct-to-Consumer model. Oh, by the way, I wish they would've done it sooner. Because I'm one of those guys that's ordered a Ford Bronco that I've been waiting on for quite some time, and I've been dealing with the whole dealer markup due to the demand and the supply issue. So, Ford, if you're listening, change quicker, because I want to buy directly from you and cut out the dealer there. So, I think that's fascinating. But, a couple of things I'd like to talk about. So, you talk about the doing part, right? In terms of companies really embracing the future around marketplace, this is something we're following here at Aryaka. In fact, we actually launched the first ever SD-WAN SKU in a marketplace this year with AppDirect. So, we're very excited about that.
And I agree with you, I think customers will continue to look to buy their infrastructure, their cloud, their security, in these marketplaces. So, what's your advice-- the question really is to you, like, what is your advice for companies like ourselves that are making that transition right now? Like, what are some steps we can take now to start to embrace that marketplace strategy to get ready for the future, whereas you mentioned, the majority of consumers are going to be buying in a digital format?
Jay McBain: Yeah, absolutely. I mean, in the whole idea of marketplaces, and marketplaces grew more in the first three months of the pandemic than the last 10 years combined. What we've been interested in, we're not post-pandemic yet, but we're far enough along that we're interested in what's happening now. You know, was this like a Peloton story that this all is going to reset itself and we're just going to go back to our old ways? The answer is, ‘no’. We're watching the two or three quarters now in the later pandemic stages and all the consumer type categories, and the B2B categories we're watching continue to grow. So, marketplaces were upwards of 1/3 of the US economy, and it's grown. And it makes common sense, in that, you don't buy a digital subscription or any kind of consumption in an old human-based way. Because today you don't buy Netflix from your cable person in the white van, you buy it on a digital subscription. The $15 or whatever it costs, a couple of months go by, and you're looking at your credit card and you haven't watched a movie in two months, you're probably going to cancel. It's this new world where the average buyer today, buying your products, are probably buying six others at the same time. They're looking to procure and provision those at the same time. They're looking to level up or level down those as their business changes. So, these types of things like that, you know, no one can wait for someone to go make seven arrangements, seven business relationships, get seven different pieces of special pricing, get seven contracts where you have to do the redlining, and lawyers have to get involved.
I mean, it's becoming this point-and-click environment. And as everything is moving subscription, what you're really signing on to is the first 30 days, and all the rest of this stuff becomes quite easy for the buyer. So, the doing part of it then is, where is this market TAM? So you build a whole set of products, and I could break down every one of your products in your portfolio, and let's talk about SD-WAN, let's talk about every nickel that drops around the world, into every industry, in front of every buyer, and every different location through different distributors, through master agents; now tech solution brokers, through big cloud solution providers like Pax8, and, let's look at that entire market TAM and start to see where the marketplace activity is, the early movers in these categories, and make sure-- like you said, you've got the first SKU that got loaded up. And as this starts to grow over this decade, you're going to be positioned ahead of that demand, to basically make a frictionless buying environment for your customer. It is in the end what you're trying to do, and what your partner is trying to do as well.
But here's the rub, and here's the differences between traditional channels, and what we're calling now, ecosystems; is that every customer or every prospect that you have, and your partners have, have on average seven partners that are servicing them today. And today, we kind of know who one of them are, mostly who takes the customer's money; the point of transaction, the point of sale. Where the other six partners are doing other activities, either before the point of sale, during the point of sale, or obviously, after the point of sale, every 30 days forever. And if we could know what these other six partners, if we know who they are, if we could measure, monitor and manage those moments better, we could start spreading out our program, start spreading out our partner-friendliness, and we could be working partner-to-partner to better serve customers. And that's where we're going now is-- we actually see six swim lanes outside of that point of sale. And, you start to see companies now talking about partner-assist, instead of partner-sourcing. Microsoft would be a good example of that; where they used to be 90% partner-sourced, everything, Office Windows, everything got sold through the channel. Where in Azure today, maybe it's only 30%.
So, instead of talking about the different partner sourcing by product, all they're doing is saying that 96% of their business, they can measure as partner-assisted. Partners are there during the first 28 moments of that customer journey before vendor selection. Partners are there at that point of sale. So, we just talked about marketplaces. 24% of marketplace deals, someone else presses the "buy" button, not the customer. There's procurement services. There's somebody doing the Configure Price Quoting, and actually doing it on behalf of the customer. But you can't measure that 24% because those people actually don't do the resale. They don't take the customer's money, but they're assisting that deal going in your favor, and that has to be measured a different way. And then the fun starts, that's only the first 30 days. You have to measure adoption, implementation, integrations and stickiness, upsell, cross-sell, enrichment. There's so much that needs to be measured every 30 days forever to get you a customer for life. Getting in front of and knowing who these seven partners are, are becoming absolutely critical for the future.
Craig Patterson: Just amazing insights there. And I think it's really good advice because I think some companies get so caught up in the now versus thinking about the future. And so, as you think about these marketplaces, I think we all need to be understanding, in that, sales are going to happen overnight. We got to build the foundation, we got to build the workflow for the future. And I think you're spot on. The companies that embrace that marketplace strategy now are going be the ones that win. We're going to be winning in three, in five years when that pivot happens in the marketplace and customers start to transact through these marketplaces. And if you don't embrace it now you're dead. You're gonna be dead in three, in five, in seven years. So, really good insights there. I appreciate your feedback.
Let's talk about -- what are thoughts around the future of programs itself? I see a lot of programs starting to pivot away from these traditional tiers, like the tiering model; the gold, silver, bronze. I think that whole model is pretty played out. But what are your thoughts around the future of just programs themselves? Do you see companies starting to abandon the tiering structure? What are your thoughts?
Jay McBain: Yeah. I mean, the traditional model, and going back 40 years now, isn't optimized. Because what ends up happening--, and you can ask any direct sales rep their opinion on this, you end up overpaying a big portion of partners at that point of sale, assuming they did all the marketing, the selling, the engineering, and everything else to get you the deal, and they didn't. But then on the other side, you end up underpaying 50% of other partners that did all the work and you won the deal in your sleep, because they did everything. So, what happens is, everyone earns the same margin regardless of how much skin you had in the game. So, what we're trying to do is shift from the point of sale, and paying at the point of sale, to paying at the point of value. So, I mentioned that the average customer is going to walk through 28 moments-- it's like when you bought your Bronco. You're going to read things on the internet, you're going to go to social media, you're going to watch YouTube videos. You're going to be all over the place, getting all the latest and greatest on all the Bronco models, and things like that. I did the same thing during that time.
But those 28 moments got you so smart. You know more about that truck than any dealership ever would. You knew more about the deal. Like you said, you went and got the invoice price, you got the backend rebates. You knew exactly the financials, because you are empowered and could go get it. Those 28 moments exist for all of us. And if a partner is there nudging you towards a Bronco as opposed to a Cybertruck, and you land at the point of putting down some money on a Bronco, Ford has a lot of people to credit for getting you there; your neighbors, your friends, and all kinds of things. But in the end, the more of those moments that they can measure, they can pay on, that e-book that helped you, that white paper, that video, that event you went to, that association, whatever you're doing to get smart. You know, they'd behoove themselves to go and build partnerships with those people. Because guess what? We're at the end of cookie, another trend. So, at the end of cookie, I can't just go buy a piece of MarTech. Today, there's 9,932 pieces of marketing software who can help you by buying data. You're the product on the internet. Well, at the end of cookie, Apple has stopped them, Google is trying to stop them. But between them, they own 99% mobile share, and they own 86% desktop browsing share. So, they are the two brokers of cookies.
Once we're at the end of cookies, you can't buy that 28 moments anymore. I can't watch my prospect go through those early moments and guide them into our product. I now need partners and I need to attribute those moments to, which is a new piece of technology. I need to share data with them early and often, which is another piece of technology. So I need to invest in, for example, those 28 moments differently than I would've ever had to do in the past. So that's like a big change that's happening in terms of how actual partnerships work, and how business is going to be done in the future, and why Ford is out saying what they're saying yesterday, in front of a pretty large audience, of how cars will be sold in the future.
Craig Patterson: That's really interesting to think about. So, I look at my journey working with Ford, looking at that Bronco transaction, looking at those 28 moments, Jay, I got to think that I spent 27 of them trying to figure out the color that I want, researching the color. And with the color, the seatbelt color- it was a very difficult decision for me.
But that's fascinating. In terms of the end of cookie, and just those 28 moments. Let's pivot here a little bit more of a personal question to you. Obviously, you spent a lot of time at Forrester, really being one of the key analysts there, and recently, you made a move. So, just curious, ultimately, what led you to that decision, and how's the new role going for you?
Jay McBain: Yeah. For me, it was a great move, because there's an example of being at a large company that kind of covers everything and you're having thousands of analysts that can talk about pretty much anything inside of business, to go into a company that's 100% focused on channels, partnerships, alliances, and ecosystems. A company that has the data, a company that has events, a company that has analysts that wake up in every country around the world, thinking about these things.
And the great thing for me is the pushback. Because when we talk about what we talk about here, the subscription consumption models, that's delayed. Marketplaces are delayed in Europe by probably around five years. So, they're not having the same urgency at the moment, but obviously it's a part of their future. Asia Pacific is probably delayed 10 years. China is probably 15 years. So, I talked to analysts from there and they're like, "I'm working with people who will be long retired before they have to worry about marketplace strategy." So, there are nuances around different geographies, and being in a company that just does this for a living is pure source, is more powerful, and it makes my research better, and it makes everybody's-- all boats rise when you can get all different opinions at the table.
Craig Patterson: So, for you, I mean, I got to think that it almost has to be a dream job, right? To be 100% focused about the thing that you've done since college, and that's channel. So, you get to get up, you get to have your coffee, you get to have a little bit of breakfast, and then you get to crush channels all day, every day. So, I got to think that's just super awesome for you.
Jay McBain: Yeah. Well, 75% of world trade, world GDP 94 trillion goes through channels. So, you're gonna buy your Bronco, you're going to be forced to, buy law in your state, to buy it through a dealer. So, you're probably within a decade. These are pretty powerful dealers, by the way, for four generations, they get senators and congressmen elected. They sit as a board of the Chamber of Commerce. I mean, these are not rollover type of people. But everything you do, you know, the last TV you bought was from a retailer. The last jar of peanut butter you bought was from a grocer. But I do get to wake up and look at all these key changes as every company becomes a tech company, as software kind of eats the world, and watching everyone flow into the point now where we're counting millions upon millions of tech partners.
In other words, who are these seven people that are helping every client? And as we get better as channel professionals, figure out who these people are-- if I am a partner, I want to figure out who the other six are. So, there's a huge opportunity to work together. One plus one can equal three, and it's not P2P anymore; Partner-to-Partner. It's like thinking about all seven and who makes sense. There's a digital agency there, there's an accountant, there's ISVs in there, there's MSP that's in there, there's a VAR that's in there. I mean, we're all doing different things, we're swimming in different lanes, but every dollar that's flowing today in tech, hardware, and software is again, kicking out $6-$10 in services. And we want to know who those buyers are, we want to be working with those partners, and we want to be doing what's best for the customer, which is obviously going to create lifetime customers for partners as well.
And I want to work with vendors who get that, I want to work with distributors and tech solution brokers, and others that get that too. I want to build a community. I want to build an ecosystem around myself that I can go double, triple, quadruple my business in the years to come, by choosing the right train to hook my caboose to.
Craig Patterson: That's awesome. Congratulations, by the way, on the new role. It sounds super exciting. I love all the content that you're creating, and you're pushing out on the market. It's excellent stuff. So, as you talk about those seven key people and you talk about-- I hear you talk a lot about the influencer strategy. You know, companies really need to embrace the key influencers that are top of mind in our industry. So, any thoughts or feedback or recommendations around how companies can embrace more of an influencer strategy?
Jay McBain: Well, there is. The world is becoming inside ecosystem. It's a top-down and bottom-up approach. It's only a dual approach to the market today. Top-down, regardless of who your market is and who the top players are, you can pretty easily find that on some list somewhere. You need to have coverage, you need to have a capacity plan and everything else in place. I mean, that's stuff that we've known for decades, and that's what we took courses in college on.
What we're getting to now, in this kind of modern world, and as you're buying your Bronco, and you could probably name off some people in the Bronco communities and stuff, that are ultra smart, and they're telling you what seatbelt color to go with, and they're telling you to wait for the Raptor version of the Bronco because of this, this, and this. These are the people that become super important because they have followers. These are the mini-Kim Kardashians of the Bronco space, or the tech space, or the SD-WAN space. And in ‘the law of a few’, Malcolm Gladwell's Tipping Point book talks about 100 people that drive almost all of the activity.
And so, in any market, I call it the 14 spheres of influence. As you bumped along those 28 moments, you bump across 14 different spheres. You're on social media, you're reading magazines, you're going to an association, you might talk to an analyst like me, you're in peer groups, there's distributor communities and vendor communities. There's all kinds of things going on that are generating content, generating knowledge. You're going to tap into maybe upwards of 14 of them. But as a company, I can literally hire one person as a community leader to go figure out those 14, to go figure out all of the different watering holes, and then to double-click on those watering holes to find out who has the loudest voice and the biggest following, can run a little algorithm and I can build my own 100 list of who's going to make my company the most successful. Whether I'm a partner serving Wichita, Kansas, or I'm a big vendor, like you serving the world, it all rolls down to 100 people. And that's what I would be extremely focused on making sure I was visible in the watering holes, and making sure those people that carried weight, carried influence, were saying nice things about me. That's the future of marketing, that's the future of partnerships, and that's what most companies right now are doing a terrible job at.
Craig Patterson: Yeah. So, I think for us as Aryaka, we really need to lean in finding the top 100 people that are really influencing the SD-WAN and the digital transformation into this convergence of networking and security. I think it's excellent, excellent advice. By the way, any updates on when we're going to see the top 100 influencer list published by Mr. Jay McBain?
Jay McBain: Yeah, I did it like five or six years ago. And it was just so much work, it was like 100 hours of work. Because the algorithm, I did it in order, too. Usually, magazines just sort by last name so you don't know if you're number two or number 98. I actually put the points beside people's names, and you were on there, and I knew the algorithm of how to get to those points and going across thousands of watering holes and stuff like that. But, I do it as an analyst today, rolling up my sleeves for specific companies to say, okay, you're in SD-WAN, let's break all this down and find, and go, and build a repeatable strategy of how that community leader, how that face to the company can go really make things happen bottoms-up and trust the company is going to come in and do all the right things top-down. And when we meet in the middle, we're in the conversation, in every dollar of our potential market size, our TAM, that we're in every one of those customers' 28 moments, multiple times. That's when we become a massive company, and massively valued, and everything else. Like, that's the ticket to the future in terms of really building a successful company.
Craig Patterson: Well, I'm going to be on the lookout for that list because I'm a competitive guy, Jay, and I want to make sure that I land right back on your top 100 list. So, just kind of wrapping things up here, just more of a personal question. Obviously, you being a hockey fanatic like myself, you know how passionate I am about the best game in the world, that is hockey, and my passion for the Colorado Avalanche, especially winning the Stanley Cup this year. Any predictions for the upcoming season, like who do you think has the best opportunity of taking the cup this year?
Jay McBain: Well, I'll make 100% accurate prediction that Toronto probably won't make it past the first round again, I haven’t been alive I don't think to see them do that. But that's a good prediction. I do have a prediction that a Canadian team is going to make it further, and I hope-- it's been again, three decades since a Canadian team has won the cup. I don't think next year they're ready to win the cup, because I think Colorado has an absolute juggernaut that they've built here, and I think we can be on the front end of perhaps another-- Tampa did it multiple years in a row, and I think Colorado has the team here if they can keep it together, to go do two or three years in a row, or maybe even a New York Islanders, Montreal Canadians four year in a row type of run. So I think things are in your favor, if I were to make a prediction.
Craig Patterson: Well, I hope so. I mean, being a season ticket holder, I'm rooting for the Avs to win the cup again. And of course, we're willing to embrace you as a new fan of the Avs. So, happy that you're now supporting the best team in the NHL.
So, last question, Jay, any advice for listeners out there? Any, like secret sauce, any channel hack that you want to share to the listeners?
Jay McBain: Yeah. My hack is always-- we learned in college, and when I got my first job at IBM, I always had a manager saying, "Oh, you’ve got to grab the top three things and hit a home run." And we're just out of the home run game. And for anyone that's watching, another great sports movie, Moneyball - channel is literally Moneyball. We're aiming for singles. We're trying to get on base. And, you may aim for the fences, but while you're doing that, and spending time, and spending money, going to aim for the fences, one of your competitors might have got 10 people on base. And so, this is a game of winning and losing by singles. And when you talk about these watering holes, when you talk about marketplaces, we talked about subscription models, we talked about so much during this time, but it's all at the grassroots. It's about doing. You've got to have the dream, you've got to have the target, you've got to know where things are going, but you've got to be spending 90% of your time landing the plane. Names, faces, and places.
Craig Patterson: All right, my man, Jay McBain, everybody. The 2021 Influencer of the Year. He's just a key analyst in our space. You guys have got to follow him, look at his content, it's really great stuff. He's a marketplace guru. I think we can all learn about how to build for the future from Jay. And I really love the detail around those 28 moments. I think we can all embrace that, learn from that to figure out what those 28 moments are. And I love all the commentary about landing the plane and Moneyball, I agree with you, channel is everything and the center of everything in terms of how we're going to continue to accelerate growth in IT spend.
So, Jay, it's been a pleasure. I've really enjoyed the conversation. There's only one thing left to do here, my friend. And that's, I got to hear a "Let's go" from you. So, I'm going to give a little 3, 2, 1, and we're going to end this podcast with a Jay McBain ‘Let's go.’ You ready?
Jay McBain: Let's do it.
Craig Patterson: All right. 3, 2, 1.
Jay McBain: Let's go!
Craig Patterson: Let's go! Let's go, Channel. Here we go, Jay McBain. Thanks, my friend.