The Decade Of The Channel Ecosystem Accelerates With Massive Software Consolidation

Jay McBain, Principal Analyst

Oct 14 2020

A couple of years ago, I made the prediction that we were entering the third stage of sales and marketing — the decade of the channel ecosystem. With over 75% of world trade flowing indirectly, I started to sense an influx of investment in and attention on indirect sales by firms in all industries.

Looking back 20 years ago, the sales technology stack (led by customer relationship management, or CRM) took direct sales from an art to a science. At the time, over 300 CRM companies existed; we know the handful of winners today. Ten years ago, the marketing automation phase took direct marketing from an art to a science. Over 100 companies consolidated down to the five or so winners we have today, with Eloqua being acquired by Oracle, Pardot by Salesforce, and Marketo by Adobe as prime examples.

The next decade will be driven by the 159 software companies on the channel software tech stack that I predicted will consolidate into around five horizontal platform winners. These companies would serve the trifurcated channel across customer influence, the transaction, and the long-term retention of customers in a subscription/consumption model. It will also serve the people, processes, and programs that make partner ecosystems flourish.

The consolidation phase is now underway in earnest. My top prediction of 2018 was private equity making a sweep of the channel software space, creating some unicorns along the way. Since then, I have counted over 30 acquisitions on the tech stack.

As we entered the early stages of the COVID pandemic in 2020, venture capital and private equity activity in this space cooled off as companies assessed the environment. As automation, cloud acceleration, and customer experience became the top customer demands over the summer, the industry benefited, and investments have picked back up.

Cases in point:

360insights announces acquisition of Perks WW. The purchase marks 360insights’ sixth acquisition in three years — becoming a $100-million-plus company and positioning it as the largest pure-play channel incentives management platform provider globally. This was right on the heals of the CR Worldwide acquisition a couple of weeks ago. 360insights enables brands to manage, measure, and optimize consumer rebates, sales incentives, volume incentives, market development and marketing co-op funds, sales allowances, points programs, and associated spending in one central location using data-driven channel insights, with concierge support including program design and management, regulatory and compliance services, and help desk, claims adjudication, and payment services.
E2open to become publicly traded company. A leading provider of end-to-end supply chain management software shocked the channel world when it made a quick series of acquisitions, including Zyme (which had just acquired CCI and Foster MacCallum), Entomo, Birch Worldwide, and then Averetek, last year. Today, E2open announced that it will become a publicly traded company, and it is expected that its common stock will be listed on the New York Stock Exchange under the symbol “ETWO.” E2open’s aim is to combine networks, data, and applications to provide a deeply embedded platform that allows customers to optimize their supply chain from channel shaping and business planning to logistics and global trade to manufacturing and supply management.
Impartner completes acquisition of TIE Kinetix’s channel marketing and demand generation business. Adding to the previous acquisitions of Amplifinity and Tremolo, Impartner further built out its channel management platform in the partner relationship management and through-channel marketing automation markets. Looking ahead to a trifurcated channel model of transacting- and nontransacting-type partners, Impartner is investing in brand control, demand generation, and channel lifecycle technologies that serve both traditional and nontraditional partnership ecosystems.
LogicBay is acquired by Pluribus Technologies. Founded in 2003, LogicBay delivers technology-enabled channel management solutions to companies that need to build, scale, or optimize their indirect sales channels. Pluribus is a Canadian-based company dedicated to acquiring and enhancing small B2B software companies from owners and investors that are seeking a succession plan. With recent enhancements to their PRM, LMS, and especially ecosystem technology FUSE, I was surprised to see LogicBay go this route. Other companies in Pluribus’ portfolio include continuing learning for accountants, workflow management for restoration companies, and management of medical test data. On the surface, I can see no synergies here and seems like a hasty exit. Will update as I learn more.

Point solutions are rapidly consolidating into broad, industry-agnostic, global platforms that serve all partner types and pave the way for the road ahead.

In an Accenture survey, 76% of CEOs agree that current business models will be unrecognizable in the next five years — with ecosystems as the main change agent. The channel software industry is rapidly building out ecosystem functionality and acquiring key assets as these companies look to emerge from the “decade of the channel ecosystem” as winners.