The Rise of the “Born in AI” Partner

Hey, guys. Thanks for the intro. We're here with Alex Smith, who's vice president of Ecosystems, Channels, and Marketplaces for the Futurum Group, and there's a new report out about what's going on in the channel, and well, in the age of AI, you might be surprised to discover that there's a lot of change happening.

Alex, welcome to the show. Hey, thanks for having me, Mike. So, in general, I know you've been following this now for years and putting out multiple reports, but have you seen any fundamental changes in the mindset in the channel, and what are some of the highlights in the report?

So, Mike, the, I think the channel is a community that's always kind of facing adversity and always facing kind of the, the looming threat of, extinction, and, AI is, n- probably the latest, technology paradigm that is, you know, putting, a lot of, partners maybe at, what... Surfacing that conversation again, let's, let's say. But, really, I think what's striking is that the partners, you know, from what we could see, are still showing, you know, pretty healthy growth, pretty healthy optimism, and especially around AI, you know, really showing a, a, a real surge of confidence in their ability to, navigate their business model in, in the AI landscape, and that certainly was one of the data points that came out.

You know, 83% of partners who we surveyed, explained, or showed that they were confident about their business prospects in the, age of AI. So overall, I think, you know, lots of good optimism from the partner community. It seems like there's two ends of, of this...

Let me try that here. It seems like there's two ends of this thing. One is the selling motion around AI products and services, and the more we get into AI, the more challenging and complex that seems to be for the end customer.

So is that creating the opportunity for the partners? 'Cause ultimately, it just comes down to who has the expertise. Yeah, exactly.

So, I think as you highlighted, from a portfolio side of things, any time there's a new, technology landing in the market, that is a new technology that, tech partners can bring to their customers, as part of their o-overall portfolio. And certainly, that is one of the, you know, when we look at AI software, one of the, or the technology that partners indicated is going to drive, growth for their business, that kinda came out overwhelmingly, on top. Um, but then, of course, there's all the other, associated underlying technologies that really support that.

Um, cloud infrastructure is still showing a lot of, strong growth. Um, cybersecurity, it's a technology that, you know, no matter what trend is happening in the landscape, it has cybersecurity, implications. So partners that are in the business of cybersecurity, will see more, opportunities, around cybersecurity as they're deploying, AI and AI software for their customers.

So it's not just the AI software itself that creates opportunities for partners, but it's all the underlying associated technologies, as well. And so that has a, kind of a multiplier rippling effect for, across the portfolio. And then on the other end of it is how they use AI themselves internally to become more profitable, because I think a lot of the partners, as you well know, have always struggled with, you know, making sure that they're making enough money to sustain themselves, and that also requires a fair amount of expertise.

And as you talk to those folks, you know, are they getting there? Are they kinda still in the early stages of that? And kinda what are their hopes and dreams?

Yeah, I think, I think that's the dynamic for every business, right? Like, it's, it's... AI is one of those transformational technologies that, you know, really a-asks kinda two questions.

One, you know, how are you, as a company, going to improve your portfolio of offerings that you have to the market on the back of AI? Like, what are you providing that is underpinned by AI? And then two, you know, let's call it enterprise AI, how are you actually leveraging AI internally to improve your operational efficiency, your, your, your cost of doing business, et cetera?

And, and so we see those dynamics play out likewise in the partner ecosystem. Um, in fact, one of the areas, and we asked these questions, to get a pulse from partners, one of the biggest changes we saw compared to this time last year was the number of partners who are developing their own solutions on top of LLM, well, on, on top of these large language models. And I think that's something that all companies are experimenting with, how can they, you know, add a, a wrapper of their own IP, their own, use cases around these LLMs.

And in, in terms of what we're seeing in the partner ecosystem, we definitely saw a big spike of that, more partners actually building on top of LLMs, you know, as, as the understanding and the knowledge base around this technology matures a little bit compared to this time 12 months ago. Looking over the horizon, do you think partners might be a little concerned about, well, eventually the customer's gonna figure out that the cost of delivering services is dropping in the age of AI because I'll be able to, I don't know, update and automatically patch an application, for example, or I might be able to thwart some sort of security attack, at a much w-lower cost, and if that's the case, will there eventually be pressure on the pricing of the services? And how does this play out in your mind?

So Mike, I think that goes back to the opening remarks, right, of, you know, the, the partner ecosystem always under threat of, you know, being cannibalized by technology and, you know, evolving, you know, evolution of, of, technology, platforms. Um, but I, I would point to a couple of things. I think you're right that the, the, the kind of the question on services on human deployed kind of capital, like, you know, hourly billing, for sure those types of things are under scrutiny.

And I think even if you look at some of the recent partner program, changes that we've seen in the market, where you're looking at... whether you're looking at Salesforce or, Adobe, you know, all companies who are revamping their partner programs, and there's definitely an emphasis there of shifting some of the metrics, so to say, towards outcomes rather than billed hours. So I think there will be a dynamic there where partners need to evolve more towards, outcome type and deliverables versus, you know, a, a standard hourly billing type dynamic that has existed in the pro- professional services world for, for decades.

Um, the second point I would say is even the, the, the purveyors of, AI, companies like OpenAI, have, have really, shown an appetite for working with the partner ecosystem. Um, OpenAI just launched its, announced its, Frontier Alliances, and really framed in the market's mind, a ecosystem of partners who they saw as companies who are going to be at the front edge of helping enterprises deploy, AI at scale. " So I, I, I think, for a, a few partners out there who really understand the technology, grasp it, there's gonna be a whole new realm of actually what we're calling frontier partners, companies who are really landing AI operationally inside of, you know, modern enterprises.

Do you think also, and I, I know we've been banging this drum for years, but the partners need to be more, business use case led, and that they're working with their customers to actually drive some sort of outcome that means something to the business. But have we finally come to the point now where, well, that's no longer an option, that's just a matter of survival? Uh, absolutely.

Yeah, I think that, increasingly, I mean, that's been a dial as you, as you alluded to, that's been kind of being turned really for a number of years now. Um, you know, it's not just about deploying horizontal technologies en masse inside, inside companies. Like, that part of the market will gradually commoditize.

Those will be a role for, you know, the act of just simple reselling. But, you know, admittedly, it will kind of be a different part of the value chain, whereas the actual, you know, deployment of technology to make it, really map towards the specific business outcomes that a customer has, that's the secret sauce that partners can, can bring. And being that kind of inter- interconnect between here's this whole kind of complex world of technology that exists out there, a growing, complex technology, world, and here's how it can map to, you know, my specific customer and the, and the specific challenges that they have, the specific processes that they have, the specific industries that they play in.

Um, and partner is always going to be a, a, a, a strong interconnect there, just by virtue of being that, you know, kind of last mile, engagement between, the tech community and the, the end customers themselves. It also seems like the line between what services the partner builds and provides versus resells from somebody else is getting a little blurry, and maybe has been for a while now. But we've had this software as a service kind of motion and this whole as a service category.

Are we getting better at kind of sorting out if I'm a partner, what should I go invest and build in versus what do I need to just kind of resell within my portfolio, but I, I don't need to build everything myself? Uh, I, I think that we actually might be getting more complicated there, unfortunately, and I think AI might supercharge that. Um, I noticed that, for example, one anecdote is, when, when Google Cloud launched, well, launched the, the agentic, category in its marketplace, you know, one of the big, contributors to that were, were the, the GSIs themselves.

Um, and, you know, I think that's one kind of corner where, if anything, what, what agentic is doing is kind of bringing that world of product and the services more closely together. When you think at the very core of what, you know, agentic does, it is that kind of almost, technologifying of, of, of professional services of, of, of human capital, of human labor. So I, I think both the, the, the quote unquote traditional SaaS software companies are wanting to get into this space, but so are the traditional services companies.

So I-Yeah, I do think agentic brings these two, I don't wanna say disparate worlds, but, you know, a more sep- more disparate worlds together in, in a way that, I, I think we really haven't seen, prior to it. So I think there will be some reframing of, like, what roles do, do partners play versus technology companies. But, I think what doesn't change is that last mile aspect and the fact that fundamentally technology companies are building products and solutions kind of more for wide mass adoption, and partners are, you know, gearing their offerings more towards very specific, client customer bases.

And so that's something that they could still bring to the table in many cases as a competitive advantage and, and, you know, a- a- an important role too, that they'll continue to have in the, in the ecosystem. Maybe I'm doing this too long, but every time there's a new inflection point in the technology, I always see the same thing play out, and I wonder if you're gonna see it here again. Um, there's a consolidation among the old guard, folks who don't wanna necessarily move on to the next phase and don't really wanna play with the business model and reinvent their business.

And then there emerges this whole other class of folks who were native to that technology, and maybe we'll see some AI native partners as well. But is that whole drama just playing out again? I think so.

I, I think, you know, anytime, you know, a new technology lands in the market, there's gonna be a new ecosystem of companies that are really building kind of very, you know, much around that new technology paradigm. I mean, in the same way that we saw kind of the born in the cloud partner, I think we will see the born in AI partner. And again, we're calling them the frontier partners.

Um, but as we saw kinda play out in... with the born in the cloud partner, many of those will end up getting acquired by, partners of old, so to say. Um, and, you know, I think we'll see that kind of life cycle, play out again.

So do I think that, you know, the, the big GSIs of the world will, you know, kind of disappear? No, certainly not. But some will, you know, some will rise, some will strengthen through M&A activity and skills development.

Um, some probably will, struggle to make the leap. And the same will be kind of, you know, can be said of each of the major, partner categories, whether you're talking VARs or, distributors, et cetera. Um, so I think we'll see this, you know, interesting blend of new business models, new capabilities, M&A activity and consolidation, as the partner landscape kinda goes through a, you know, a, a typical reshuffling, um- As part- ...

yeah, you know, kinda story plays out again. Yeah. And, and as part of that, do you think the next generation partners might be more independent of the vendors than they have historically, where they're always kinda dependent upon, you know, in the old days, just reselling something that somebody else made?

But maybe this next generation of partners, you know, they're the ones who will create their channel programs and, and, and then decide if the vendors wanna be part of it. I don't... I, I think it will be more, the next generation of partners will be aligned to a different part of the technology ecosystem.

So if you were a, a, a, a, a channel partner in the, l- the, the, the, the early part of the century, the, the kinds of technology companies who you would build your business around are probably gonna be very different from, the technology companies you would build your business around if you were launching a partner today. Um, you know, and just by virtue of some of them not existing. But if you were building a, a, an AI first practice, it's almost certainly you're going to want to build your tech, and services platform around an OpenAI, an Anthropic, or even a, you know, a Google Cloud or, or, or what have you.

So I, I, I think the, you know, AI as a technology paradigm has kind of moved the, the center of... w- is gradually moving the center of the partner universe, so to say. Um, I, I, I, I think you could even kind of make that same kind of leap when we were talking again about moving into the born in the cloud era, right?

Um, there was a time not too long ago where, you know, there weren't that many partners out there who were building their business in and around AWS or Google Cloud. Now they have become very much, you know, top strategic, partners for, for most company, for most partners, i- in the ecosystem. And, and I think what's even more impressive when you have a company like Microsoft that has managed to navigate those transitions from, you know, from era to era and remain a top, you know, key strategic partner for the ecosystem.

Well, fast-forward 10 years, I think the technology partners will be, you know, still reliant on their underlying vendor technology brands. But what brands it will be, you know, that, that, that kind of, that, that, that, lens moves gradually over time, I'd say. All right.

Well, I know you just got the first half report for 2026 in the books, so I, I know there's no rest for the weary, though. So what's the second half looking like? Oof.

Um, well, you know, I think the second half we're gonna have to see, you know, some of the, some of the, let's call it, problems of old around, you know, I think com- going into, going into this year, some of the challenges the partners were e- expressing in terms of what they were, concerned about going into 2026 tend to be a little bit more inward-facing around, like, their portfolio competitive, competitiveness, around their ability to, you know, d- you know, to drive, to drive sales. Whereas this time last year, a lot of the concerns were more external factors, the state of the economy, supply chain issues. Um, I almost wonder if, you know, as we kind of get into 2026, if some of those concerns, macro concerns, might start to rear their head again, whether you're looking at kind of the, the health of the global economy, whether you're looking at kind of, supply chain short- shortages that are impacting from the, you know, memory constraints and the rippling effects that that will have throughout the entire, technology stack.

So I, I, I wonder if some of those, concerns and fear factors will start to, simmer up as we kind of get into the middle part of the year. All right, folks. You heard it here.

The times are a-changing in the channel one more time. Hey, Alex, thanks for being on the show. Hey, thanks for having me, Mike.

Talk again soon. All right. And back to you guys in the studio.