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Jay McBain Keynotes Ultimate Partner Winter Retreat
What are the AI and Tech trends for 2025? Industry expert Jay McBain shows us the future.
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In this dynamic keynote, industry analyst Jay McBain unveils the seismic shifts reshaping the partner ecosystem, driven by the explosive growth of AI and the evolving customer buying behaviors. McBain emphasizes the staggering trillions of dollars being invested in AI infrastructure, highlighting the vast opportunities for partners to thrive in this new era. He stresses the importance of moving beyond traditional resale models, advocating for a focus on delivering comprehensive services and building strategic partnerships to capture the immense value within the growing service sector and the expanding marketplace.
McBain further explores the concept of the “seven trusted partners” surrounding every customer, underscoring the necessity for vendors to engage these influencers to drive sales and market penetration. He details the rise of “micro-consumption” and agentic AI, forecasting a future where partnerships are paramount and traditional sales models are disrupted. The discussion highlights the critical role of data quality, the need for strategic alignment between partners and vendors, and the imperative for businesses to adapt to the rapidly changing tech landscape to achieve “ultimate partnerships” and long-term success.
Key Takeaways:
- AI’s Massive Investment: Trillions are being invested in AI, creating vast opportunities for partners.
- Service-Centric Growth: Services are outgrowing products, making them a crucial area for partners.
- The Seven Trusted Partners: Customers rely on multiple influencers, not just vendors.
- Integration is Key: Millennial buyers prioritize product integration over brand loyalty.
- End of Resell: Traditional resale models are being disrupted by marketplaces and service-driven models.
- Micro-Consumption: New pricing models are emerging with agentic AI, changing how services are sold.
- Data Quality Matters: Effective AI and partnerships depend on high-quality data.
- Strategic Alignment: Partner and vendor alignment is crucial for success in the new tech landscape.
Don’t miss this opportunity to gain insider knowledge from industry leaders shaping tomorrow’s digital world. Tune in now for an inspiring conversation that could redefine your business strategy!
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TRANSCRIPT
Transcript:
Jay McBain Keynote
[00:00:00] Jay McBain: AI is going to be very good for the hyperscalers. It’s gonna be good for their marketplaces. And if you wanna hook your caboose to a train that’s growing at 30% quarter in, quarter out for the next 10 years, here you go.
[00:00:15] Vince Menzione: We believe this time is like no other. We believe we refer to these as the tectonic shifts,
[00:00:20] Jay McBain: all the hyperscalers in the world, if you add them all together.
[00:00:24] Jay McBain: Managed services will be one and a half times larger because it is the customer buying behavior that has created the need for all of us to rethink our models.
[00:00:33] Intro: Until we have data quality, the effectiveness of AI cannot be realized and effectiveness of the partnerships cannot be realized. Can you figure out, first, what your purpose is and how Microsoft can support your purpose and how you can support Microsoft purpose?
[00:00:47] Intro: Now we have a partnership. It’s the ultimate partnership.
[00:00:52] Vince Menzione: Welcome to, we Welcome back to The Ultimate Guide to Partnering. I’m Vince Menzi, own your host, and my mission is to help leaders like you achieve your greatest results through successful partnering. On February 20th, 2025, a small group of industry leaders converged on Boca Raton, Florida to this same studio for Ultimate Partners Winter Retreat.
[00:01:14] Vince Menzione: What followed was an incredible discourse on the tectonic shifts. And the rapid changes we’re seeing for partners. If you aren’t able to join us in person or on the live stream, we’re bringing this incredible session to you. What follows is a keynote session with Jay McBain, the industry analyst from Canals, talking about the trends and predictions for fiscal year 25.
[00:01:41] Vince Menzione: This is my gift to you. All I ask in return is that you tell your friends, subscribe. Consider joining the Ultimate Partner community and hopefully join us at a Future Ultimate Partner event. I hope these sessions provide you the learnings you need to continue to achieve your greatest results. And now, Jay McBain.
[00:02:02] Jay McBain: Thank you. Thank you.
[00:02:06] Jay McBain: It’s great when you leave your, with your wife, Michelle, in the morning, drop off the kids, come to a great partner event. Could, could, could life get, uh, could life get any better? I wanna frame up the tectonic shift first in numbers, a little bit of trends and, and the way my brain works is kind of top down.
[00:02:22] Jay McBain: Every time we’re given hundreds of billions here or trillions there, I, I kind of have to. Orient myself kind of at a North star. The best place for me, and it’s usually a channel analyst, wouldn’t talk about world GDP, uh, but here we are, 193 countries, uh, ran 105 trillion last year. The good news is, if, if those of you in channels of distribution, 75% of world GDP went indirectly.
[00:02:50] Jay McBain: So for all of the dealerships, the agencies, the brokers, the resellers, the retailers, the franchisees. For the gas stations and the pharmacies, 297 sub-industries inside of this take advantage of channels, but not the reason we start with this. The reason is some of the numbers around AI and the tectonic shift are a material part of this.
[00:03:15] Jay McBain: So when Microsoft talks about six and a half trillion dollars, this isn’t Microsoft’s cam. You see the word ecosystem in every quote. This is all of our opportunity. And we know in, in the world we live in, the rich get richer. You know, Microsoft moves from a $3 trillion valuation to a 10 trillion. So do most of them, or probably all the magnificent seven.
[00:03:39] Jay McBain: We know that we’re gonna create a lot of wealth and, and we’re looking for opportunities for our businesses. We’re looking at opportunities for all of us who have chosen this profession on how to succeed in this really big environment, and not to be outdone. Open AI is talking about a $7 trillion build out of infrastructure in this next phase, this next 20 year era that we’re in.
[00:04:02] Jay McBain: So again, pretty big numbers. When you compare that against World Trade, it makes up six or 7% and just to bring it home. For those of you that kind of were working back in the mid nineties, we used to joke that an internet month is like a year, and I’ll say that in ai. An AI week is now like a year I, I say that we wake up like Star Trek Captains now, and we ask for a damage report is the first thing we do.
[00:04:32] Jay McBain: What happened in the last 12 hour news cycle, and by the way, if you start to look at 500 billion being committed, a hundred that’s been raised not to be outdone, France comes in at $112 billion. You know, we talk about open AI and the valuation there of a hundred billion. Talk about the four of the magnificent seven coming in and committing on their earnings calls.
[00:04:54] Jay McBain: $325 billion of infrastructure. Build out the deep seek that, uh, Vince just mentioned that they built all of chat GPT for $1.6 million. Turned out not to be true. They caused Nvidia the largest one day drop in value in history. $700 billion was lost in value in one day. Until the next day when we found out that these folks are running 50,000 NVIDIA processors, spending billions to build this chat, GPT equivalent.
[00:05:28] Jay McBain: So in this daily grind, this daily damage report that we get, we gotta take a little bit of a deep breath, but there’s already $2 trillion committed and raised against the seven. That is phenomenal. The companies that are gonna benefit most IE Nvidia are going to reach that $10 trillion valuation before.
[00:05:53] Jay McBain: So not only are we talking channels and partnerships here, we’re talking about our 4 0 1 Ks or our RSPs, if you’re Canadian, and how you’re thinking about who wins in these type of environments. But just to go into perspective, again, the six and $7 trillion numbers are bigger than our entire industry.
[00:06:13] Jay McBain: That’s been building for 50 years. Businesses and governments this year will spend $5.4 trillion on hardware, software, and services. In tech and telco. The way it breaks down, there’s about a trillion dollars in hardware. There’s about a trillion dollars in software, and there’s 3.4 trillion in services.
[00:06:34] Jay McBain: So services are larger. Not only are they larger in number, but they’re larger in growth services are outgrowing products. Partners are outgrowing the vendors they work with almost in every product category. So this is the opportunity and as we start to look at where these opportunities are in this next cycle, this is the tectonic shift that we start talking about.
[00:06:59] Jay McBain: So back to my dealerships and agencies and brokers. 70.1% of our industry still goes to through and with channels. If you happen to be in my cybersecurity, it’s 91.6% gets transacted that way. A key part of Ultimate Partner is obviously supporting the routes to market, the go to market that your industry, your companies within.
[00:07:25] Jay McBain: I had a cybersecurity conversation 10 minutes ago, and while you can grow direct and build out product fit in a sales and marketing engine, that works. If you’re in a $97 billion opportunity, that’s 91% channel. You’re not gonna go much further. What got you there is not gonna get you further. So in this world though, there’s another part of this number.
[00:07:45] Jay McBain: Last year, by the way, this number was 73.2. So if you wonder why this is going down, because a marketplace, by the way, is an indirect sale, all of the wonderful things Vince mentioned in marketplace is inside this number. It’s just another point of distribution. The big drop in the number is Nvidia. Nvidia is growing by triple digits.
[00:08:07] Jay McBain: It’s the, you know, beneficiary of most of the trillions of dollars, a commitment, and it’s all going direct. So there’s no channel involvement in terms of a cash register. But there’s a secondary part of this, and this was kind of a blind spot that we had missed in our industry for a long, long time. I even called them shadow channels back in the day.
[00:08:29] Jay McBain: And this idea that, you know, McKinsey would say there’s seven partners that are trusted in every mid-size customer and larger. So who are these other six people who are not cash registers? They don’t collect the customer’s money on behalf of a vendor. And for all of us who have ever ran channels, there’s this incredibly long, long tail of partners and we spent decades.
[00:08:52] Jay McBain: Do we cut them off? Do we incent them? Again, we think that our competitors are winning over there and we’re not. It never was the case. We were just, we had, and I was at Lenovo and IBM, we had hundreds of thousands of inactive partners. Just because we’re trying to measure a fish by their ability to climb a tree.
[00:09:11] Jay McBain: The partners never wanted to be a cash register. Sometimes they were forced, and that’s why they were on your active list at some point, but they were out doing other things. So this whole idea of surrounding the customer with the seven people they trust became something. And after living through a decade of sales kind of triggering in 1999 with Salesforce.
[00:09:35] Jay McBain: Went into 1999, I was a salesperson going into Y 2K doing really, really well. Uh, but you think you were born to be a salesperson. You think you manage your territory with your gut at the end of the decade. It was a science. Your pipeline management, the tools, the sales tech stack, we entered into the decade of marketing, and I remember in 2009 being at cocktail parties, having CMOs joke that 50% of their marketing dollars were wasted.
[00:10:02] Jay McBain: They just didn’t know which 50%. And that was really funny. In 2009 until midway through that decade, every 58-year-old CMO got replaced by a 38-year-old growth hacker, and they had 14,106 tools on their MarTech and ad tech stack to bring to the problem. When we exited the decade of marketing, it was a science.
[00:10:25] Jay McBain: You knew where every nickel was going, and you had a hundred different ways to analyze it. So here goes everyone in marketing, everyone in sales, everyone in customer success, and everyone in product now realizes that they’re not gonna get to market in front of a new buyer without winning these seven partners.
[00:10:45] Jay McBain: Quick story with, uh, Microsoft for example, we’re facing off to a massive competitor with huge first mover advantage with A-W-S-A-W-S had better product. AWS had better pricing. AWS had better promotion, and all Microsoft had in its legacy of 40 years was partnering. The culture had been built from the mail room to the CEO.
[00:11:13] Jay McBain: What if we got two, three or four of those seven people to talk more about Azure than AWS? And that was the play that took them to the most valuable company in the world, and now 26 straight quarters. Of growing faster than AWS. You learned in college the four Ps and what companies are learning today, it’s really place doesn’t matter how good your product is or where you’re even priced, so the decade of the ecosystem takes off and you start to arrange all of these partnerships you need.
[00:11:47] Jay McBain: As of January this year, we got a millennial majority buyer born After 1982, buys the most of the 5.4 trillion. Their number one criteria is integrations. Baby boomers and Gen X care about your service levels, your support levels, your price, your brand reputation. All that is thrown in the garbage. They’ll buy a product, 80% as good as the competitor if it works better in their environment.
[00:12:11] Jay McBain: Integration. First, you need the tech integrations to win. They don’t buy best of breed. When I joined IBM in the early nineties, you couldn’t get fired for buying IBM. Now, I think it’s the opposite. You probably could. The fact of the matter is it’s best of breed. The average deal in the hyperscalers, the average deal in SaaS, the average deal in cyber, the average deal with the distributors today, td, Synex, or Ingram, is seven layers.
[00:12:37] Jay McBain: And in integration, first they need all seven layers to work. You need the services, partnerships, the consulting, the design, the architecture, the implementation, the integration, the managed services. To bring all that together, you need the channel partnerships. Depending on what market you’re in, 70, 80, 90% of it might go through those.
[00:12:55] Jay McBain: You need those routes to market built. You need the strategic alliances. It’s not just your platform you’re building at other times, you’re gonna be participating in other major platforms. Sometimes you’re layer one of that seven layer stack, you’re the million dollar part of the deal. Sometimes you’re the $10,000 add-on at layer seven.
[00:13:14] Jay McBain: You’ve gotta be bifurcated. You’ve gotta build your platform while you’re working well with others. That’s your alliances. And then obviously the co-selling, co-marketing, co-innovation, co-development, co keeping that keeps everyone up at night is where we all are. So this is the new framework of partnering when there’s seven partners surrounding every single dollar within your tam, but vendors aren’t in the middle of this.
[00:13:39] Jay McBain: The customer is, this is the way when you put the customer in the middle, that they think about it. There’s 28 moments in green before someone makes a considered purchase. Whether a million dollars in software or buying a car, it doesn’t matter. You move through 28 and mostly digital moments. 75% of millennials don’t want to talk to a human and they’re okay buying a car or okay buying a million dollars in software if they haven’t talked to a human all the way along.
[00:14:07] Jay McBain: After the 28 moments, they’re building that seven layer stack. Again, how money changes hands has become the smallest part of, of their thinking. And then the fund starts in subscription and consumption models. Now in micro consumption, in gen ai, we are in this every 30 days forever. So the before, during, and after, and the hundreds of services that wrap around it, whether they insource it, do it inside or outsource it, 82% of end customers are now outsourcing more.
[00:14:40] Jay McBain: Then they, um, insourced last year. So managed services, for example, I mentioned was one and a half times larger than the SaaS industry. Managed services is one and a half times larger than the hyperscalers all combined, and that’s just not three of them. That’s Alibaba. That’s Oracle, that’s IBM all the way down.
[00:14:58] Jay McBain: This is a massive market in terms of how it all plays out. This is the six, seven, $8 multipliers, which we’ll talk about in a minute. So when Mark Benioff first kicked off Dreamforce with 180,000 people in the audience, he was, you know, very clear. I’ve, I’ve got all my customers here. I’ve got 223,000 partners here for a company that’s almost a hundred percent direct, convinced, 223,000 partners to join.
[00:15:28] Jay McBain: I’ve got my employees here, what I call Ohana. And when you walk away today, understand that it costs $6 and 19 cents. For every dollar of Salesforce to get it to work as Salesforce just reaches $40 billion in sales, mostly direct. There is $240 billion to get it to work. Now, I don’t want any customer to outsource all of it.
[00:15:51] Jay McBain: You have to have some internal skills to keep the lights on, but I don’t want you to insource it all either. You’re not gonna find the AI skills, you’re not gonna find the cybersecurity skills. You’re not gonna find the deeper skills you need in sales tech or MarTech. So you need to decide on your number.
[00:16:08] Jay McBain: If you’re gonna outsource two of that $6 or $3, there’s probably some somebody literally sitting beside you that can do it bigger, better, faster, cheaper, and that’s the definition of Ohana, which he kind of stole from Hawaiian culture. You know, HubSpot, $5 and 80 cents. We’ve got all the big SaaS platforms, ServiceNow and Workday, and others kind of talking at this level of language.
[00:16:33] Jay McBain: Again, these are mostly direct companies. Only 20% of SaaS is resold Google Cloud. We’re just writing the update to this. This was years ago, but the update’s gonna be about $7 and 5 cents. Microsoft is $8 and 45 cents, but spun in a way that we’re unlocking trillions. If you multiply that out by their revenue.
[00:16:55] Jay McBain: And by the way, none of this is Microsoft dollars. These are all customer dollars. This has nothing to do with our program. AWS is $6 and 40 cents, and they break it down into minute detail of where those dollars go. And when you start to look at where this industry is between 20 and 30% growth and you project, you see the, the things are tipping up over the last top couple of quarters.
[00:17:20] Jay McBain: AI is going to be very good for the hyperscalers. It’s gonna be good for their marketplaces. And if you wanna hook your caboose to a train that’s growing at 30% quarter in, quarter out for the next 10 years, here you go. But it happens in our traditional channel as well. So Cisco, I made a post yesterday, um, about this, but they went and kind of took, and they hired Microsoft’s channel chief and now works at Cisco.
[00:17:45] Jay McBain: But Cisco isn’t the company you thought it was in in the 1980s. 1990s. Only 45% of their business is now send selling. Switches and routers and firewalls and things. 55% of their business is now recurring revenue. They made 287 acquisitions thanks to Michelle for that number 17 years at Cisco. But here we are, we’re at a 55% recurring company, third biggest cybersecurity in company in the world now with Splunk.
[00:18:14] Jay McBain: So Rodney, you know, steps in and looks at 90% of incentives, the gross to nets inside their revenue, which is almost all channel. Goes to those people. The 45% are selling switches and routers, 90% of the money going to 45% of the audience. And they’re creating a point system that just even kinda like Microsoft did two and a half.
[00:18:38] Jay McBain: We care about getting the customer to the dance. We care about getting them on the dance floor, whichever way, and then we care about keeping them dancing all night long. That’s the program and that’s the changes. And yes, partners are divided. I spent, uh, the day with the board of one of their biggest partners yesterday.
[00:18:56] Jay McBain: Very concerned about what’s going on about this. If you happen to be in resell and you’ve been milking these margins for a long time and haven’t been building a multiplier business to go earn money around the cycle, you’re a little concerned. By the way, all their biggest partners are public companies, tens, twenties, $30 billion in revenue that rely on these dollars from Microsoft and Cisco.
[00:19:20] Jay McBain: And Dell and Lenovo and HP and a lot of traditional client server companies. And look at the, and this is just in the last like 30, 60 days, the shrapnel is happening every day when Insight goes and buys. Vince mentioned not only Google’s partner of the year, there’s seven time partner of the year. People scratch their heads because this partner doesn’t do any reell, but does a wonderful job of selling $3 inside that Google.
[00:19:49] Jay McBain: Multiplier, then they go and buy ServiceNow’s partner of the year. And then Joyce Mullen, who used to be Dell’s channel chief you thought was maybe a client server channel chief, she goes to Wall Street and says, the future of my $20 billion company looks a lot like that multiplier instead of margin.
[00:20:07] Jay McBain: Insight outgrew Microsoft for three years on the stock market because the stock market lifted all $20 billion in value, even though they’re still 98% resell. It seems like their vision is somewhere else, which inspires Presidio to buy this year’s ServiceNow part of the year. You just saw CDW by AWS’s partner of the year.
[00:20:29] Jay McBain: You know my time with the board yesterday, you can imagine the work we’re doing now with when you win a partner of the year at a big SaaS conference or a big hyperscaler conference, you take your piece of glass, you get your picture on stage. By the time you get back to your table, you’ve already got an offer.
[00:20:45] Jay McBain: And so that’s what people are watching. Now they’re like flying to HubSpot inbound and they’re going to Marketo and they’re going to NetSuite and they’re just like, where’s the partner award dinner? ’cause that’s their m and a teams, that’s all they’re doing now. Because if we could go tell Wal, uh, that changes everything.
[00:21:01] Jay McBain: Microsoft did a tour, uh, in fourth quarter going to all their biggest partners, tens of billions of dollars, and basically said, we’re turning the tap off this 23 complicated contracts that we have, these enterprise license agreements. Are gonna be down to one. And Sacha has been very public about, you know, software ate the world and now AI is eating software subscriptions and even consumption is gonna go down as these micro consumption agentic AI and other charges go up.
[00:21:33] Jay McBain: There’s no way this is happening through two tier distribution. This is gonna happen on the Microsoft marketplace. It’s gonna be over the next 10 years. The two biggest Microsoft partners in the world are now together Software one and Crayon. Uh, are coming together. The biggest partner in North America Soft Choice just got sold to WWT over and over almost on a weekly basis.
[00:21:56] Jay McBain: We’re seeing these moves now happen. So while we’ve talked about the end of resell for decades, it’s now here as your biggest vendors in your line card come to tell you that these changes are happening and the programs are gonna spread the money, like peanut butter. This is it. This is when a 10, 20, $30 billion company, if you sit on the board and you have fiduciary responsibility, you have to kind of roll up your sleeves and do some work.
[00:22:20] Jay McBain: Now, you’ve kind of gotta mail it in now for 30 years, you’ve gotta do work. Salesforce helped us with this as well. In their state of sales, they go and talk to all the CROs and VPs of sales. 89% of salespeople in the world now are using partners every day for the ones that don’t, 11% that don’t 58% plan to within a year.
[00:22:42] Jay McBain: If you add those two numbers together, that’s the magic 96% partner assist. What does Microsoft measure in all their deals? 96% partner assist. It’s happening here in every industry. In 2024, over half of the salespeople in the world missed their numbers. Tough year. For those that made their numbers, 84% point to partners is the reason why this is a surround environment.
[00:23:10] Jay McBain: The numbers outta HubSpot in marketing are 84%. We, we we’re done convincing the world that partnerships are everything and getting those ultimate partnerships set has to be part of your evaluation, has to be part of your job role. And the flood in of partners is amazing. Every partner, you know, every professional services firm that comes out of other industries, 78% of digital agencies are now tech services.
[00:23:37] Jay McBain: 81% of accountants are now tech services. I. You gotta go to page four of their website to see they’ll do creative work or do your taxes. They are tech services companies. Got 250,000 SaaS companies. We had over a million emerging tech companies now IOT, AI automation, blockchain, quantum self-driving cars, drones, metaverse, uh, 3D printers, whatever future you want to talk about.
[00:23:58] Jay McBain: Over a million companies, 10 million people trying to get into that trusted spot. The seven trusted spots. So again, millions of companies, 20 partner types, tens of millions of people trying to get that trusted spot around the customer to earn that multiplier dollars. And now we’re hearing from the traditional channel people that grew up in the 1980s, grew up in the 1990s, from that August 12th, 1981, Vince, that August 12th, 1981 PC with Microsoft on it are now showing their vendors that they’re doing other stuff.
[00:24:34] Jay McBain: Over half of them are charging the customer for consulting, design, architecture work. There’s no margins left to give it away for free. A third of them look like system integrators. 44% of them are developing software. That was a shocking number. These are VARs, you know, from going way back 10, 20, 30-year-old VARs that are using ai.
[00:24:54] Jay McBain: They don’t have to hire developers anymore to build software. And they’re, uh, doing the managed services. So they’re doing 3.2 business models on average. So you can’t categorize a partner anymore. They’re trying to be in all the before, during, and after parts. The other part of the research just recently is now the number one thing partners are asking for from their vendors.
[00:25:16] Jay McBain: You gotta recognize me for all this great work. I lower your cost to acquire customer. I close bigger deals faster, and I get you a customer for life until you can start taking all the work I do and put in against your own KPIs. Stop paying me just as a cash register ’cause I’ve never been that. And you know, your systems and your processes have never accelerated.
[00:25:40] Jay McBain: Marketplaces growing at 82% compounded over the last five years and continue to grow. And I’ll show you why I think we might have under called this, but the underlying thing, we got to embed ourselves in the top 10 marketplaces in the world, the three hyperscalers. The big distributors, TD Cynics, Ingram, arrow, also PAX eight got to embed in Telco, so we got to look at the biggest 20.
[00:26:04] Jay McBain: Uh, it was 20. We embedded in 10, but we think 50% of all deals will have partner funding in them. The gross to nets that would’ve been front and backend margins in a resale deal. The the vendors themselves are holding those numbers. True. They could have just gone and, uh, you know, reduced those and pay out 5% or something.
[00:26:26] Jay McBain: Like they’re not, they’re keeping the 20% partner offers, which are the private offers. Multi-partner offers distributor sellers of record, and that 50% over time should become 96. So partners are winning inside these marketplaces. But take a look at this, if you want kind of a view forward in this new era.
[00:26:48] Jay McBain: Ag Agentic ai, which is all the rush and all the rage on Wall Street, is coming out as a new model. You know, we knew what product billing and telco and tech looked like in the eighties and nineties. You know, Salesforce in 99 kind of disrupted, and then the SaaS industry brought in subscriptions and got everybody else to think about Subscriptions.
[00:27:06] Jay McBain: Dell Apex, Cisco plus, Lenovo True Scale, HPE, GreenLake. Then the consumption model of the hyperscalers. We’re now moving into a new era, which is micro consumption. I’m gonna charge you $2 per conversation. I’m gonna charge you a dollar per resolution. I’m gonna charge you a dollar per outcome. I’m gonna charge you 50 cents per photo edited.
[00:27:27] Jay McBain: We now have over thou a thousand pricing models because the boards of these companies have pushed them. Before you buy all these Nvidia chips and spend the billions in r and d that you’re trying to say, I need to see how you’re gonna monetize it. It’s not by subscription. They’re not by consumption, it’s by micro.
[00:27:45] Jay McBain: And if you think $2 for this and a dollar for that is gonna run through traditional distribution and traditional ways. It’s not. It’s all marketplace. So watching this as a way forward, kind of AI view, 83% of the world’s business data sits on premises. I went and spoke at all three hyperscaler conferences this year, and all of the CEOs told their partners.
[00:28:10] Jay McBain: They don’t have the room to forklift that data, nor do customers want it. More of the work is gonna be done at the edge in ai, whether co load or at the Edge Data center in terms of training and tuning. A lot of it sits your relationship with your bank, your relationship with your airline, your relationship with your government probably sits on a mainframe that was installed in the sixties or seventies.
[00:28:33] Jay McBain: That storage is not gonna be where the data lake is created and Snowflake or Datadog is gonna be put on top of it. That opportunity for compute storage and networking is gonna happen more at the edge. But let me kind of create the tectonic shift here. If you go back 20 years on the Fortune 552% of companies no longer exist.
[00:28:55] Jay McBain: If you go forward from today, 50% of today’s Fortune 500 are not gonna exist in 20 years, half. So when somebody writes the book on failure and they blame the board, they blame the executives. They didn’t see this coming. They didn’t see the turns of the crank. You know, whatever the book says, you kind of look back and say, what and how.
[00:29:23] Jay McBain: If you go back on our industry, I mean, if you were there in the seventies with Telco in with some of the legendary software, or August 12th, 1981. But as the channel built into millions of companies and tens of millions of people over the course of time, a strange thing, if you overlay it, it happens in eras.
[00:29:44] Jay McBain: There was a 20 year client server era that never went away. I mentioned we still have a trillion dollars in hardware, but it hasn’t grown pretty much in 10 years or more. Cisco hasn’t grown a nickel of revenue in 10 years. There’s still a $50 billion company that Chuck took over 10 years ago from John Chambers.
[00:30:04] Jay McBain: All the rest of the companies are pretty stagnant on revenue. The cloud era triggering SaaS into the hyperscalers created another 20 year era. Do you remember the richest people in the world? Bill Gates, Larry Ellison, Michael Dell turned into Elon Musk, Jeff Bezos, tens of billions turned into hundreds of billions.
[00:30:25] Jay McBain: We create a new era, 20 year era here that’s gonna create the world’s first trillionaires. Elon Musks will probably be the first, but we’re gonna create a whole set of trillionaires in the next 20 years. The good news is from edge to cloud, 80% of the processing of AI is gonna sit on your smartphone or your AI pc.
[00:30:46] Jay McBain: They want more of the model to be out there and not when you ask the weather the Super Bowl score. You know, it’s not gonna have to like to Siri or Alexa. It’s not gonna have to go back to the network every day for the most common things. The other thing is the data. 83% of it sits at the edge. A lot of this is from edge to cloud.
[00:31:06] Jay McBain: The closer it is to the edge, the better it is for partners in a lot of cases, especially traditional partners. So this is that inflection point we’re at. For those of you, again, that have worked a long time in this industry. You’ll know that AI isn’t new, but March of 2023, when our neighbors and friends who are not tech people got to see the poetry, the music, and the deep fakes, the first thing they came is asked us as tech people, did we just light up Skynet?
[00:31:36] Jay McBain: And we quickly, in March of 2023, had to figure out an answer and an opinion of whether we did or not. Is Arnold Schwarzenegger gonna come back and, you know, start shooting things up? Yes. When I joined IBM, you know, back in the nineties we were just getting ready to play Gary Casper off and chess and that deep blue computer.
[00:31:53] Jay McBain: There’s never been a grand, uh, defeated by a computer until then, and since then, there’s never been a grand that can defeat a computer. It was a turning point. Google went and beat go the game, and then years later, which was a generative AI problem, IBM beat Jeopardy. If you remember Watson up against Ken Jennings.
[00:32:15] Jay McBain: Again, that’s a two part problem. You’re kind of asked a question or, or given the answer. You’ve got milliseconds whether to press the button or not. That millisecond’s, a brute force compute goes back to the deep blue. You press the button or not binary. Once you press the button and Alex addresses you, you’ve got about four seconds to get the answer and frame it up as a question.
[00:32:42] Jay McBain: Which is now a generative AI problem. You gotta read the internet cover to cover and you’ve got four seconds to come up with something smart. So since that time, and you know, Watson walked away with that, that was in 2011. So, I mean, this is, you know, a long time coming, but here we are, the first couple of years though, we’re coming up on the two year anniversary next month, and I’m gonna say that the results have been ordinary.
[00:33:10] Jay McBain: All the GSIs who ought to have been the ones out consulting building this new future, reported about 3% growth in an industry that was growing at 8.3. They disappointed investors. They disappointed everyone. We overestimated the first two years, but were underestimating 10 while we’re talking about agentic AI today and all of us becoming better and more efficient with copilots and.
[00:33:36] Jay McBain: Agent fours and other things on our shoulder. The 10 year vision is our relationships change with our airlines, our banks, our governments. We never go back to where we were. The that the apps on your phone start to melt away when the world becomes headless. Your copilot works with their copilot, you know, you end up upside down on a runway in Toronto.
[00:34:00] Jay McBain: You know, you’re already your co-pilot’s working with Delta to get you free flights for life. Thank God everybody made it out. Okay. Generative AI itself from a partner. We’re not talking 7 trillion now, but there’s over $158 billion and a 59% compounded growth, one of the fastest services growth opportunities in our entire market.
[00:34:22] Jay McBain: And understanding exactly where those are is important. As we frame up partnerships, we build this ultimate partner that’s taking their services. Working with the 250,000 SaaS companies on agentic ai, working with the Snowflake, Datadog, Clouderas, working with, um, all the layers of data and then whatever we can work on the $7 trillion infrastructure build out closer to the edge.
[00:34:49] Jay McBain: So this is a kind of a four stage ultimate partner game in ai. Kind of a couple last things I’ll leave with. Is the innovation in AI inside our channel tech stack is growing as well. One of the big problems on this tectonic shift, on this inflection point is we had a whole bunch of partner PRM through channel marketing incentives and things that supported the old model, the two tier model, the reell model.
[00:35:17] Jay McBain: We didn’t have a lot of things that could measure, monitor, manage in a reliable, repeatable, scalable way. All these other six partners in what they did, ’cause they didn’t collect money. I couldn’t get a distributor sales out report to measure that, but we have five new islands of innovation, hundreds of entrepreneurs raising billions of dollars to go solve this in the future.
[00:35:43] Jay McBain: Our tech stacks are growing and we’ve got several in the room here that are doing amazing things in terms of creating this future ultimate partner game, and this has been kind of a joy for me over 30 years in this industry. I love the psychology of influence and my favorite book was Malcolm Gladwell, the Tipping Point, reading chapter two about Paul Revere reading about the law of a Few.
[00:36:08] Jay McBain: I wonder if our industry worked the same way. Are there really a hundred super connectors like Paul Revere that, you know, create all this change and create things to tip? But if you ask people back to March of 2023, we all had to get smart really fast. Do you know that 12% of us love podcasts? Only 12. But when there’s tens of millions of people, it’s still millions of people.
[00:36:32] Jay McBain: It swayed the US election, the Joe Rogan. You know, the week before there’s 121 podcasts that people listen to. That’s it. There’s 35% of us that love to go to events like this, press the flesh, have lunch, have dinner, you know, kind of work. You know that networking. There’s 352 events this year that we’re being invited to.
[00:36:53] Jay McBain: But as you go around the 15 spheres of influence, this is everything. There’s only a thousand watering holes total that tens of million people come into to be influenced if the company you work for is not obsessed with intercepting this ’cause. You’re not gonna hire channel account managers to go recruit a hundred thousand partners, convince two or three outta those seven to say nice things about you.
[00:37:20] Jay McBain: You’re gonna have to get them at the point of their influence. Some of them love peer groups, some of them love sitting on a board of an association. There is people that still read the 106 channel magazines around the world. You see them behind the scenes here. There are people that get influenced all the way around.
[00:37:36] Jay McBain: We got some of the best channel consultants in this room, so this is it. And when you talk about channel marketing, when you talk about the kind of the future of this galactic tectonic shift. How do you do this the best? And maybe your product is only 80% as good, and maybe it’s not the cheapest, and maybe your Super Bowl ad wasn’t the best.
[00:37:57] Jay McBain: But if you solve for this, you solve for the ultimate partner. Thank you.
[00:38:02] Vince Menzione: Thank you for joining this episode of Ultimate Guide to Partnering. And if you haven’t done so already, mark your calendars. Ultimate Partner Live Spring is coming to Redmond, Washington on May 1st and second. This is going to be an incredible event.[00:38:18] Vince Menzione: Like each of our ultimate partner events. This one is going to be just a little bit better than the one before. We’re having incredible leaders from Microsoft Industry leaders talking about co-selling marketplaces, aligning to Microsoft priorities and more. You don’t wanna miss this event. Sign up today before seats run out.