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2Inspire Interview Series
Channels are a long-term commitment... a partnership marriage! Not everybody survives the post-Honeymoon period.
Ken Beam is an IT Strategic Alliances Consulting and Business Development Specialist, with 27 years in IT Industry and channel management positions for Oracle, Baan (now owned by Infor Global Solutions), Intergraph, Sun Microsystems, GE Access.
Ken is also president and founder of The VAR-City - a Channel Sales development, management and consulting company for the IT industry.
Delia Ene: You've been in the IT channel management business for a long time now. What has changed and what is more or less constant in this line of business?
Ken Beam: Let me start with the Channel constants and then we'll circle back to the changes.
Most of the things that haven't changed could be classified as business drivers, or "why" they're in business. What they do, and how they do what they do fall into the changeable group.
They're 'resellers', so unlike a Vendor, their product is not a tangible entity you can slap a SKU on. Their product is themselves - their reputation, their expertise, their credibility, honesty and trustworthiness. They always strive to be accepted as the knowledgeable trusted advisors their customers can call on for advice, guidance and informed recommendations leading to the delivery and satisfactory implementation of the recommended solution.
They may be generalists serving the needs of a community or specialists reaching beyond the finite demographic limitations of a staked out region. Either way they face a similar competitive duo - other resellers and vendor direct reps. And, in either scenario, their strongest defense is «differentiation» or, more importantly, «relevant differentiation».
What I mean by that is offering something the other guy can't offer and that something must be of importance to the buying decision maker. It may be a team of specialists who are trained and certified to address a unique requirement or circumstance; it may be owning the exclusive sales and distribution rights for an absolutely necessary product. More frequently it's somewhere in between.
I point this out because that's one of the most important things that have not changed, from the vendor's perspective.
Any reseller worth your effort to pursue is constantly poked at and prodded by other vendors seeking a sales partnership and they better have a well defined Business Value Proposition that includes a differentiation factor along with a realistic profitability projection if they want to be seriously considered.
[reseller's] strongest defense is «differentiation» or, more importantly, «relevant differentiation» […] offering something the other guy can't offer and that something must be of importance to the buying decision maker.
Resellers, VARs, Systems Integrators, whatever handle you apply, have limited resources and are only looking for new products that do not cannibalize sales from existing products (a no-win zero sum game) and products that can be a catalyst for greater growth within their existing customer base and one that allows them to extend their established expertise into new and incremental business opportunities. It's also worth a couple of bonus points to you if your product compliments another high revenue product they currently offer.
There are many other things that have not changed - but, for the vendor attempting to expand their indirect sales revenue this one is, in my opinion, the most important to understand and plan for.
In regards to what has changed the most, other than the obvious product and technology advances, a couple things come to mind.
One is how the resellers have morphed (perhaps "evolved" would be a more accurate description) to adapt to the commoditization of technology products that were once the sales domain of technicians and only purchased through locations that could deliver, install and support the purchased (high profit margin) items. By happenstance or convenience the internet started growing into an acceptable buying vehicle about the same time, and together this dual-force wave began culling the storefront retailer herd and opening new marketplace opportunities for eBay, CDW, Amazon and others.
Resellers had to find new ways to make money, some didn't.
As a result what we began seeing in the reseller community starting in the mid-90's (or a little earlier) was a shift (by resellers) towards products that required more services and what was once an 80/20 - Products/Services model began closing in on 50/50 and even greater to a polar reversal. As it turns out, services are generally accounted for in the 50% profit range while products began dipping towards 10% margins and less.
Following that trend we also started seeing more resellers dropping product sales altogether and calling themselves "Sales Influencers". In the simplest terms they behaved just like they had as resellers with proactive marketing and opportunity creation; but, what was different is that, as the opportunity approached closing, the recommended vendor was brought in to complete the sale and handle the nasty bits like invoicing and collections (aged receivables really knock down the profits and crunch the credit line). The "Sales Influencers" would then mange the services aspect of the project and enjoy the higher margins without diluting their profitability with lesser margin products and delayed pay.
Those would be the high points on both sides of the question.
Delia Ene: When is a software company ready to embark on indirect sales? I know you've contributed to a very useful Channel Readiness Quiz by Bruce Hadley (part 1 and 2). Is there a most essential requirement that no channel program should be initiated without?
Ken Beam: That quiz, even though a bit outdated, is still a good indicator of just how Channel worthy-ready you and your organization are. The included self-scoring is also a good way to identify (in) which areas you might be the weakest and how important those areas are in the big picture. Some are easily handled with minor modifications and others are, frankly, deal ending.
Too many go into Channel sales believing that they're ready; but in fact they really are not.
What I typically find is that the readiness factor is less about the product than it is about the people. Too many go into Channel sales believing that they're ready; but in fact they really are not. Their expectations regarding time to profitability, infrastructure overhead, their product's actual appeal to the reseller community, their allocated budget and so much more are completely out of whack and often self-deluding.
Comparatively, Direct Sales is a weekend on the town while Channels are a long-term commitment... a partnership marriage! Not everybody survives the post-Honeymoon period.
Delia Ene: I'm a channel ready ISV. Where and how do I start with my partner program to make sure I get it right?
Ken Beam: I'm going to assume that by "channel ready" you've at least done the basics. You've confirmed that your product meets the price point/services/sales cycle litmus test. Meaning that there is a clear and reasonable Business Value Proposition (BVP), remember that? Confirming these things are your Step # First.
your message must match the type of partner you're courting.
You've identified your product's strengths and the "ideal partner profile" matching these strengths. And, you've identified your partner program segmentation - sales, consultants, developers, sales influencers, agents, affiliates etc.
Be prepared to deliver your BVP in short form (single sheet), long form (verbose document) and an elevator pitch. Your message must match the type of partner you're courting. For example, a developer partner has no interest in sales and marketing information - they want to know about your SDK [Software Developer's Kit - editor's note].
I'd make sure I have my prospecting presentation ready for show time. That includes everything leading up to it such as a partner specific demo and recruiting PowerPoint slide deck.
The next thing I'd do is make sure I have all of my "On-Boarding" processes in place and I'm prepared to survive for the next 6 months without significant revenue.
Delia Ene: You are preparing a seminar with Software CEO on Navigating the Channel - How to on-board new partners for maximum performance, and faster cash results. Particularly when things are not smooth, what is best to do: on-board new partners or concentrate on improving the relationship with existing ones (something like file for divorce & re-start dating or go to marriage counseling)? How can you tell that existing partners are as good as it gets no matter how much effort you're putting into the relationship before you exhaust your resources?
Ken Beam: In this case I don't find the options mutually exclusive. An individual partner matter should be treated on a case-by-case basis with the firm understanding that if the partnership is not working out for one member then it's also not good for the other.
In the same way that I work through the reasonable expectation factors with my clients before giving Thumbs up on going forward with a Channel, I do the same with new potential partners before offering them an agreement to sign.
If a partner prospect asks me about how we generate leads in one of their first 3 questions - they are instantly qualified out!
I make it clear beyond any question that if they are not ready to leverage their skills and expertise to generate sales for the vendor then we don't need them. If they believe that becoming a partner is their spillway to an eternal lead fountain they're not a good fit for us. In fact, if a partner prospect asks me about how we generate leads in one of their first 3 questions - they are instantly qualified out!
New partners can be qualified in the recruiting cycle in the same way that a prospect customer is qualified in or out during the sales cycle. The senior sales person knows when it's time to let go and move on to the next qualified target. The channel manager assigned to bringing new partners on board should do the same.
Some things the channel manager's manager should be looking for are drop-offs in partner productivity that are not within acceptable seasonal patterns. Also, if a partner is doing well with one product, and not doing well with yours, that could signal a disconnect at the partner manager/partner annex point.
To build on this a bit more and summarize, I treat every partner matter within the construct of that relationship and go out of my way to reward hard work and good effort; and, have very little patience with repeat offenders. An offender's removal will often set an example that resolves other border line problems.
Delia Ene: Establishing a sales channel abroad - how much more difficult than expanding on the domestic market? Let's take the U.S. market as an example. Any useful pointers?
Ken Beam: It's tough, it's very tough. In addition to the usual establishing a new channel slew of issues we regularly face, we have now piled on more potential partnerships concerns for resellers and, by transference, any preferences or dissuasions their customers may also have.
[...] the addition of a U.S. office, even a small shop will suffice and [...] if the U.S. staff was drawn from local roots you've taken another step to increase your odds for success.
Resellers are very sensitive to carrying products that, for what ever reason, may have some difficulty being accepted by their customers. For example, if a major software company is under investigation for accounting practices and there's even a hint of this interfering with their ability to deliver product or support that would be a problem for the customer buyer and, in turn, resellers who carry the product. This is an exaggerated example, but the reason for push-back does not matter, if there is push-back.
Valid or not, concerns about time zones and the potential for delayed support, language barriers, currency/economics, even guarded fears over political disruptions are all factors that impact the resellers decision to take on a new product. And, when resellers are already very picky about their new partnerships, they don't need many more reasons to decide not to take a chance.
As a relevant side note, many of the resellers I speak with when recruiting new partners for my clients will tell me - "Sorry, we're not looking for new partnerships right now we're trying to decide which of our current partners are going to be let go". There are more resellers reducing their relationships than increasing them. And, any reseller waiting by the phone for someone to call and ask them to be a reseller is not a reseller I want.
These circumstances are exacerbated when there is no local representation, but can be mitigated to a great extent with the addition of a U.S. office, even a small shop will suffice and ideally it would be staffed with one sales person and one technical person, or one person well versed to do both. And, if the U.S. staff was drawn from local roots you've taken another step to increase your odds for success.
You will find online retailers like Programmers Paradise and others, but they are primarily order takers and charge a hefty amount for a variety of marketing campaigns that run blast emails into their customer base or give you a more visible position on their website under feature products.
These steps are not necessary, but with each one you will be increasing your chances of developing a successful U.S. Channel sales program.
Delia Ene: How can you define in one paragraph Efficient Channel Management?
It's all about execution and follow through.
Ken Beam: It's all about execution and follow through. Expect your partners to be spot-on responsive and by example you will be too. If the partner is not playing by the rules or they are becoming a disruption find gentle ways to remind them that being a partner is a privilege not a right. Resolve channel conflict issues on the spot - do not let them linger or fester. Take excellent care of your good partners and don't hesitate to show problem partners the exit.
Delia Ene: Thank you, Ken, for taking the time to talk to us.
Don't forget, on April 16th Ken Beam is holding a seminar on How to on-board new partners for maximum performance, and faster cash results and has generously offered a 40% discount to Avangate Digest readers - contact him directly if you're interested.