Commonly Used Definitions in the Software Industry Front Office – 4
In a [slider title=”business model”] As defined by Alexander Osterwalder & Yves Pigneur in their book ”Business Model Generation,” John Wiley & Sons 2010. [/slider] context the Channel is the way you take (sell) your products and services to your customers.
In the software industry the term Channel is often used to describe the situation where independent 3rd party companies resell the software vendor’s products to the final customer.
This series of posts provides definitions for all the various types of Channels we see in the software industry.
A Sales Agent is an independent 3rd party company (often just a single person) representing the ISV in the sales activities aimed at winning customers for the ISV’s products.
Very often the Sales Agent is already well established in the market segment in question with good connections to potential customers. In this respect the Sales Agent is acting more as an intermediary or a broker as his main interest is in maintaining his good relationships with the potential customers rather than with the ISVs who come and go.
The Sales Agent typically works on a non-exclusive basis with a fixed monthly retainer and a commission on sales accomplished. The balance between the fixed retainer and the commission will depend on the length of the sales cycle and the competitive situation of the ISV.
The Sales Agent will serve several ISVs at the same time and allocate his time based on his own assessment of the best opportunities for securing his business and revenue stream while mitigating the risks.
Being represented by a Sales Agent is not considered appropriate in some markets and can damage the reputation of an ISV. Exceptions are situations of extreme niche markets where the customer cannot expect the ISV to establish a more permanent representation before the first customer has been secured.
A Systems Integrator works on behalf of customers helping them implement and manage IT systems.
There is no formal relationship between ISVs and System Integrators. The software used by the customers is not acquired though the Systems Integrators, but through other sources.
If a Systems Integrator delivers products to his customers then he becomes a Value Added Reseller and is no longer a System Integrator.
This definition may seem tortuous, but there is a substantial difference between being a Value Added Reseller and being a Systems Integrator.
The Systems Integrator is supposed to be working exclusively for the customer. The customer expects that the Systems Integrator is independent of economic interests with third parties. The Systems Integrator cannot maintain his independent status if he has a vested interest in selling software on which he receives a margin.
Systems Integrators are not channel partners, but rather a group of companies that have an indirect influence on the decision making of certain customer segments.
About this series of posts
This series of posts provides a definition for the most commonly used abbreviations and terms used in the software industry front office.
Please also check out my book Building Successful Partner Channels
Other posts in this series
Commonly Used Definitions in the Software Industry Front Office – Part 1
Commonly Used Definitions in the Software Industry Front Office – Part 2
Commonly Used Definitions in the Software Industry Front Office – Part 3
Commonly Used Definitions in the Software Industry Front Office – Part 5