Designing Effective Channel Partner Programs in the Software Industry (3)

 In Building Successful Partner Channels, Industry News

Channel development requires insight & understanding

To read part one of this series click here >> Part 1.

To read part two of this series click here >> Part 2.

The series of posts discusses how to design effective business partner programs in the software industry.

The posts explains the design criteria for a business partner program, stressing the difference between the business model of the software vendor and that of his channel business partners. Effective business partner programs are based on the best-practice approach for building and growing a business around the software vendor’s product.

The posts also briefly explains the difference between the business partner agreement and the business partner program.

Finally, the posts provide specific recommendations for the content of the business partner program in the software industry. In this context the whitepaper makes recommendations for recruiting and starting partners as well as for managing the portfolio of partners.

The Business Partner Program Elements

The business partner program will have to cover the following areas:

  • Business Management
  • Training and Learning
  • Sales and Marketing
  • Customer Support
  • The Partner P&L
  • The Business Partner Community

Business Management

7 steps simpleYou and your partners are running a business together. Although each of you is responsible for your own P&L the two of you must sit down together from time to time and do the following:

  • Understand and align your market assumptions and insight
  • Set business objectives
  • Develop strategies to achieve these objectives
  • Detail the action plans required to execute the strategies
  • Define the budgets to support the implementation of the plans
  • Follow up on the results and take corrective actions when reality deviates from the plan (which it does all the time!).

The business management activities must be supported by facts from the market and from the results of the business partner’s activities.

As you will not appreciate going through individual business planning formats with each partner it makes sense to provide a standard business management format.

Getting started

The first iteration of the business management process is based on very little information. As you do this activity with other partners all the time, a new business partner will expect that you know what is the “best practice” for getting started.

As you kick-start the relationship you will have to connect the various organizational functions with each other answering the following questions:

  • Who is responsible for the overall business relationship?
  • How do we get access to information?
  • Who takes care of support (sales, marketing, pre-sales, post sales, sales admin. etc.)?
  • Who takes care of special bids[1]?
  • How do we escalate issues (sales, marketing, pre-sales, post sales, sales admin. etc.)?

When signing the business partner agreement you will probably sponsor a kick-off party taking the opportunity of raising the awareness level within your business partner’s organization and get acquainted with the operational people, who are going to make the relationship work on a daily basis.

The Partner Portal

The software vendor must provide access to all relevant marketing, sales, support and product documentation though a web-based portal.

Serving a large number of business partners without an effective “self-service” platform will obstruct the scalability of the software vendor’s business.

Partner Management in the long run

Fig. 1: Partner Pyramid

Fig. 1: Partner Pyramid

As your channel of business partners grows, the challenges facing your partner management activities change fundamentally.

Any software vendor’s channel of business partners will gravitate towards the situation illustrated in figure 1.

5% of the business partners are stars capable of growing their businesses and driving the demand for your product.

10% of the business partners can grow their businesses if supported with business development and management coaching.

85% of the business partners have no or only very limited growth potential.

The software vendor will have to adapt the business partner program accommodating the needs of the Stars and the Growth Potential while reducing the cost of management of the large group of partners with no growth potential.

The distribution into the three groups is mainly a function of the management ambitions and skill-sets available in the business partner channel. The software vendor will instigate mechanisms to spot the “partner talent” and direct resources to help stimulate the growth. If the “talent” is not present, then no program or initiative will have any impact.

Training and Learning

Software Project Audit

You may want to consider introducing a certification program as your portfolio of business partners grows.

Although training and learning is particularly critical when starting the relationship there will always be an on-going need as partners grow and/or staff come and go.

Training should take place at all levels in the partner’s organization. The better briefed the staff are, the more likely you are to have a successful relationship with them.

Start with training the sales and marketing people so they are able to do the business planning with you based on factual insight. Then continue with pre-sales and post-sales as required.

Many software companies categorize their business partners based on the type and volume of certified people they employ. You may want to consider introducing a certification program as your portfolio of business partners grows.

Sales and Marketing

The top priority with new business partners is to get the first revenue-generating projects as fast as possible.

FunnelMany business partners will be reluctant to introduce new products to their existing customers. They are afraid of making mistakes and jeopardizing an existing relationship. However, selling a new product to a new customer is the most difficult scenario in any sales situation.

Unless there are certain specific circumstances speaking in favour of the “new/new” scenario you should always insist on getting your product sold to the business partner’s existing customers.

Sales cycles longer than 3-6 months are difficult to manage for most business partners. The business models of most business partners do not generate a lot of cash, thus “time to revenue” and time to a cash-positive situation is critical.

Your business partner program must include a dedicated section on how to accelerate the “time to revenue” and the “time to a cash-positive” situation. The investment must be shared between you and the partner.

Customer Support

You must ensure that the customers are well supported.

With customer support we are referring to all the professional services elements required to find, win, make and keep happy customers. The services include pre-sales demo resources, proposal writing, price and cost estimation, project management, integration services, customization, training and on-going support.

In most business partner models the profit for the business partner is exactly the delivery of these services. It is thus equally important for you and your business partners that the quality of the customer support services is as high as possible. However, the more comprehensive the software solution is the longer the learning curve is for the business partner.

On site coaching is most likely required in addition to the training until the business partner is self-supporting in all steps in the value chain.

The Business Partner P&L

Bringing together all the elements described above makes up the business partner P&L scenario.

Partner P&L graphThe more experience the software vendor has with setting up new partners the more historical data is available for making a realistic P&L scenario with a new business partner.

Some software vendors are reluctant to perform this exercise with new business partners as it may turn out that the investments are high and the time to a cash positive situation is very long.

However, today most business partners will ask to perform this exercise. Even established software brands will have to perform this exercise convincing (and contributing to) new partners to migrate their solutions to new platforms.

The Business Partner Community

Getting business partners together for conferences and events has a tremendous motivational impact on the business partner community. It is an outstanding opportunity for the executives of the software company to meet up with their most important partners and to make “best partner” announcements etc.

For software vendors creating eco-systems these “physical communities” are critical in building relationships between business partners supporting the growth of the eco-system.

In the early days of building the channel there may be just an annual partner conference, but as the business partner channel grows the events will get more specialized and take place on the various continents around the globe.

To be continued…

[1] Reductions in the transfer price in situations where external competition demands so.

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