Global growth through a partner channel in the software industry – Part 1: For all the wrong reasons
An associate of mine once concluded: If you have enough money: Go direct. If you have enough time: Build a channel.
My associate had been spearheading the development of one of the most successful VAR channels in the world. This channel now belongs to Microsoft and is branded Dynamics.
This series of posts will discuss the issues associated with using a channel based Go-To-Market approach on the path to global market leadership for Independent Software Vendors.
Few success stories and numerous failures
Using a channel of independent companies to resell, implement and/or service customers have a long tradition in the history of the software industry. For some software companies the channel has been a major contributor to global success, but for most software companies making it work is a depressing and constant struggle.
The word “channel” is used in the software industry to describe independent companies that assume various roles and obligations in bringing a software product to the customers. The definition is rather broad, since the roles and obligations can vary substantially from “simple” reselling to system integration, solution development on top of the software, implementation in terms of consulting, project management, customization, training and support.
The common denominator is the fundamental condition that the individual channel operator is an independent contractor operating in his own name, at his own expense and at his own risk.
For all the wrong reasons
Why do so many software companies have difficulties in building a partner channel and making it work?
From my experience with GTM projects in the software industry there are three fundamental reasons why a channel based GTM fails.
1. The negative approach
Software companies very often turn to a channel based GTM approach to avoid the investment required for rapid growth and the risk associated with the unpredictability of penetration speed. Although this may appear as a solid business reason, the premise is negative. You expect that someone who is not so familiar with your product and your market should be prepared to make the investments and take on a risk, which you yourself are not prepared to take? The premise is a negative approach and your behavior will be colored by your risk aversion attitude. You perceive the channel solution as the easy and cheap solution and try to shift the investment and risk to you channel partner. This approach is actually conveying an anti-partner attitude.
2. The amateur approach
When a software company with a direct GTM approach decides to apply a channel based GTM they are starting from zero on the learning curve. For some odd reason software companies with a direct GTM approach tend to substantially underestimate and misjudge what it takes to recruit, enable and grow a channel. Assigning staff with skills and competencies with direct sales obligations to be responsible for the design and implement of a channel based GTM is very risky. There is substantial difference between running a direct GTM approach and an indirect GTM approach.
The risk of missing what it takes to build and manage a successful channel is very high, if you have no experience or support from someone who has done it before.
3. Lack of ambition and passion
Some ISV’s are not ambitious and passionate about their business. They use a channel approach as an “easy” and “risk free” approach to try getting some additional short term business. They make no investment in a channel enablement program and provide no support helping new partners bootstrap the business. When the endeavor shows unsuccessful, they blame it on the partners and pull out.
“To partner or not to partner”
This series of blog posts is mainly focusing on optimizing partner based GTM approaches. The series is primarily dealing with B2B type of value chains, with complex purchase processes (complex purchase processes have more than one decision maker). However in the next post we will be discussing the principles behind the fundamental decision: “When to partner and when not to partner”.
Other posts in this series:
Post #2: For all the right reasons
Post #3: The Three Stages of Market Penetration
Post #4: Partner Value Proposition (Bootstrapping)
Post #5: Partner Value Proposition (Bridgehead)
Part #6: Partner Value Proposition (leadership)