What’s a best practice solution for managing channel partners in the software industry?
Any software-driven company relying on channel partners to sell and implement their products is faced with the same challenge. How do you grow your business, when sales and implementation are not under your own direct control?
Using a channel of independent companies to resell, implement and/or service customers has 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.
Let’s walk through a typical software industry scenario:
“Double over three”
A software company selling through a channel wants to double their revenue over the next 3 years
They have the following options:
- Push distributors to step up the activities and make resellers sell more
- Push distributors to recruit more resellers
- Cut distributor margins
- Bypass distributors and work directly with current resellers to make them sell more
- Bypass distributors and recruit new partners directly
- Cut reseller margins
- Invest in massive marketing campaigns and hope this will generate more demand for the products
Anyone in the channel would love massive marketing, but unless you have a closed-loop business model, there is no known relationship between the investment and the outcome. There is just no way to determine – with a reasonable certainty – how much it will take to create a pull big enough to achieve “Double over three”.
Working with the distributors
Anyone in the software industry working in a three-tier setup recognizes the massive inertia associated with having to change the behavior of partners through distributors. It is almost impossible. The software company decides to bypass the distributors.
Working with the resellers
Recruiting new partners is all well and good, but the recruiting effort and the learning curve for new partners will prevent this activity from providing major contributions to the growth objective. Furthermore, it may lead to market saturation and demotivate the existing partners.
The software company decides to work directly with the existing resellers and to focus the efforts on those partners who already have growth potential. The distributors are invited to participate in the program, but as observers only.
The software company decides that the issue is not pushing license sales “from behind”, but helping the resellers grow their license related business. Then license sales will grow as a consequence.
The software company realizes that defining and executing a 3-year growth plan must be anchored at the CEO/Board level of the resellers. Resellers are sick and tired of hearing their vendors talk about strategy and plans as well as give them templates to fill out, return and never get any feed-back on. A new and lean format is required. A format that doesn’t require any paperwork and which yields immediate and tangible value.
The new format must provide a strategy and associated plans, which the resellers own and are highly motivated to execute. The software company will then agree on support activities for these “individual” strategies and plans.
The Solution: ValuePartner
ValuePartner® is based on a simple questionnaire that each member of the reseller’s management team must answer individually. The software company extends the questionnaire with a number of questions reflecting their own global strategic direction. The answers from the management team will then reveal the degree of internal alignment as well as the degree of alignment between the two companies.
The software company engages an external coach who can facilitate the process and make the representatives from the software company, the reseller and the distributor equal participants.
The process takes just 1½ days plus 1 hour for filling out the questionnaire.
The resellers were overjoyed. The process was short, precise and exclusively about them. It was not a corporate program designed in some ivory tower in a far away country. It was 100% about the reseller and his opportunity to grow “Double over three.” All the issues related to releasing this growth potential were identified and agreed to by the management team. And the resellers’ own plan now gets the backing of the software vendor and a distributor eager to demonstrate that he can add value as well.
Other articles in this series:
- Successful Channel Building in The Software Industry
- The Best Process for Recruiting Channel Partners in the Software Industry
- Steps to designing and executing productive Partner Channel Programs in the software industry
- Partner P&L – the path to productive partners in the software industry
- Strategic Partner Development in the Software Industry