In my previous blog entry, I discussed about the complexity of channel development and channel alignment. I recommended for SaaS software vendors to use Business Model Canvas to compare the business model with the assumed business model of its prospective channel partner.
During the past few months I have spent time building a SaaS channel development educational program, a program that I wanted to be not only actionable, but providing information of all of the needed drivers that SaaS software vendors should be thinking about when building its channel strategy. Call me old fashioned, but my philosophy is to educate people of things that I have personal experience in. There are lots of consultants that “help” their clients doing things such as channel development, consultants that have never sold anything, but have read about it in books. My strategy is to build something that is concrete and actionable (not academic) that my audience can use when thinking about their SaaS channels.
The way I initiated the development of the channel development alignment educational program in http://www.tellusacademy.com was to reflect on my own channel development experience (both as channel builder as well as reseller) and list the main things that I felt were crucial in getting channel partners to become excited. The way I started working on it was not from a traditional channel perspective. I asked myself a simple question: how is the channel partner going to make money? Once we identify this, we can worry about the software vendor (ISV) as without a profitable business model for the channel partner, there is no need to invest time and energy to plan something that will not work anyway.
If the financial success of the channel partner should be the foundation for the software vendor to evaluate the channel strategy, it is easy to assume that it is important for both the software vendor and the channel partner to understand how SaaS financial will change the business model and what kind of drivers each party needs to be thinking about. Therefore, I believe that every person working in the SaaS world needs to have a good and solid understanding in how the financial and operational model will change when running a SaaS business. I am sure that the CFO of the ISV and channel partner appreciates this.
I spent considerable time in reviewing the topics that both ISVs and channel partners should be thinking about. Besides having a solid understanding in SaaS financials, any vendor in today’s world has to be thinking about business model innovation and topics around that. How do we stay relevant today, tomorrow and next year? What is happening in our marketplace and what kind of actions do I have to take to ensure that my services or solutions are also appealing in the future? You would not believe how many organizations ignore this….it is amazing.
Another important factor to think about is to understand the expectations from the channel and ISV perspective. What can the ISV expect from the channel and what should the channel expect from the ISV? This is a also something that has changed in the last couple of years as channel partners have a tough time to adjust to the recurring revenue model from the traditional “one big lump sum model”. Besides this, traditional channel partners are not very good at account management and this is a huge issue for SaaS vendors as upselling and ensuring retention is a top priority to any SaaS vendor. The ones that have negative churn can say that they have been successful at least in the upsell to existing clients.
Channel roles and responsibilities is a topic that seems to be very unclear to both software vendors and channel partners. Basic questions such as “who is going to provision the cloud instance” is not clear and questions such as billing is also a question that many struggle with. Should the software vendor manage the billing or should it be the channel partner? What if the end customer does not pay the bills, should the software vendor still bill the channel partner and even take them to court for unpaid balances? In the traditional channel world we can argue that most of these types of questions could be easily sorted out due to known practices, but the SaaS/app world is still a bit unclear who does what.
Part of the channel profitability discussion should be a discussion of channel margins. In my course, I will give examples of a typical channel partner scenario where we will model one sales rep and his/her targets and what it means to the channel partner. This type of exercise is extremely health for any software vendor to see the reality of a channel partner and their desire to build a solid business. If you are a software vendor, have you modeled the channel partner business and how your solution might play in that space?
And finally, any software vendor will either become successful or fail and it is going to be based on the channel program that the organization is going to build and maintain. During my SaaS channel development course, I will also address the main drivers of channel management and key issues that an ISV need to be thinking about.
It was fun to create this course as everything is based on experience either from my own work or the teams that I have worked with for more than 20 years. As said, I do not believe in education of best practices if the person does not have any personal experience. This type of experience comes with blood, sweat and tears.