What can we learn from SolidWorks Channel Program–Conclusions

This is the final blog about the case SolidWorks and the channel program and success that that David Skok describes well in his series of blog entries. SolidWorks grew their revenue from $135M to $400M in 5 years and one of the key elements was the channel. In my first blog entry, I described SolidWorks VAR development program, in my second blog I discussed the means how to grow your sales with the channel and in my third blog, I discussed about scoring your channel partners.

When I reflect back on the SolidWorks growth with the situation today with a strong cloud drive, I will draw some conclusions of things that are still valid when building your channel. Lets look at what David Skok concludes in his summary of SolidWorks channel program.

The fallacy of thinking that Channel gets too much money

ISVs tend to forget, that the ISV do not finance the building of the channel partner from a cash flow perspective. If the channel partner hires a couple of sales reps and technical people, the sales of the solution better to work. According to Skok, ISVs fall very easy to the trap thinking that channel partners take too much money from the transaction and that it really should be the ISV that owns the customer relationship. But is it really this way? I hear this more and more from ISVs moving to the cloud where the ISV wants to move the customer relationship to itself and let the channel partner to become more or less the lead generator. I think this is a dangerous proposition from the ISV side specifically in the enterprise side as most end user organizations still expect to have support from the organizations that know the locals and these locals also kind of “own the relationship”. What was interesting that some of the competition had the direct sales force compete with the channel and this is never a good way to grow the business.

SolidWorks took the channel as the route to market, believing and investing in the channel. This investment meant that the SolidWorks had to believe that the channel would bring the needed growth and that SolidWorks had to gain trust in the channel. Without trust, there is no channel. Some organizations have even thought that the channel is loyal to the vendor, but that is just a dream. The channel is loyal as long as they make money. End of discussion.

Building a channel requires hard work – there are no shortcuts to success

The management team picked the strongest and most experienced senior managers with strong operational experience to build and develop a channel. This team had not only seniority, but were also experienced operationally. If the channel person has never sold anything, how do you expect the channel to believe in this person? I would not. I mentioned this in in my previous blog posts that I got reminded this in my younger days when becoming CEO in young age. The SolidWorks VAR channel managers became coaches to the channel, helping to build the business.

It was not easy for the VAR team and the pace was challenging to keep up with and some of these people still had other things to do besides being coaches. According to Skok, one of the learning’s was to understaff the VAR team and reward the success and this also led to a behavior where the VAR managers invested their time to relevant tasks.

The management needs to make a commitment to lead by example. If the management “walk the walk”, how can you expect the line management to do it? Lead by example is the key and this has applied at least in my career. The collaboration between the top management and the VAR team was ongoing with immediate access for discussions and reviews. That is a powerful concept and unfortunately many organizations forget this. Management stare purely on the amount of calls and not asking the right questions why something does not work. If you have a broken model, how can you expect to work in the future?

Building a channel is a road that requires ongoing reviews, changes in direction and deep understanding of the target markets. If the ISV does not have this touch, how can one expect them to lead the channel partners to success? I do not think it will ever work.

The question that we have to ask is whether you need to be a large ISV to afford this type of channel program that SolidWorks created. The answer according to Skok is that the team does not have to be big as long as they are dedicated and know what they are doing. You also have to pick the measurements that you want to track, metrics that apply regardless of geography and culture and this helps everybody to get aligned and speak the same language.

You have to have a long-term view on your channel partners

You should take a long-term view on the channel partner. Do not create “incentive of the month” kind of initiatives. This drives the wrong behavior in your channel partner. Your channel partners should be strategic and this will always require a long-term view.

Would the SolidWorks VAR Channel model work with cloud business?

In the beginning of this blog entry, I said I would reflect if the VAR channel management will change anything when building a channel for cloud VAR channel partners. The answer is no. The same basics will apply, but what needs to change is to get alignment between the ISV and the channel partner and this should be done by comparing the business models side-by-side, looking at the drivers for both sides. In the cloud business, there are multiple new factors that will change and one of the biggest factor is revenue model and this could be a prohibiting factor for the channel partner. Building an organization from recurring revenue streams in the beginning could be challenging and it is also challenging for the ISV.

This concludes the series of blog entries of SolidWorks, a successful ISV that was able to create  strong channel.

Will it help to accelerate your channel by scoring your VAR Channel Partners?

I wrote about the creation of an effective channel program for VARs in my previous blog entry and explained how SolidWorks made a decision to really understand its channel partners, their strengths and weaknesses. What SolidWorks also did was to rank its partners and the question that we of course have is how to make all of this happen. There are a myriad different ways to rank things but what SolidWorks decided to do was to create a derivate of GE Marketing Management Model that enabled them to rank the channel partners.

Based on the analysis from David Skok, clustering the partners based on different criteria helped SolidWorks tremendously to see where to put their focus on and also create a plan how to help its VAR channel.

The criteria that they put together was based on a numeric score (from 1 to 5) and the questions were based on factors such as “Do you have a dedicated sales manager?”, “What percentage of your sales representatives has attended formal sales training?”… I am sure you get the point here… Read more about the questions in the excellent blog by David Skok.

What the interview process revealed was that most of the VAR channel partners did not have written  documents capturing the business plans or any system to track the performance. Furthermore, the business leaders had for the most part a good and solid understanding of their business, but the lack of written procedures and documentation prohibits these organizations to scale and grow.

What was also interesting in the analysis of SolidWorks Channel Partners was that not all of the VAR channel partners bought into the improvement program of different reasons: some just couldn’t and some just did not want to. This is a very tough question to any ISV: should I kick out the channel partner from the program if it does not show its readiness for investment? What if I walk away from considerable revenue source if I do that?

I have built and managed channels throughout my career and I have to say that it is very hard to provide one simple formula for success. What I can say though is that an ISV has to treat its channel partner almost as part of the ISV organization itself. I have seen too many organizations mistreat its channel in many different ways, everything from competing with its direct sales to changing terms during the sales process. Those are things that will cause trouble for the ISV sooner than later.

I have soon lived half of my life in the US (second half in Europe) and I can confidently say that even if the the world is large, it is extremely small in respect to each industry. Europeans see US as a huge market (which it is), but the players are still pretty much known. I know the Microsoft ecosystem and I would be tempted to say that many know me and my company as well. It is the years of collaboration on multiple different levels that has made this happen. I think this is extremely fascinating to think about and it is also a tremendous opportunity for any ISV to grown and build its channel. There is a simple rule to this: “treat your channel as you would treat your own people, and you will see that your interests are aligned”. Nothing else matters.

It the last and final blog entry about SolidWorks, I will summarize the findings, and recommendations of their channel program.

Stay tuned for more….

Is a Solid Channel Program the foundation for increasing your sales?

This is the fourth blog posting about VAR Channel programs.In my first blog entry I claimed that the ISV needs to realize that it works for the channel, not the other way around. In the second blog entry, I initiated the discussion of why it is important for an ISV to really pay attention for its channel program and educate the channel specifically in the cloud transformation as that is what the channel is saying is needed.  In the third blog entry I explained the channel program developed by SolidWorks and what type of findings that this ISV found out as reason for its successful channel development and results.

In this blog entry I wanted to portray the VAR Development Program modules that SolidWorks developed with some comments around these. The program “Channel Capabilities Assessment” is divided into four separate areas in following way:

VAR Channel Program-003

When you review the areas above, there isn’t really big surprises as such, but what is interesting is that most ISVs neglect many of these areas and this will hurt the ISV in the long run. If the ISV does not know its channel and its partners well, how can the CAM estimate anything in respect to forecasting or even the skillsets that the channel partner has in the sales process itself.

What David Skok explains in this blog entry is that to really understand the channel, SolidWorks had to put a “social scientists” hat one to really study the behavior of the partner and to understand their capabilities and what was really needed from the ISV. It is so easy for us to ignore to reach out to our customer/partners/prospects to ask: “how can I help you guys to become successful”. If you are working with a channel, ask yourself how much you really know about your channel partner business? I would bet that not much. To be transparent, I have had the same issue myself, still have but have tried to really dig into my customer case and understand what is needed. It is an ongoing battle and challenge.

In the SolidWorks case, a survey of 65-questions was created with six categories: Business Planning, Finance, HR, Sales, Marketing and Technical Support. Two person teams where trained to do face-to-face interviews and each interview took an entire day.  What I find fascinating is the way these VARs where ranked. Two dimension was created, one that portrays “Vision and Execution” and the second was based on “Willing and Able”.

The process was not only good for the ISV to achieve better understanding of the VAR channel, but it was also interesting for the VAR channel partner to understand its needs and also to get a better understanding how the ISV can help the channel to become better. SolidWorks used a modified or variant of GE Market Management model to categorize the VAR channel partners and I will present this in my next blog entry of this topic.

The conclusion that we can make of this blog entry is that an ISV needs to put time and effort to understand its channel and this will take time and money. Besides this, it is imperative to rank and categorize the business partners so the ISV can allocate its resources to the partners that are “Willing and Able” to perform and invest in the joint future.

Stay tuned for more….

How to become successful with your Channel–a case study to learn from?

In my yesterday’s blog entry, I gave a few hints of channel development and what kind of things the software vendors should avoid.

Today, I thought to share some perspectives on a case study that David Skok gives in his excellent blog entry.  Like in my previous blog entry, I will give my perspective on the findings of this case study.

The case study software company is SolidWorks and this company is specifically known within modeling for mechanical design. This company grew rapidly and one of the key reasons was an effective and well-managed VAR channel. According to the blog, the success of the channel was based on three distinctive phases:

  1. Hiring an executive that had been part of the channel in the past, so this person really understood the channel and how a VAR business works.
  2. Understanding that the success of SolidWorks
  3. Realizing that the VAR channel as an un-optimized  resource and how decide that it was worthwhile for SolidWorks to educate its channel on business skills. This meant every aspect of the business, almost like a mini-MBA

During the spring/summer 2012 I did some research in the VAR/MSP channel and one of the findings was that a key obstacle for many VARs and MSPs specifically in moving the cloud business is lack of expertise and the business model was seen to be unclear like can be seen in following picture (Source: CTTA 2012):

Obstacles in moving to cloud-2012

The latter is specifically relevant to the discussion of SolidWorks and what they did to make the channel successful. What happened in the case of SolidWorks was that the channel account teams became business mentors for the VARs and educating them to run a better business. In retrospect, I think this is exactly what ConnectWise CEO Arnie Bellini is trying to do with its resellers in its annual User Group Meeting IT Nation in the beautiful Orlando, Florida in November 2012.

He even brought in my favorite author Jim Collins that has written many bestselling business books and the latest book “Great by Choice: Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them All” was given to all conference attendees.

I had the opportunity to hear Jim Collins keynote and I think it was one of the best speeches I have heard in my life. He brought up things in an interesting way and without every loosing the audience in the session.

In the next few blog entries, I will review what a good VAR channel program should look like and what kind of VAR development program did SolidWorks have to run its VAR business. I will also give my own add to this by looking it from a Business Model Canvas perspective which we use every day for everything we analyze in respect to Business Models. Stay tuned for more!

The Channel does not work for you, you work for the Channel

pentagons and negative stars - CPBuilding a channel is not an easy task and there are many things what one has to think about when building one. I have had the pleasure to building channels for more than 20 years in enterprise software space, specifically in business intelligence,  collaboration, document management and integration software.

Today, when doing some preparation work for a channel related gig, I found an amazing link of a case that describes a successful channel development initiative and also some of the common mistakes that software vendors do.  The author of this article (David Skok from Matrix Partners) is definitely an authority in many areas (specifically SaaS related things). He lists a few very important points for software vendors to remember and I am now listing them here with some additional comments based on my own experience:

  • You (ISV) have to figure out the sales model first and then using this to teach your channel. I have heard many naïve comments from ISVs where the management explain that “we don’t have to do anything, the channel will take care of that…” Well.. I have not experienced this in my 20 years…..
  • Building a channel takes long time and ISVs forget that the channel has different priorities to what the ISVs have. The channel is focusing on products that are paying the bills and if you have not been able to demonstrate your capabilities to sell, why would they want to take the risk with you? I will never forget when a good friend of mine in California asked me once when I had become a CEO for a software company in the US and recently emigrated from Europe (from from a technology role). He asked me: “ How many have you Petri sold yet…. Call me when you have some stories to tell…”. I closed a few deals, called him and he was a man of his word. We closed large deals together during our collaboration. I had to show my friend that I could sell myself and show by example how enterprises would buy my BI solution.
  • Resellers need ongoing education on your solution, how to handle objections and how to differentiate your solution from the fifty-nine others on the market. You will have to provide marketing material, PowerPoint decks, PDF White Papers etc. And please do not say that there is no competition for your product. Give me 2 minutes and I will list 20 for you….
  • Do not expect your resellers to do lots of marketing, because they expect you to participate and expect you to pass some leads as well. You are expected to help in the channel demand generation efforts by working together with your channel partners.
  • Try to identify a pre-existing channel that supports your solution or your solution can be sold as an add-on. Business Intelligence is a good example where you can sell a collaboration solution as part of the value-added delivery. When you do this, you have to customize your messaging in a way where the channel partner realizes that that your solution together with the other solution is more than 1+1, it is in fact 1+1=3.
  • When ISVs build a channel and have an existing direct sales model as well, there will always be conflicts between the channel and the direct sales force. This can’t be avoided and if the ISV is committed to the channel, the channel will always come first. It is not easy and there are some rules that the software vendor has to apply. These rules will have to be emphasized from the top management of the company. Skok also states that one should expect the direct sales execs have an issue in moving to the channel sales model. Channel people know that with good channel management and right type of partners, the channel will give much higher leverage than trying to grow with direct sales.

These are some of the statements flavored by my own experience and I could not agree more with Skok on these. The good news according to Skok is that with the “right channel, the right people, good product/market fit and with lots of patience, the channel sales model can be one of the most profitable business models.” I echo with this!

Stay tuned for more in this topic and love to talk about it as I happen to have million different scenarios that I have been exposed to.