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.