Channel Strategy Archives - Dr. Petri I. Salonen Views on Life, Entrepreneurship, and Software Business

Is your software SaaS solution channel friendly?

June 9, 2014 by DrSalonen Leave a Comment

Every software vendor needs to think about the question whether its SaaS-solution is channel friendly. And I am not talking about channel friendly from a financial perspective, but also from the perspective how your channel partners can administer its end users customers and deploy the solutions. One of the biggest challenges that many software vendors as well as system integrators/managed service provides are facing is the deployment and automation of software solution to end users. In the past, the software vendor was able to ship the bits on a CD/DVD or as download, but now the expectation is that the software vendor provides an instance of its cloud in an automated way and in a way where the channel partner can manage not only the deployment, but also the provisioning, billing, support and all of the associated functions that a software solution delivery needs to include.

Most software vendors are missing all of the key ingredients in transforming the business model to a SaaS business model as it is changing almost every single aspect of the business. The first question is who is going to provision the solution? Is it the software vendor that will be notified of a new client by the channel partner or is it the channel partners that has a solution (UI) that enables them to manage everything themselves? Who is going to do the billing? Is it the channel partners or is it the software vendor? What happens when the end user customer does not pay to the channel partner? Will the software vendor send a threat letter to the channel partner for non-payment of owed use of service? Is the end user customer going to call channel partner first, or directly the end user organization?

I could keep asking these questions and most of the traditional software vendors have not mapped out these changes and will handle them one-by-one as they come. That is not the most effective way of dealing with change as it is managing one crisis after the other while the better model would be to map out the process, ask the hard questions before anything gets shipped.

I got inspired about this topic today as I read in Redmond Channel Partner about Microsoft Office 365 current status, business growth and perspectives of the environment on channel partners. Based on the most recent quarterly financial report from Microsoft, Office 365 was one of the key highlights where the commercial cloud business for Microsoft has doubled year-over-year and both Office 365 and Azure are performing extremely well according to Microsoft new CEO Satya Nadella. He even concludes that Office 365 should be “a gold-rush time in some sense of being able to capitalize on the opportunity”.

The Office 365 business is already a $2.5 Billion business for Microsoft on an annual basis and when you calculate the entire ecosystem of Microsoft partners, it is easy to say that the overall revenue that the ecosystem is generating is many times that number. Microsoft CFO Amy Hood is concluding that it is the partners that are helping in the growth and this is exactly what one want’s to see when working in an ecosystem. The more Office 365 seats are sold, the better opportunity for third-party vendors to build solutions on top of the platform itself. We have to keep in mind that Office 365 can be seen as a platform and any platform should and will always have innovation extensions built by the ecosystem. If you look at SharePoint ISV ecosystem, there are lots of different solutions that people need to complete the platform. I mentioned in my previous blog entry the Office 365 scanning solution GScan Online from Gradient that enables end user organizations to scan document directly into SharePoint libraries without having to install heavy desktop software to do the job. The app is installed centrally and every user gets the ability to scan in documents using any scanner or image on a share folder. This is exactly the type of innovation that software vendors need to be thinking about and identifying what type of solutions are needed, what part of the ecosystem they fit in and create the right type of messaging around it.

Back to the question whether you are channel friendly. What Microsoft has done with its Office 365 channel partners is to provide a new partner tool that enables partners to manage the Office 365 service on behalf of its customers. Based on the feedback from his channel partners, Microsoft has now announced the brand new admin tool that will help Office 365 to be even more channel friendly for its partners.

If you want to scale your business to the next level, you will have to think about how you provide the needed tools for your partners. You can’t expect channel partners to wait you to provision, manage, support and do everything on their behalf. Most of the channel partner want to own the customer relationship and you as software vendor need to provide the tools to enable this.

photo by: Tim Green aka atoach

SaaS Channel Compensation

February 27, 2014 by DrSalonen Leave a Comment

SaaS Channel compensation is one of the hardest things that software vendors are facing today. If you have a nice traditional software business model with good software maintenance revenue and mature channel, you are reluctant to change or touch it. Let’s dive into some of the difficulties that software vendors are experiencing.

I am currently running educational sessions in SaaS channel development where my audience is given the task to present the business case of a channel partner for a given software vendor. We are using Business Model Canvas to model the business. The task that I am giving to my students is to represent the software vendor leadership team that is trying to recruit a channel partner to become a reseller. The way this is done is to present a Business Model Canvas to the channel partner management team. If the software vendor management team can’t convince the channel partner of the benefits, then the business model is broken. I have done this exercise with many software vendors and it is one of the most powerful ways to get the software vendor to think about the partner, not about themselves.

I have bad news for you. There are no exact rules what kind of compensation models a software vendor should have for its channel, but what is known is how to calculate whether a business can be profitable for the channel partner using different compensation models. Why is this? The biggest issue that software vendors have is that many of the processes and tasks that the channel partner has taken care of in the past, have now moved back to the software vendor. One of them is the monitoring the cloud infrastructure, provisioning the solution, upgrading the software etc. In the end of the day, it is all about roles and responsibilities that the software vendor and the channel partner have to agree on. The more the software vendor moves responsibilities towards the channel partner, the more margin the channel partner expects to get and this is very typical in the traditional software channel model. The software vendor delivered the CD or download to the channel partner, but in the new SaaS world, the instance is provisioned by the software vendor and the channel partner becomes the “middle man” between the end user customer and the software vendor. Let’s review some of the industry “standard” commission models and some implications around them:

If you look at the percentages, the one that is missing is the typical 10% which is really more of an opportunistic percentage that anybody will give out regardless of business model. If you call a software vendor and tell them that you have a lead, they will pay you at least 5%, but 10% is not uncommon.

When you add an additional 10% (now the total is 20%) it adds more interest to the channel partner. The software vendor can not expect any active sales with this percentage and can’t really ask the channel partner to do any serious account management. This is mainly lead generation activity and typically there are other products that the channel partner is reselling as well.

If we add an additional 10 % (now the total is 30%), this is still too small to be able to build an organization and requires the channel partner to have many different products that they are reselling. Larger reseller with deep pockets to build and maintain an organization, 30% is doable.

When the percentage is 40% or more, the software vendor can expect investments from the channel partner and reporting responsibilities on pipeline to the software vendor channel account manager. This type of percentage is also doable for smaller channel partners that want to build a business around the solution and build a dedicated team.

The biggest surprise that most software vendors are facing when we discuss about the roles and responsibilities is the amount of additional work that the software vendor has to take on. In a pure SaaS channel scenario, the border of responsibilities are blurred and the end user customer ends up in many cases in direct relationship with the software vendor. This has been a big no-no in the past for channel partners as they have wanted to “own the client”. However, the reality is that the cloud is changing the roles and channel partners have to make changes in their models as well. This is a behavioral change that is taking place and can be compared with the changes that are taking place how software sales people are compensated. Nobody wants to change the way things were in the past, but the market and competition is forcing the change and the ones that keep doing the same thing as before, will eventually be on the loosing side. We have already seen this in many organizations.

Before talking about channel margins, the software vendor has to decide what kind of role they expect the channel partner to play and then define how much they can afford to give a way of the margin. Some software vendors have even decided that a channel is not an option in their new business model and this is of course an option if the company has the resources to build its business with its own direct sales and internet marketing methods.

photo by: woody1778a

Complexity of Building a SaaS Software Channel Program

February 18, 2014 by DrSalonen Leave a Comment

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.

photo by: Sean MacEntee

Is the cloud killing your business?

February 14, 2014 by DrSalonen Leave a Comment

Cloud adoption is accelerating and it is also in the process killing many businesses. I read today an interesting blog entry “Are Cloud Vendors Cutting Out the Channel” and this article explains in great detail what is happening on the marketplace in respect to channel partners including value-added resellers (VARs) and MSPs. I remember vividly when Steve Ballmer suggested strongly a few years ago that Microsoft partners should really start adopting the cloud and a couple of years later, he stated that it might in fact soon be too late as the competition is already doing it. Pure channel partners with a business model to resell without adding any value will disappear from the markets.

I have recently talked to quite a few channel partners and the common message that I heard was that the markets are getting tougher and having a business without having a specialty or vertical experience might in fact kill the business sooner than later. I am seeing this also among software vendors that are refusing to adopt the cloud model. There are thousands of new pure SaaS entrants that want to be new market leaders in their domain and many end user organizations are refusing to go with the old-fashioned model where IT departments are the only part of organization that will be buying software and services. Based on the blog entry today, Tiffany Bova from Gartner concludes that many IT consumers are now “front-office buyers” from departments such as sales, marketing, finance, and human services. These departments are bypassing the centralized IT and this type of “uncontrolled” buying pattern will continue going forward in my opinion.

Microsoft management has been vocal to its partner network that every partner should by now be looking at cloud transformation and Kevin Turner (Microsoft COO) expressed his concern during Microsoft Worldwide Conference in Houston (July 2013) that only 3 percent of the company’s channel network was actively selling cloud services and this included products such as Windows Azure and Office 365. These numbers will change with time and I am convinced that there will be many partners that will experience the pressure the hard way. If the channel partner starts too late with the transformation, it might become irrelevant and have the wrong type of personnel with skills that do not match what the market wants. I am sure that somebody reading this blog will not agree with me, but I have seen already now quite a few channel partners that do not know what to do going forward. There is a real need to reboot the business model and rethink how the company will be surviving in the future.

I forecasted a couple of years ago that Sony will not survive the competition of e-books and devices due to many factors, Amazon Kindle being one of them. A few days ago, I read that Sony will be exiting the business. Sony had its own e-book format and I was one of the ones that spent hundreds of dollars in books, which now will be converted to Kobo Android devices. I have no intention to buy any new devices. The reason I am sharing this is that even large organizations are forced to change the business model every now and then and consumers make wrong bets on the horse that they should be riding.

When I look at the global markets and what is happening around us, the change has accelerated in software domain and it has taken many by surprise. I would not be surprised that we hear bad news from many large industry dominant players in the software space that the transformation into new generation solutions has failed and consumers and businesses have adopted technologies that are more nimble and easy to use. It is very dangerous to ignore the trends and even more dangerous to think that market leadership means anything without hard work to maintain it.

photo by: karola riegler photography

Complexity of Channel Development for SaaS Software Vendors

February 6, 2014 by DrSalonen Leave a Comment

Channel development can be complex if you have a SaaS solution and you want to ensure that your growth comes through the channel. I have spent my past 20 years involved in software channel development on many continents and I have seen many different variations in both failure and success. I think the biggest obstacle for many software vendors to become successful with their channel is when they ignore to recognize and understand the business model that their channel partners have or are building. SaaS software vendors assume that their solution is the only one that makes sense, but a typical channel partner have tens of other solutions that they can represent.

What SaaS vendors forget in many of the cases is to realize that a channel partner has to make a sizable investment in personnel, marketing, support and any other functions that the company has to have to become successful. What it means in real terms for the SaaS vendor is that a channel partner is making a considerable investment on behalf of the SaaS software vendor. That is what the SaaS vendor is really asking for. Invest in us, and we will then pay you your share of the success. If you do not sell anything, you will be left with your investment. I think every Channel Account Manager (CAM) making outbound calls to potential channel partners need to first figure out how the channel partner can make money and how they can help their business to become better. If the CAM focuses on the product/solution and not on the channel partner business, the relationship will never take off. I have experienced this so many times during my career and every relationship that I have put time and effort to, typically has paid off. Today, I got a call from a document management software vendor and the CAM not only presented his case well, but gave the reasons why I should take the next steps in the discussion. It takes skills to do what the CAM did and he was focusing on my business, not on how good his solution was technically.

One way to understand the channel partner is to create a Business Model Canvas for both the channel partner and the SaaS software vendor and then analyze them side-by-side and see if there is business model alignment. What it means in real terms is that each side has an interest to do business, both parties have an opportunity to make money and become successful. I have run workshops using this type of approach and the typical reaction from the software vendor is to realize that some of the foundational thinking has been based on wrong assumptions. It is important to realize that this has nothing to do with the skills of the software vendor, it is just a perspective that they never had and thought of when setting their channel strategy. The key is to help to build the “story” for the channel partner and part of the story is also to identify how your solution fits in the other solutions that the channel partner might be representing. If you want to become successful with your channel, stop focusing on yourself and put some time focusing on the channel and how you can make them happy and successful.

photo by: futureatlas.com

Does your channel partner program play a strategic role in your cloud business?

August 19, 2013 by DrSalonen Leave a Comment

In preparation to my upcoming workshops and seminars, I am updating myself on multiple different things in respect to ISVs (independent software vendors) and one of the key drivers based on the workshops we have delivered the past 2 years is by far the question how ISVs should align themselves with channel partners. Today when doing some reading, I run into an interesting study by Forrester Consulting (commissioned by Avangate, September 2012) where 79% of the researched ISVs (53 US and UK SMB enterprise software publishers) feel that their channel partner program is of strategic importance.

One of the key concerns that ISVs had in this study was that channel partners are ill-equipped in changing their business model from front-loaded licensing model to a recurring model where partners are incented to renew customers as to acquire them. As much as 49% of the ISVs where concerned that channel partners are not going to be able to support new or evolving business models.

Another key finding in the study was that smaller software vendors are ill equipped to expand to new markets and this mainly due to support-related issues. Channel partners expect ISVs to help in marketing and generating demand, but smaller ISVs are typically not funded to be able to support this type of activity.

The study revealed many other factors that the channel partners were concerned about such as channel partners now been able to support end customer over the lifetime of the contract, inadequate efforts in renewing the end customer contracts and overall bad visibility over the end user customer. The roles are responsibilities are definitely changing in respect to ISVs and channel partners and this I have had the opportunity to run a bunch of channel alignment workshops where we map the ISV business model with the channel business model and if there is any misalignment between these, the results are typically miserable.

ISVs have a tendency to dream that their solution is the only solution on the planet that matters, but unfortunately there are others with the same belief. I like to use Business Model Canvas in the channel alignment exercise as it portrays extremely well potential issues that ISVs have to deal with such as giving the opportunity for the channel partner to become profitable. That is easier said than done.

Partner or die – that is the question for you to ask

July 27, 2013 by DrSalonen Leave a Comment

I run into an excellent blog by Bill McComb, CEO of Fifth & Pacific Companies, Inc. The blog gives examples of failed enterprises that did not understand when to partner and examples where it has worked tremendously well. One very well-known example is Barnes & Noble’s failed strategy in its eBook reader business where it should have partnered with an established hardware vendor to create an eBook reader, but ended up creating Nook that failed drastically. Another well-known example is BlackBerry’s failed attempt to revitalize the BlackBerry platform by introducing a new music service… I still remember that moment (as a BlackBerry use at the time, now a happy Nokia Windows 8 Phone user) and thought for myself: “why on earth would you do that and there is no way I am going to sign for that”. Even if Mr. McComb is not from the software industry, the same rules apply well to that as well. I have a passion for partnering and always have.. so this blog entry from Mr. McComb made me smile.

I have had the opportunity to work with and within an amazing non-profit organization International Association of Microsoft Channel Partners (IAMCP), first as President for Dallas-Fort Worth chapter and then eventually global President for the organization. During my tenure with the organization, I also had the pleasure to work with IDC (led by Darren Bibby from IDC) to measure the impact of partnering and the results confirmed that the organizations that partner, will have higher profitability than the ones that don’t. A new study (third one for IAMCP) released during Microsoft Worldwide Partner Conference (WPC13) in Houston, confirmed that this really is the case. You can also download from WPC web-site IDC’s study of successful cloud partners and what it really is that makes them successful. It is a good read for sure!

The latest study done by IDC of IAMCP members show that 25.1 of partners (of the top quartile) had 30% or more of their revenue related to Partner-to-Partner (P-2-P) deals. This is a very telling story why partnering matters and why leadership teams at ISVs and SIs should care about this. I am also tremendously excited about the Managed Service Provider (MSP) space as I did a study of the US markets during spring-summer 2012 to really get an understanding how MSPs drive their business, what their pain-points are and where the revenue earning opportunities are. In the same vein, I looked at distributors and large account resellers (LARs) and to my big surprise, there was lots of investment done in building a cloud business and partnering with ISVs. I think the distributor and LAR business will have interesting and exciting times as they really have to identify their role in the overall ecosystem going forward.

The objective of this blog post was to highlight that partnering does carry results with the right attitude and approach. In future posts, I will also give examples of failed and successful partnering models for both ISVs and SIs as I think it is important for each leader to recognized if he or she has the partnering in the DNA… if not, then partnering might not be something to consider. There is no need to waste time on either side. I have many cases of this as well that I have seen and experienced.

What can we learn from SolidWorks Channel Program–Conclusions

February 8, 2013 by DrSalonen Leave a Comment

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?

January 19, 2013 by DrSalonen Leave a Comment

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?

January 18, 2013 by DrSalonen 2 Comments

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:

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….