Software Channel Archives - Page 2 of 2 - Dr. Petri I. Salonen Views on Life, Entrepreneurship, and Software Business

Disclosure: I am a former global Chairman for International Association of Microsoft Channel Partners (http://www.iamcp.org) that according to IDC 2009 study had $10,1 billion in partner-to-partner business. My views might be biased due to two factors: I am a Finn living in the US and earn 100% of my revenue from the Microsoft ecosystem. This blog entry is about the possibilities for Microsoft and Nokia, and not about the past mistakes that might have been made.

The much speculated announcement from Nokia and Microsoft is now reality. Nokia and Microsoft have announced a new strategic partnership to build a new global mobile ecosystem. This news item has been dwelled in the cyberspace such as PCMag.com, blogs such as Mary-Jo Foley All about Microsoft and some newspapers such as Financial Times questioning whether Elop is the right person to lead Nokia. The rumbling of Nokia’s strategy accelerated to full force after Stephen Elop’s internal memo was leaked to the public. This memo included strong words about Symbian and how it was burning and it was time to jump ship. I have commented on Nokia in some of my previous blog entries but today and going forward, I am going to focus on future possibilities and not dwell on the past as this does not bring anybody any good.

This announcement from Microsoft and Nokia is not just a major and dramatic shift for Nokia, but also for the entire Finnish business ecosystem. Based on the Finnish news sources, this is the biggest change that Finland has seen in the technology landscape since the changes that took place in traditional industry such as forest, metal and shipbuilding. I feel sorry for the thousands of Nokia employees and hundreds or even thousands of companies that have earned their living from Nokia and its ecosystem. I have in fact been Chairman of the Board for one company and Nokia was a very important source of living for the company. However, each and every one of us has to admit that this did not happen overnight, the writing was on the wall and Stephen Elop just happened to be the one that had to make this change.

I have been tracking the discussions in the cyberspace and this announcement has caused emotions, both negative as well as positive. I believe that Nokia to Finland is like Volvo for Swedes and it has to do with national identify and when that gets threatened, people react in different ways, some probably without really thinking about the consequences of what they say, and some more realistic and with the future in mind.

I have had a chance to track the evolution of Nokia story from a US perspective during the past 13 years and I have to say it has been depressing to see Nokia and the Nokia brand sink among US consumers and businesses. Already a few years ago it was almost impossible to find a nice Nokia phone in local AT&T store and this should have been a sign already then that something was wrong. One could argue that the current Chairman of the Board Jorma Ollila should have seen the signs on the wall when he was the CEO or at the very latest during Olli-Pekka Kallasvuo’s tenure. He did not, or if he did, the board and the management team did not take the risk of changing the course.

The current Nokia CEO Stephen Elop was the one that was forced to stop the bleeding of Nokia’s market share in the smartphone space and he is now the one that is taking the heat from the press and industry analysts. I do not think it is fair to put this on his shoulders as Nokia has had ample chances to change the course during the past few years or at the very latest when the first iPhone was released in in 2007.

When I saw the Meego leader Ari Jaaksi leave Nokia a few months ago to lead HP Palm software to become senior vice president of WebOS, I smelled problems in the future of Meego. This is obviously bad news for the companies that have invested in Meego development and future, but that is unfortunately nothing new in the technology field. During my career, my company had to invest in APPC communication protocol development that nobody remembers today. Nobody asked me how I felt when APPC was replaced with TCP/IP.

Once the companies and Nokia employees that have put their lives into Symbian and application development around Symbian have spent some time to reflect what they want to do going forward, I would like to encourage them to view Microsoft as an opportunity for them to change direction and get really to become a part of Microsoft huge 600k plus partner ecosystem. That is what we entrepreneurs do all the time. We have to review our business model, its robustness and change it when needed. We will never let outside forces let to drive our future; we need to be in charge of it. If your current revenue model is 100% from Symbian, you are the one responsible for it and you can’t blame Nokia or Microsoft for it. Running a business on one horse is both stupid and risky and not good for shareholders. In some cases it can reward you, but in some other cases it can also take you down. You have to be on watch what happens around you and the day when you start ignoring the outside world, things start falling apart and this is exactly what happened to Nokia.

I have seen some misrepresentation in some blog entries that Microsoft would not be partner friendly which is a misrepresentation of huge measures. Microsoft partner network generates more than 90% of Microsoft annual revenue. Bring me another company that would do that with its partners. Microsoft has of course individuals that might in some cases have hurt some partners, but overall Microsoft has a strategy to work with its partners, not against its partners.

When I look at the Microsoft ecosystem and what is happening today from a technological perspective the cloud and the mobility are the two current topics that everybody seems to be talking about. Look at what is happening with our youth. They assume to be able to consume services from the cloud and they are born with smartphones and know how to utilize them effectively by using messenger and SMS. What does this mean for Microsoft and Nokia? Microsoft has more than 30.000 Windows Azure clients and an ecosystem building cloud solutions. These cloud solutions need mobility applications and this is where I see the thousands of current Symbian developers to have a huge opportunity if they so want to see it. It is going to be a change that they have to take and any change will hurt and be difficult but without change and pain, there is no gain. There are thousands of Microsoft partners that are more than willing to partner with mobility professionals and once the mourning is over, it is time to jump on the bandwagon of cloud and mobility and start building new innovative solutions.

I would encourage all current Symbian developers and vendors focusing on Symbian to look at what Microsoft brings to the table and the opportunities that it brings to these companies. We know that Symbian is not the nicest development environment to work with and based on developer experiences, Microsoft development tools and environment will be better and more productive. Yet again, there are many different opinions on this as well, but I am basing my opinion on the tens and hundreds of developers and people that I have talked and worked with.

I would also encourage both existing Microsoft partners and Nokia development partners to get together and IAMCP.org is an example of an organization that can facilitate partner-to-partner collaboration. IAMCP has chapters and chapter meetings every day in some part of the world and this gives a tremendous opportunity to get a view of what it is to be partnered with Microsoft. I would also encourage to ignore the ones that are resistant to the change as the change has already happened and the ones that will prevail are the ones that takes this moment as an opportunity to grow and build a new sustainable business.

I rest my case and welcome all Nokia developers to learn what it is to be part of the Microsoft ecosystem.

If you are a software business, sooner or later you have to consider a sales channel for your growth. It does not matter whether you are in traditional software business or considering a cloud business, you will probably end up having a channel in some shape or form. Some cloud solutions might be simple enough to be able to deploy without a local consulting practice getting involved in the delivery, but most enterprise level software solutions will still require a middle-man that knows the end user client and is able to do onsite consulting. There is no substitute for local support and partners that have access to an ecosystem that the software vendor would never have access to.

Is your current organization capable of supporting a channel?

Building a sales channel will have to fit into your strategy and my recommendation is to use some type of strategy framework (like Dr. Osterwalder Business Model Canvas) to identify how each functional area in your company plays in a possible channel scenario. Do you have the right people supporting the channel? Is your product strong enough for a channel and do you have the right skills to penetrate new geographical areas that could possibly include other language versions of your product? Do you know how to manage 24/7 support if you sell cross different continents? Does your current management and operations understand international business? How does your current software/solution delivery model aligned with a channel sales model? Does your product support the correct compliance rules of the geographies that you are going to address?

The questions above are just the beginning of the questions that the software ISV has to respond to when entering new markets. Each of these markets could potentially lead into additional complexities that the software vendor did not know at the time of decision making of the new market. However, the potential resellers in these markets will eventually ask the questions and you’d’ better be prepared to have the right answers.

Do you have a robust channel program for your prospective resellers?

Do you have a good and profitable program for your channel partners? We are seeing a transition from traditional software business model to cloud model, but the foundations of channel rewarding will still stay the same. If the channel does not see enough of an opportunity to invest in your software solution and in its sales, you are out of luck in trying to convince the reseller or distributor prospect to take on the product into their solution portfolio.

There is no success without showing success yourself. As an ISV (Independent Software Vendor), you have to show how to make money to convince the channel that it is worthwhile to put effort into the sales of your software solution. This was something I learned very early in my sales career as a young CEO of a US-based software company. One very experienced reseller on US West Coast asked me bluntly how many deals I had personally closed when I approached him to resell my software solution. Had I said none… the discussion would have been very short.

My recommendation to all ISVs, regardless of the software domain, is to demonstrate your own sales success before trying to solicit channel partners to replicate your success. It is naïve to think that a pure channel sales model would bring you success. It has to be a combination of direct sales and channel sales that bring either success or failure in your efforts. If somebody claims otherwise, ask them to provide evidence of a model with only channel sales as revenue source.

Having a channel sales strategy could become very effective specifically in cases where an ISV wants to broaden its sales to new markets/geographies. Typically, the ISV has already some experiences in its own native country of the sales and the sales processes and what it takes to become successful. This is also a basic requirement in trying to get others to sell your solution. The success in local ecosystem should be easier and also become the “beta site” for any other markets. If you can’t demonstrate success in our own backyard, why would you be able to do it in a remote geography?

Do not underestimate the resources a reseller has to invest in selling your product

In many of the cases, software vendors forget that setting a reseller or distribution business will require the very same resources as the ISV would have to have in its own sales operations. If you have pre-sales resources in your organization, it is to expect to have the same requirements for your reseller. If you have a need for inside sales force, the same requirement will apply to your reseller partner. In cases, where the solution requires solution delivery, the reseller has to provide resources in solution delivery or create a partnership with a local partner organization that enables a successful delivery of a solution.

Do you know how to reward your channel?

How much should you pay your sales channel when closing deals? How much commitment do you expect your resellers to put on your product? It still amazes me to find software vendors (ISVs) that assume the distribution channel to be OK with commissions such as 10% with the assumption that the distribution channel will invest in the sales of the product. How many companies do you know that can live with 10% and create an organization to support the ISV’s product for 10%? I do not know any. Many reseller partners expect commission ranging from 30 to 50 percent to be able to create an organization that delivers a solution and promotes the product. If the commission is 10%, we are typically talking about referrals, where an opportunity name is given to the software vendor and the vendor is running with the sales effort without any interaction from the organization that gave the referral. What the ISV tends to forget is that there are tens of other solutions that the very same reseller community gets solicited on and therefore your value proposition and attractiveness has to appeal from get-go.

The cloud will change the channel models sooner or later

There will be new rules in software channel sales when working in the cloud era and I will be addressing these in later blog entries. Jeffrey M. Kaplan from THINKstrategies makes some predictions of what is going to happen in 2011 in the cloud era and one of the key elements will be the implementation of new channel programs with new channel partners that will compete of the same space as the more classic resellers that we have seen in the more traditional software sales business models.

I would like to emphasize that it is unrealistic to expect the channel to disappear, but what every software vendor in the cloud arena needs to figure out is to create enough value proposition to channel partners (like resellers and distributors) to be able to build a solid and profitable business. The componentization of the software and new models of software consumption will have ever lasting impact on software ecosystems.

I have to say that this new cloud era excites me tremendously as we get to see new exciting innovation and new business models from new players. Some players are trying to eat into more established vendors such as BranchOut trying to take on Linkedin as a new way of business networking. BranchOut uses the huge database of Facebook to build a new view to business connections. I expect this type of new innovation to continue and Facebook to also become a greater platform for other social functions besides “connecting” with friends.