Service Providers Change Compensation Game9:00 AM EST Mon. Apr. 25, 2011
In the last month, I've had four separate conversations with four separate technology vendors about field sales compensation and the age-old concept of "channel neutrality." On that note, I will never forget my first day on the job as a channel chief with a major technology vendor. I went to my boss at the end of that day and said, "We need to talk about compensation. We don't have a compensation neutral pay plan for the direct sales team." His response was, "Are you willing to bet your job on this recommendation?" I replied, "Sure! I've only been on the job one day!" One day or five years on the job, it was worth pursuing the point to ensure the channel strategy had a chance of succeeding in a territory shared by a direct sales force and reselling partners.
That conversation was the precursor to months of writing compensation neutral business justifications, compiling case studies of partner and direct rep examples, and modeling the budget impact and "incremental revenue" assumptions that would occur when partners' investments were protected by a neutral compensation program. The goal: a sales force willing to support customer choice, customers empowered to buy based on the value they personally ascribed to each of the potential product sources, including direct marketing resellers/catalogers, VARs, ISVs, managed service providers/hosters or even the direct sales force.
Those conversations took place several years ago and are typical of what happens when a technology vendor introduces indirect channel sales into a historically direct sales environment. For most of us who have been on the vendor side of the channel, this is an age-old issue. Today, I see these conversations taking place again. What was old is now new and contemporary. The new component is the added complication of vendor products brought to market by service providers. The problem to be solved today involves the direct reps, service providers and traditional solution providers when hardware and software are delivered as a service by vendors like Microsoft, IBM, AT&T, Rackspace, Amazon, Verizon Terremark, NetApp, Dell and others.
The emergence of the service provider in the technology distribution ecosystem inhabited today by you and the vendors' direct sales teams presents a new compensation puzzle to be solved.
The question is, how do vendors ensure the direct sales force is able to meet a customer's technology needs without regard to where or how the customer wants to buy? The objective is to support customers whether they are buying for the data center or prefer to utilize a managed service provider and/or a cloud-based software or infrastructure service provider to decrease cost.
This is the contemporary view of the age-old neutral compensation issue. It is somewhat reminiscent of the compensation dilemma presented by enterprise hosts or local managed service providers. We are now faced with a new ecosystem, with new fractional ownership characteristics of buying by the user where product title doesn't typically transfer to the end customer. With any luck, today's technology vendors will make the investment to achieve the next generation of a compensation neutral selling environment. It won't happen overnight, but we see signs of vendors moving in this direction.