A decade ago in this column I discussed 12 steps that needed to be taken to construct a successful channel. In essence, it was a model for solution providers to assess the channel leadership, commitment and acumen of a vendor as it pertains to the channel.
The world has changed a lot over the past 10 years and the new model emerging as we morph more completely to the cloud is much different. So what is the new criteria you should use to assess a vendor you are considering throwing in, or with whom you already have a relationship?
First and foremost let's not forget the underlying principle that no vendor does business with you because they think you are nice. The only reason to engage is an economic one, and when the economics change, so do relationships. It's like politics-once you are out of office and unable to deliver on a constituent's request, there's little reason to engage.
With that as a backdrop, there are three overriding themes I think you should look for when evaluating vendors.
First is cost transfer. Is the vendor expecting its channel to take on costs that arguably should be borne by the supplier? In the simplest form, this starts with training. Vendors don't charge members of the direct sales team for training but often attempt to charge the channel partners. Interestingly enough, this is most often the case with the larger suppliers that have more leverage with partners, while smaller suppliers more often bear the training costs themselves as an incentive for partners to engage.
But moving forward, there are other costs that need to be considered. A cloud sales model when bundling in services provided by manufacturers is causing, and will cause, cash flow issues given the payment is piecemealed out over a year or more. This is forcing, and will continue to force, some partners to consider selling receivables as part of cash-flow management. Whether vendors should bear some of the cost of this is debatable, but I think it's worth a discussion and those vendors that solve this in some way are going to be better placed and more desirable.
The other theme that I believe bears watching here is the motivate vs. mandate approach to the market. Clearly, vendors can mandate how their own direct sales force goes to market. In fact, the hardest thing for many companies that move from a direct to an indirect model to deal with is that partners can't be told what to do the way a sales team can.
In the channel, some vendors with dominant positions in a product category do have enough leverage to mandate in some cases. This can take many forms, some of which are absolutely legitimate like requiring certifications to carry certain products to market. It can also mean not allowing certain products to be sold by partners at all-a recent example being Microsoft's tablet, which it only sells direct.
In the end, it's not hard to identify programs that are built with an understanding that the channel partners need to make a profit. Programs that pay margin on dollar one vs. those that require a certain threshold to be hit first are more lucrative as an example.
The last general category is, does a vendor put resources behind channel development or take an approach of putting all the resources behind channel sales management? Channel account managers spend their time working with partners to drive sales. That's relatively straightforward. Channel development is a longer-term play where the vendor works with the partner base to position the partner and the vendor for a longer-term objective by driving that into new verticals or building out new growth strategies.
Robert Faletra, CEO of UBM Tech Channel, writes a monthly column on CRN.com. You can contact him via email at email@example.com.
PUBLISHED FEB. 25, 2013