Compensation Routes

If vendors do use spif programs, then I think they also need to take a look at how they compensate the management of the reseller affected. After all, it's the solution provider owner who is paying the bulk of the salesperson's compensation. By providing spifs, the vendor is essentially hijacking his or her assets. To compensate the owner, vendors should issue stock options in their companies.

Truth be told, only the top 20 percent of any given vendor's channel should get those stock options. After all, that 20 percent generally generates 80 percent of the vendor's channel revenue. If vendors want to keep those solution providers loyal, then they should give them a stake. That way when a vendor decides to hijack that solution provider's sales force, presumably any resulting increase in sales for the vendor will boost the value of the stock options.

The fact is that vendors build their companies on the backs of solution providers, which generally take on 80 percent of the risk for less than 20 percent of the profit.

It's especially important for startup vendors to about think this. After all, most startups are prone to be acquired. If this occurs, the solution providers that backed that vendor because it would differentiate them from their rivals frequently discover that thousands more resellers now have access to that startup's product overnight. The solution provider did much of the sales work to get that startup into a position to either be acquired or, better yet, go public, but when the big payday comes, it typically doesn't get to cash in.

Solution providers need to take a good, long look at the contracts they have with their vendors. And instead of listening to vendors talk about routes to market, they should focus the conversation more on routes to compensation.

Are you being compensated fairly? I can be reached at (516) 562-7477 or via e-mail at [email protected].