1999 Study On Customer And Partner Relationship Management In The Channel
3:47 PM EDT Tue. May. 23, 2000
From the May 23, 2000 issue of VARBusiness
Key Insights
The IT channel is dissatisfied with the state of relationship management tools for customers and partners. And something must change, because competition is tougher than ever. Both IT vendors and their channel partners must find new ways to add value while running an efficient operation.
What's the payoff? For vendors, the opportunity is to improve partner relationship management (PRM) systems to increase partner loyalty, streamline the selling process and reduce the cost of channel operations. In fact, 24 percent of partners Front Line Solutions surveyed said more effective CRM/PRM tools would be a major factor in vendor selection. The good news: PRM vendors now are emerging in growing numbers, with automated solutions to meet these challenges.
While channel partners have much to gain from improved PRM tools, they also want to take better care of their own customers. Current customer relationship management (CRM) tools are rudimentary, with Microsoft Office the leading solution in use by partners. That's hardly a formula for success, as customers become ever more demanding of personalized, responsive service and support.
Why This Study?
Although the CRM market is about $2 billion strong and growing 50 percent per year, solutions primarily have been client/server-based and focused on the needs of direct employees and customers. In mid-1998, CRM vendors began a rapid migration to Web-based solutions, which provide a more effective technology platform to support partners. However, vendors were slow to recognize that partners are not like direct sales forces, and require unique solutions.
In the IT industry, channel partners handle about $120 billion of computer products annually. That's more than 50 percent of the total IT market. Yet CRM tools have not been widely adopted in two areas: the selling chain from IT vendors to partners, such as VARs and integrators, and the selling process from channel partners, typically small businesses, to their end customers
Therefore, this study was initiated in early 1999 to answer four key questions:
Survey Methodology
Front Line Solutions designed a research project and Web-based survey following an IT Strategy methodology. Major areas of focus included:
Businesses only will make technology investments if they deliver a significant impact on results. And current satisfaction levels determine whether IT channel businesses will be motivated to change.
Front Line Solutions widely distributed survey invitations throughout the IT industry to get a representative sample of individuals in sales and marketing positions. The result: 499 qualified survey responses were secured from IT vendors and partners of all sizes and types.
Competitive Environment
As shown below, the top issues are about finding enough people and dealing with a rapidly changing, competitive environment where customers are tough to satisfy. Key competitive strategies include building value through services and specialization, plus streamlining operations to reduce costs.
Given the hype surrounding e-commerce, it was a bit surprising that respondents considered it neither a major threat nor a top strategy. And while channel partners continue to struggle against margin pressures, they do not appear to blame vendors. Instead, most IT vendors and partners share the view that the pace of technology change coupled with ever-higher customer expectations creates a very challenging business environment.
Satisfaction With Current CRM and PRM Tools
Is the IT channel happy with the current state of CRM and PRM tools? No. Satisfaction levels were low overall--70 percent to 80 percent of respondents did not give a satisfactory rating to tools used for marketing, sales, service and e-commerce.
Partners typically use low-level applications such as Microsoft Office or contact management software. Major reasons cited for dissatisfaction included poor ease-of-use, limited functionality, no solutions available or insufficient business benefits.
Partners also are using Web sites provided by vendors and distributors, and there the picture is slightly brighter--40 percent to 60 percent were not satisfied. While a few very large vendors were lauded for effective channel Web sites, the majority were criticized for ease-of-use problems and difficulty finding information without excessive surfing. In fact, partners said they waste an average of 6 hours per month on vendor and distributor Web sites.
Vendors aren't thrilled either. Although vendors are more likely than partners to use major CRM developers' programs, many are using custom solutions that don't work very well. Overall satisfaction is about the same for similar reasons. And channel Web sites don't effectively help vendors manage partner relationships.
What Does the Channel Want?
Vendors clearly want more channel management and measurement functions. Partners' priorities are focused on the tactical issues needed to close deals and solve problems.
Partners prefer e-mail to the Web for information delivery by a 2:1 margin, while vendors rate them about equal. Partners also want better integration of information from multiple vendors and distributors into the partner's quote system. Vendors are less enthusiastic about supporting this capability, for obvious competitive reasons.
Will the Channel Invest In CRM or PRM?
Nearly 1 in 4 partners responded that if a vendor provided significantly better CRM tools, it would definitely have an impact on vendor selection. Another 61% percent said "maybe." The bottom line: better service can lead to increased loyalty and market share.
Nearly 40 percent of vendor respondents estimate CRM budgets of $100,000 per year and up. And about 50 percent of partner respondents say they will spend over $20,000 per year.
Keys To Success
Vendors have been struggling with channel management issues for as long as there has been a channel. PRM offers new hope that vendors can manage and measure the contributions of their partners. However, vendors must be careful not to repeat the mistakes that have undermined many CRM projects. Focusing too much attention on management control could have a negative effect on partner relations and, in fact, reduce partner loyalty. Front Line Solutions recommends implementing PRM solutions in phases, where the initial roll-out is focused on adding value to partners and making the business relationship work more smoothly. Vendors then should implement more rigorous management and forecasting processes, which will improve the life of channel managers. Earn loyalty first, then ask for something in return.
Vendors also should keep partners actively involved in the development of the PRM solution from the very beginning. Implement a continuous improvement approach and don't expect to have the perfect PRM solution in the first release, no matter what software package is used. Consider how partners will use information from the PRM system and develop ways to integrate that data into partners' internal quoting systems.
Partners need to take responsibility for their own destiny, and not depend solely on vendors for automation tools. Affordable CRM tools exist and should be more widely used. Microsoft Office and contact management systems will not be enough to help partners survive and prosper in the channel of the 21st century.
Bob Thompson, President
Front Line Solutions
1261 Cortez Avenue
Burlingame, CA 94010
Phone (650) 343-8529
Fax (650) 343-8599
bob@frontlinehq.com
www.frontlinehq.com
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