Can a strong channel partner program give you a competitive edge? That is what software vendors are contemplating on. When you add the transformation of business models for both the ISV and channel partners, you have multiple dimensions that will have an impact on the success of your channel efforts.
What has not changed in channel development during the past 20 years?
When I look back at channel development efforts the past 20 years, there are some things that have not changed, but some that has changed dramatically. What has not changed is how you should treat your channel partners. The approach that I have taken during my entire career is to be transparent and open about expectations in respect to my channel partners. I also want to openly speak about topics that might seem “difficult”. In the end of the day a channel partner appreciates an open conversation and that you can demonstrate that your success (ISV) is the success of the channel partner. Obviously there are many other things that has not changed, but I wanted to bring this important aspect to channel management and development. Treat your partners as you would treat your own employees.
What has changed in channel development?
What has changed in my mind is that channel partners do require more from ISVs in respect to lead generation and lead passing. I believe there is logical reason for this. First of all, we have moved to a subscription-based software business model and a typical channel partner just can’t afford to build both its sales organization and take care of the lead generation at the same time as the payouts are much less when compared with the traditional on-premise onetime commission payments. There is not enough to share to the salesrep of the channel partner or to the owners of the channel business. This is something that I am hearing on continuous basis when building channels for my ISV clients and managing channel relationships and channel sales. With time, this problem will go away for the channel partner if it is able to build a nice ongoing subscription revenue stream but some ISVs even want to cut this off from its channel partners which really perplexes me. Why would I want to build your business if you take away my revenue streams that I need to recoup from my customer acquisition costs (CAC) that I have incurred?
Channel Partners are also making investments
What ISVs tend to forget is that channel partners have to make equal investments in operations in respect to sales, marketing etc. to be able to employ fulltime employees pushing the solution. If you give 30% margin to the channel partner and take 70% yourself, the channel partner has to really be able to sell lots of licenses to be able to maintain even one sales rep on staff. The same applies to consulting, support and any other support area that the partner might need to cover based on the partner contract. My recommendation to the ISV is always to simulate a potential business model for your optimal channel partner profile and see if you even yourself believe in it.
Can a partner program become your competitive edge as an ISV?
My answer to this question is clear. You can absolutely differentiate yourself from the rest of the market by not only having a good solution but also a program that differentiates you from the rest of the pack and provides a platform for your channel partners to become successful. The success of your channel partners is automatically going to be your success. If you represent the ownership of an ISV, the channel is working FOR you without you paying for them. Isn’t that a pretty good value proposition?
Creating channels and maintaining them is not easy. Based on industry standards, experience from organizations working with channels and my own experience, 20% of your channels will be the ones bringing you 80 % of the revenue – the good old Pareto principle. It is not a myth, it is the reality that many ISVs struggle with. The way you can make a difference is to make sure that your partner program has the elements that will bring the difference to your channel partners you are working with.