Satisfying partners

Building a successful and happy channel is a challenge faced by all IT vendors. So what are the secrets of a successful vendor partner programme?

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By  Stuart Wilson Published  January 28, 2004

Satisfying partners|~|Neo.gif|~|Neo Neophytou, Adaox|~|With some IT vendors looking to impose a uniform global structure on channel relations, you'd be forgiven for assuming channel management is becoming a simpler task. Not so. The need to tweak channel policy at a regional and even a country level still exists. This is especially true in the fast developing markets of the Middle East. In fact, channel development remains a fine art. So what are the secrets of a successful vendor partner programme? Running a successful partner programme is a constant balancing act for all IT vendors. The desire to drive sales growth by adding more partners is tempered by the harsh reality that resellers will avoid a model that erodes margins through over-distribution. There are a finite number of customers in the market, and that means there is an optimum number of resellers required to service their needs. Finding this optimum number is the hard part for the channel manager going about his day-to-day duties. “Assessing the optimum number of partners means looking at how busy existing resellers are,” explains Marc Van der Ven, Middle East regional manager at business applications vendor ACCPAC. “If they have more work than they can cope with, it is time to recruit more partners.” If a vendor signs up too many channel partners they end up undercutting one another and battling each other for the same sale. This level of fierce competition - and the wafer thin margins that result - can hit the quality of the customer experience. It also dampens the enthusiasm of resellers who will eventually seek out new vendors to work with. In contrast, too few partners can mean an easy life for the reseller: steady margins coupled with a nice full order book, but no motivation to drum up new business and root out new sales opportunities. The optimum number ensures a healthy degree of competition, a well-serviced client base and solid growth. “The real differentiator in partner programmes is the levels of commitment and support you give to partners,” continues Van der Ven. “Some vendors have so many partners in their channel that they can't give them adequate individual attention.” Balancing the right number of partners with strong market coverage remains a tricky proposition in the Middle East. “The challenge many vendors face is understanding the Middle East consists of multiple small national markets,” cautions Neo Neophytou, channel development consultant at Adaox. “These markets are not homogenous and vendors also have to remain aware of the potential for channel conflict. Ideally, vendors want more than one partner in each country, but it is difficult to keep each one focused on a specific area. If you have four partners in Bahrain the likelihood is that they will sell outside their target market and conflict with each other. The markets are not large enough to apply channel segmentation practices used in regions such as Western Europe.” Partner programmes — like marketing or even human resources — are a business tool which vendors use to boost sales. “Vendors use channel intermediaries to increase the number of customers they can touch with their products,” adds Neophytou. “Each vendor must carefully consider the expense of implementing and managing a partner programme. Margins have been eroded in IT markets so costs have to be calculated carefully and partner recruitment cannot be left to chance. Vendors need to be sure that partners are fully committed at the highest levels in their organisation. Many invest in signing up partners only to find sales do not materialise because there is no personal contact with the vendor.” Those companies wanting their partners to drive lead generation have to give them the tools for the job — be it marketing collateral, free training and education or solid market development funds (MDF). This is the area where vendors can mark themselves out as a superior player. Put simply, a vendor can have the best products in the world, but unless it puts an attractive proposition on the table for partners, it will struggle to reach the market and get the channel interested. “Oracle has a dedicated fund for actively investing in partner marketing,” says Hisham Efeei, Oracle channel manager Middle East and Saudi Arabia. “To qualify for this fund, partners need to present a sound business proposition and there must be a pipeline of opportunities. ISV partners use most of this fund. The model for allocating funds is flexible enough to adapt to individual markets and the budget for MDF has been rising in the Middle East for the last four to five years.” Even generous MDF models have a limited impact unless backed up by a vendor's own staff. For vendors, having 'feet-on-the-street' working hand-in-hand with channel partners plays a pivotal role in ensuring partner programme success in the Middle East. “There is only so much MDF a vendor can afford because of margin erosion,” says Neophytou. “If it is a choice between offering MDF of between 3% and 5% or keeping it at 2% and employing a business development manager, I would choose the 2% model. This business development manager can interact personally with partners and monitor exactly how MDF is being spent.” Infrastructure access software vendor Citrix Systems works closely with Mindware — its exclusive distributor in the Middle East — on lead generation activities. “Mindware has a built a 'seminar-in-a-box', which resellers can use for events focused at end users,” explains Antoine Aguado, regional manager at Citrix. “In a fast growing market, lead generation is a vital part of channel development. Citrix also has a telemarketing team focused on the Middle East region.” Educating the channel has become increasingly important for vendors. “Recent research indicates that education is the third most influential contributor to increase business,” comments Anthony Peck, director marketing services, education and training at Fujitsu Siemens Computers Middle East and North Africa. “This refers to both the channel partner's business and the vendor's business. Fujitsu Siemens is in the process of increasing resources focused on education and training. Our channel partners are in constant touch with end customers and convey to them our latest product value propositions and benefits. Education must cover all required target groups to ensure that end customers are perfectly served by our partners, from the presales and sales stages, right through to installation and after sales service.” Educating partners is either a chance to boost sales or an expense, depending on the size and status of the vendor involved. “Premium vendors such as Microsoft, Oracle and Cisco can charge for education and people still queue for the classes because these certifications are seen as a mark of quality for resellers,” says Neophytou. “In contrast, smaller vendors may need to make training free to give partners the incentive to attend.” Building enthusiasm for a vendor's products can also involve awarding glitzy prizes to top performing partners. HP ran a competition for partners during the fourth quarter of 2003 to drive sales. Harish Kanjani from Computer Care and Ralph Mendonca from Jurassic Technologies both picked up a brand new Volkswagen Bora car for their spectacular performances. “We continue to nourish relations with our channel partners,” says Christoph Schell, general manager Personal Systems Group (PSG) at HP Middle East. “HP has dedicated incentive schemes and training programmes to ensure partners receive the right marketing support and go-to-market strategies.” The role that vendors play in providing market support also varies depending on brand reputation. “Well known vendors can spend money on advertising and seminars for end users,” explains Neophytou. “This pull strategy generates leads, which are then fed to channel partners. For smaller vendors, without an established brand or presence, a push methodology has to be used. This involves going out to customers alongside partners and giving the channel the resources to then go out and create end-user demand.” The secrets of a successful channel strategy also depend on a vendor's position in the wider IT spectrum. Worries keeping an enterprise software vendor’s channel manager awake at night are very different from those experienced by a counterpart at a consumables vendor. Much of this is to do with the value of the product and the type of customer being targeted. Typically, an enterprise software channel will engage with large systems integrators and IT consultancies. Together, high-end software vendors, systems integrators and various service providers build an ecosystem capable of delivering a project-based solution to large corporate accounts. This type of vendor must operate a low volume high value channel, which builds deep relationships with a limited number of partners. At the other end of the spectrum lies commodity IT products requiring a high volume low value channel. Just to complicate the picture still further, some vendors also operate a direct sales model for large accounts. Avoiding conflict between direct sales teams and indirect sales channels remains a bugbear for many vendors. This is especially true for vendors that take an active role in lead generation. When the leads come flooding in from a successful marketing campaign, some vendors are less than keen to pass them on to partners - especially if they have their own professional services capability. “Through our programme, Fujitsu Siemens is showing commitment to our channel partners to assist them in building sales and service revenues for them. Unlike some of our competitors, it is our strategy not to compete with channel partners for service business,” comments Peck. At present, channel conflict between direct and indirect sales is a limited problem in the Middle East, where vendors acknowledge that developing a strong regional channel remains a pre-requisite for growth and market reach. Many vendors still appoint an exclusive distributor to build and control their reseller channel in the region. As the market grows, this will change and more vendors will invest in building up their Middle East presence. Several vendors have already set up lists of named accounts and complement the channel by going in alongside them and working directly with a select group of enterprise customers. “We offer a great deal of assistance to partners,” explains Van der Ven at ACCPAC. “The whole purpose of our direct presence is to support partners. ACCPAC does not sell direct in the Middle East. Even if a large customer wants to work direct with ACCPAC, we will still get a partner involved. Partners pay an annual fee and we undertake direct marketing efforts and lead generation activities. The leads are passed on to the most active partners. ACCPAC will also visit clients with partners where it is deemed necessary.” Oracle too is fully committed to the important role its channel partners play in the Middle East. “Oracle's indirect sales split is slightly higher in the Middle East than in other global regions because the channel remains the most cost-effective way of building a market presence,” says Efeei at Oracle. “They are the eyes and ears of Oracle. We involve partners in direct sales as early as possible and let them control the services element.” Channel convergence will add a new dimension to partner programmes in the Middle East. As customers evolve from buying hardware, software and services independently, they need to be served by an ecosystem of several partners working closely together. It is no coincidence that HP's PartnerOne channel programme spans both its Personal Systems Group (PSG) and its Enterprise Systems Group (ESG). This one-size-fits-all channel vision embraces the concept of solution selling by allowing HP's hardware resellers, software channel and even services partners to work together as part of a consistent partner programme. HP has also just unveiled plans to merge its Enterprise Systems Group (ESG) group with HP Services as part of an enlarged HP Technology Solutions Group (TSG). In the Middle East, vendors are starting to ask for more effort from their partners. As the market matures, the whole channel needs to pull together and work harder to create sales opportunities. Gone are the carefree days of selling into companies completely lacking an IT infrastructure. Now, partners themselves need to take control of their own destiny by investing in staff education and focusing their business on specific value-add areas. It is starting to happen but some stumbling blocks still remain. “Getting resellers to undertake lead generation on their own remains difficult,” grumbles one vendor. “Many still rely too heavily on help from vendors and distributors in this particular area.” A successful partner programme makes each and every partner feel like they are receiving special treatment whilst maintaining a fair and consistent approach. The channel exists in a constant state of flux: new companies emerge, consolidation reshapes the landscape and some resellers can disappear entirely. These shifting sands ensure that no vendor can become complacent when it comes to channel management. Partners want to feel loved, cherished and cared for by the vendors they work with — even if it is all a big front to drive sales growth. “Partners are motivated by leads and margins,” is the succinct conclusion from Aguado at Citrix. Some vendors have tried to turn channel management into a scientific exercise by giving customers forms to complete. These can then be used by to assess the performance of each and every reseller. Whilst this evaluation process works to a degree, it can never overshadow the fact that partner programmes are still built around trust and personal relationships between reseller and vendor. This is where the skills of partner account managers are crucial. It is a vendor's ability to react to market changes, successfully promote its products and modify channel programmes when necessary that really sorts the channel champions from the channel chumps. ||**||

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