Milestone Group Quarterly: April 2006
Articles
Finding the Answers to Successful Partnering; By Steve Palladino-Partner, Milestone Group
It is no secret that a sales strategy featuring a channel partners program can yield increased market share, without significantly increasing the cost of sales. Channel partners can combine strengths in product development and marketing, spread their business risks, benefit from efficiencies in scale, and increase overall profitability. As part of the program’s strategic process - and as a guide to success – a few key questions need to be answered by you, and your partners.
The first question is the big one: What do you hope to gain through a channel partnership? An expanding distribution channel offers many benefits. Independent software vendors (ISVs) earn more than 40 percent of their revenue by creating entire "ecosystems" of partners. IBM's 90,000 business partners were instrumental in fueling its dramatic turnaround back in the 1990s and partners continue to be major players in company strategy today.
More importantly, IT companies can offer greater value to their customers when they opt to work with partners instead of going to market alone. A channel (consisting of partners large and small) can provide companies, and customers, a broader range of IT solutions.
Working with a larger, well-known vendor means a smaller vendor gains greater credibility with customers. Larger vendors benefit from the deep industry knowledge that a smaller vendor typically brings to the table. Within the business application market, savvy ISVs work with partners in order to serve a broader range of industries. For example, with partners, an ISV can extend its market reach by customizing its CRM solution for the banking, retail and health care industries.
It is important to remember that channel partners do not create demand, they fulfill it. And they help facilitate new efficiencies. The chief tenet of channel management – support – cannot be overstated. A powerful strategy for improving sales performance and reducing channel conflict comes from rethinking the current relationship between telesales, field sales and channel partners, with the aim of maximizing the strengths of each.
Like any sales expansion program, the strategic process behind a channel partnership must result in new opportunities to create and capture mindshare, create loyalty and measure the pulse of the end-user. The questions that follow are designed to frame the strategy in those terms.
Questions that need to be asked as part of a channel partnership strategic process
1. Is top management fully behind the partnership? Commitment means more than giving a go-ahead, it needs to permeate throughout the organization. Top management needs to set the vision, commit the resources and then line-up the organization around the success of the partnership. A partnership is an intense relationship, and without the commitment of the entire organization, it can fall apart quickly when the going gets bumpy.
2. Where’s the added value? Partners need to complement each other's strengths, develop synergy in goals and create new benefits for customers that neither can deliver alone. The value of partnering comes from combining capabilities that can create new growth, new markets and expand each partner's revenue base. It's more than splashing a Web site with partner icons. It’s about understanding the capacity of the organization and selecting only those partners that round out customer value.
3. Are you prepared to put it in writing? Successful partnerships have formal business agreements that establish measurable goals, financial targets and strategies for dealing with conflict. These are measures that both partners use to evaluate the relationship's progress. Only through careful negotiations can partners reach agreement on overall priorities, set rigorous requirements for resource commitments, such as training, technical and marketing. An agreement with a partner needs to detail the mutual commitment of resources, and the rules of engagement when pursuing new market opportunities.
4. How will you measure success? Healthy, profitable partnerships require an investment of time and an infrastructure to make them work. In these, senior executives set clear revenue targets, hold regular meetings to monitor progress, and establish tools for measuring the results and the health of the relationship. They establish protocols that deal with conflicts as they arise (and aren't allowed to smolder). And they communicate effectively by issuing quarterly newsletters to partners, keeping them up to date on new customers, applications, product enhancements and deals.
5. Is the arrangement a win-win? An alliance isn't simply a means for one partner to get sales leads. It is a joint effort to drive new opportunities, one where both partners share the risks and the rewards. The key is in establishing an approach that is not parochial, but one where both parties look out for each other’s interests and are willing to stretch to achieve success.
6. Are you willing to be flexible? A partnership must evolve with market conditions and be transformed when necessary. It’s important to build periodic reviews into the partnership structure. A recent case is a client company in the telecom wireless space that was not meeting its revenue targets. It also makes business sense when both sides do decide to exit the partnership, to have a well-executed plan in place to save time, capital and human resources.
The answers to these questions should lead to a single unifying conclusion – that a channel partnership is more than an extension of the sales team. It is a strategic process that requires significant care and attention, especially as you chart this territory for the first time. As the channel partners become integrated into the business strategy, though, the efficiency of the practice begins to reap rewards…in productivity and long-term profitability.
Which, of course, is the answer to the big question posed earlier: What do you hope to gain from a partnership program?
Steve Palladino is a partner with Milestone Group based in the Palo Alto office.
Steve has over 20 years experience in business development, account and sales management, focusing on helping emerging growth companies deliver revenue faster, using fewer resources. Steve has held Director and VP of Sales and Business Development positions and has strong expertise in driving strategic alliances with OEM's, Resellers, SI's such as Accenture, IBM, KPMG, Harte Hanks and others.
Steve's client roster has included: Motorola, Nortel, H5 Technologies, British Telecom, Venturi Wireless, CBS, EMC, Apple Computer, IBM, Sun, Disney and Learning Company
Steve holds a BA from New York University. |
