HomeBlog Three Game-Changing Events That Could Destroy Your Channel Business

Three Game-Changing Events That Could Destroy Your Channel Business

July 26, 2013 | By Alden Cushman

We’re issuing a warning about three game-changing events lurking in the near future for most organizations. Preparation will allow organizations to properly reassess their channel efforts and benefit from these events.

Years of benchmarks and inquiries with clients have uncovered a number of common issues involving channel partners. Many b-to-b suppliers lack knowledge of effective investment strategies to fuel channel growth.

Similarly, most organizations have no measurable way to align channel programs to overarching business strategies, and channel incentive strategies often fail to drive desired performance levels and outcomes.

Many organizations are aware of at least some of their channel shortcomings and try to address them. But while most channel programs are well intentioned, they often confine efforts to a tactical, immediate view.

Therefore, we’re issuing a warning about three game-changing events lurking in the near future for most organizations. Preparation will allow organizations to properly reassess their channel efforts and benefit from these events. Organizations that hope to simply tweak tactics and programs after these events will fail miserably.

Event #1: Acquisitions

Few organizations share the same channel strategies or types of channel partners. (Think of when software behemoth Oracle purchased hardware giant Sun Microsystems in early 2010.)

Before – and, often, even after an acquisition – few organizations thoroughly review, modify and optimize their channel marketing and sales strategies. Instead, channel strategy becomes a financial exercise of spreading the same or fewer resources over a larger partner network. For example, a network of systems integrators and application resellers may expand to incorporate value-added resellers and original equipment manufacturers.

The result is increased channel sales conflict and missed revenue and profit-margin targets. Our data and collected best practices indicate that suppliers need to complete a full reassessment of channel partner relationships pre- and post-acquisition to set the foundation for a new coverage model (e.g. required support ratios for channel relationship managers and subject matter experts).

The second step is to build and implement sales enablement programs to educate and qualify partners to sell the new, broader solutions (e.g. Sun Microsystems hardware packaged with and optimized to run Oracle software). Next, re-evaluate incentive programs to increase channel partner mindshare (e.g. through better business intelligence targeting, distributor certification and  partner-led marketing programs)

Event #2: New Alliance

Suppliers often join forces with other suppliers to take bundled or original equipment manufacturing strategies to market (e.g. Ford cars with Microsoft-supplied SYNC voice-activated systems). Their reasoning is that the combined offering provides higher value or better meets market requirements. However, as with acquisitions, the reality is that few alliance partners put in the needed time and effort to succeed.

First, alliance partners must fully understand the market requirements for the combined offering in order to create enablement content and tools for alliance partners’ direct and indirect sales teams. Alliance partners also must rebalance incentives to focus on upsell and cross-sell opportunities in their existing customer bases. Lastly, they must shift channel investment and activities to supplier-to-partner demand creation (e.g. deal registration systems, ready-to-go agreements, solution certification, contra-incentives).

Event #3: New Solutions

All too often, companies introduce new products or solutions with little regard to the impact on channel partners or existing strategies and programs. Never has this been more true than during the recent rush to offer cloud-based or software-as-a-service offerings.

The fear of missing the next big market opportunity has driven rapid action with little thought about the impacts of the new business model (e.g. new revenue recognition principles; increased need to differentiate from competitors; required sales training about new features, functions and capabilities).

First, organizations must focus on clearly identifying market requirements by examining prospects’ education needs (e.g. why is cloud better than traditional deployed implementations?) and clear differentiation (e.g. when is hosted better than multi-tenant implementation?).

Next, organizations must build and require adherence to new learning and certification programs for all channel partners. A company may also need to supplement partner efforts with direct supplier-to-customer education programs to prepare customers for partner efforts to position and sell the new solution. Finally, new incentive programs will likely be required for channel partners to make up for displaced license and services revenue.

What do these three game-changing events and their corresponding preparation strategies have in common? For each of them, SiriusDecisions clients can benchmark their channel strategies to make the case for proper investment levels and allocations. They can also seek insights from a broad set of peers at the next stage of channel development, collecting best practices, identifying mistakes to avoid and planning transformational changes to mirror corporate goals.

It’s not just about asking for more investment, but about understanding the impact of game-changing events and taking the opportunity to re-evaluate and optimize channel strategies and programs. Best-in-class companies think holistically about coverage, incentives and investments as they navigate acquisitions, new alliances and new solutions.

Alden Cushman

Alden Cushman is Practice Director, Benchmarking and Analysis, at SiriusDecisions. He’s worked for more than 18 years as a market researcher, competitive intelligence manager, product marketing manager and analyst. Follow Alden on Twitter @AldenCushman.

Featured SiriusEvents®

Join Us at #SDSummit