Horror stories abound when it comes to the channel - partners going out of business and not providing the backup service and support already paid for by a client; vendors declining an order from a reseller and then going in directly and securing the order for themselves; partners failing to live up to expectations despite promising the world; and a host of other questionable activities.
Julian Field, MD of CenterField Software, says this is why partner selection is a critical aspect of a channel strategy: your partners must share the same ethics as you, have similar objectives at heart, and should operate in the same industries you want to target, with synergistic skills. He cites some examples of where partnerships have gone wrong:
* One vendor had a good partner model, then it started supplying services and going direct. It began undercutting its own partners, the beginning of the end for a principal. Where a partner had secured an order, the principal wouldn`t accept it, saying it was a named account. It took the order for itself and left the partner with nothing.
* Another principal told its partners any order over R1 million belonged to it.
* A principal is suing its partner, which sold PCs to a client and then closed its doors, so the principal had to support the client itself. It lost a lot of money as the partner had already been paid to install and support the hardware. The vendor had to supply these services for free.
Field says it is far better to have three good partners than 20 mediocre ones, as the three will promote the vendor`s product properly, while the 20 tend to do it in a piecemeal, opportunistic fashion.
He says there is no point in picking a partner to sell your product if they have little or no experience in the markets you want to go for.
"If you compare this to a marriage, you should be able to live and die together. It takes a while to find the right wife, so take time to find the right partners to represent you - they are your face in the market."
Partners need to maintain a minimum set of requirements to retain their partnership status, he says. These include the ongoing development of technical and sales skills, and joint marketing activities.
Training is a critical issue, says Field. "In terms of technical training, because the partner is your face out there, it is very important that the competence of its technical staff is up to date. On the sales side, training should be done on a regular basis, depending on product changes and upgrades.
"Typically, in our industry, we tend to give sales training for free. On the technical side, we provide it at a heavily discounted rate to encourage our partners to remain up to date. The more competent the partner, the more self-sufficient they become."
Field says in most cases a partner provides first-line support, so the partner should be able to support the products it is selling for the principal in the same way it would.
"The partner is an extended arm of your organisation. You must find someone that has the correct support infrastructure. The call desk should correctly log calls and deal with them, only using the principal as the final stop.
"What generally happens when this infrastructure is not in place is the partner goes out and tries to fix the problem and problems occur, for which the principal takes the rap. It is in the principal`s interests to make sure partners can mirrors the principal`s infrastructure."
Partners should also commit to revenue targets. "Partnerships are about boosting the coffers. However, unless both partners are prepared to commit to meaningful, realisable targets, with the appropriate measurement, monitoring and remedial mechanisms, the partnership will flounder."
The partner should not have competing products in its stable, and must be totally committed to the product for which it has been appointed a partner, he adds. "This is vital: when it comes to the crunch, a partner might earn a higher margin for its own competing products, and to favour them in a shootout situation. This makes for an unhealthy relationship, one characterised by doubt and mistrust."
There must be quality forecasting and lead generation, with a good chance of closure. The partner needs to understand that the principal has to report, typically by the quarter, on anticipated sales. This implies solid, accurate forecasting, with lead generation activities in support. Without these, the principal will be struggling to produce and fulfil targets.
Finally, a channel strategy is all about trust, says Field. "A partner must understand what a company`s motivation and strategy is, not just from a product point of view, but also from a business perspective.
"If the channel model is indirect, the vendor must stick with that policy forever. As soon as the model is changed and the principal starts going directly to large clients, the partner will ask what is left for it to sell. If the partner does close a big deal, it is important to give it its due. Then the partner knows you are not going to take him for a ride."
By the same token, the partner must engage the principal in the sales cycle, Field says. "Too often a partner will keep a principal at arm`s length in the sales cycle, when its presence could make all the difference in shortening the cycle and clinching the deal.
"This might be due to a sense of distrust, with the partner suspecting that the principal might want to deal directly with the customer. To prevent such a situation, it is the duty of the principal to set clear parameters as to when it deals direct and when through the channel, and there can be no violations of such a policy."
Field says the reason for appointing partners is to get wider market coverage. If the vendor pulls major accounts back from the reseller, it loses that coverage.
Consistency is part of trust, he says. "When the vendor commits to something, it must stick with it. Training must also be consistent among all partners. Quite often, there may be a few partners going for the same business. Don`t favour one, as that will destroy the trust of the others."
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