A vendor’s view: good partnerships

As with any ongoing relationship – be it business or personal – there tends to be strengths and weaknesses on both sides of the vendor/channel partner equation. The trick is to find the common ground, and identify ways to leverage one another’s strengths and compensate for each party’s weak points.

That sounds obvious, but all too often we develop tunnel vision that prevents us from making the most of channel relationships. Vendors, for example, can fall in love with their own products and forget that channels need to be convinced to handle their product. While we are busy assessing the best channel partners, they are doing the same to us as potential vendor partners, using increasingly sophisticated means to do it.

There is a natural tendency to emphasise margins during partner acquisition negotiations, but if they are going to compete successfully, vendors should also be prepared to compete on the basis of their ability to:

• Deliver products on time and in good condition, so resellers can avoid inventory out-of-stocks
• Offer additional incentives
• Present competitive, convenient packaging… and to update it in response to market requirements
• Deliver effective training in a timely manner
• Offer promotional assistance or subsidies
• Generate and share leads
• Build and maintain lasting relationships

The key is to develop a strong understanding of one another’s businesses. Vendors need to understand how their partners actually make money, and how vendor requirements can affect their revenue and profitability. While personal relationships are important, there needs to be a strong business rationale in order for both parties to commit.

I think the most successful partnerships are built by emphasising results, accountability and data, rather than over-emphasising goodwill and personal bonds. We have these performance expectations of our direct employees, yet somehow there’s a feeling that different standards apply to channel partners.

There needs to be more sharing of customer, sales and operational data, and metrics should tie compensation to performance. Some vendors are fearful of offending partners, but my view is that clear agreement on rewards for good channel performance and disincentives for bad execution are the way to go. Then everybody knows where they stand.

Having set up those metrics, also take a good look at how the job goals and KPIs of vendor and partner teams line up. For example, the vendor’s staff may be working to a mix of revenue growth and profit goals, while the channel partner team is focusing solely on profit.

This can lead to a situation where the channel partner is happily making money on a single account while the vendor sales and support reps find themselves penalised for not driving new account growth as well as organic growth from existing accounts. This will inevitably create conflict and can result in both sides under-achieving their targets.

It is also critical for vendors to be transparent about how they will handle lead referrals, and balance their commitments to direct sales versus channel sales. Companies switching from direct sales to a channel model, or a mix of the two, need to be particularly open and direct about their motivations and plans – short- and long-term. Channel partners are understandably wary of vendors who maintain a substantial direct sales capacity, even as they are saying all the right things about building channel relationships. It is not enough to say, we also have to do.

However, there are new business models and competitors evolving all the time. So both vendors and partners need to be nimble and flexible, willing to explore new ways of working together. Sometimes it is necessary to drop policies that no longer work or don’t apply to changed conditions in the market. In particular, we need to keep an eye on territory, market and product conflicts and act promptly to resolve them – not only for the good of channel partners, but also in response to changing customer requirements. Again, the key is openness and a deep understanding of what proposed changes will really mean to channel revenue and profitability.

I commented earlier about the need to emphasise results and accountability, and not to go overboard on personal relationships. But links between individuals in vendor and channel partner organisations undoubtedly oil the wheels of commercial relationships.

One of the most common cries from the heart we hear from channel partners is lack of continuity in relationships. Just when they get to know and trust a key vendor staffer, he or she moves on. Then they have to start over again and invest significant amounts of time in getting to know the new person – and in many cases train them about their particular business needs and constraints.

Smart vendors understand the importance of continuity and implement staff retention policies to ensure they keep key channel managers and reps for as long as possible.

In terms of the overall relationships between companies, vendors often believe that their channel partners should become more and more self-sufficient as the relationship proceeds. However even in a healthy, mutually-beneficial relationship the partner will rarely become anywhere near 100 percent self-sufficient.

Of course the channel partner’s need for help should decline over time as their staff are trained and incentive and promotional programs are bedded down, but they should never be completely set adrift. After all, if there is no vendor investment there will eventually be no returns either. The symbiosis of the vendor-channel partnership is critical for a successful business model for both parties, especially with the rapid rate of change in the IT arena.

Bill Taylor-Mountford General Manager — Acronis ANZ