Beware the pitfalls of poorly policed partner programs

Somerville Group has been in the industry for over 30 years and seen many vendors and vendor programs over that time. We have been a very loyal partner to those vendors who have demonstrated a long-term view to delivering good products, a good partner program and been fair in their treatment of their partners and customers.

In our typical solution mix, our primary vendors are HP, IBM, Cisco, Microsoft, Checkpoint and McAfee, as well as more focused solutions such as Riverbed.

If you’re a reseller, remember that a vendor’s treatment of your customer can adversely impact your long-term relationship with your own customer. That’s an important consideration, and one that often changes through the life of a partnership. We have dumped a number of vendors over the years simply because of their treatment of our customers, whether due to issues with support or the product, or because they didn’t work with us to try to rectify these issues first.

A vendor needs to remember that we are the ones who recommended, endorsed and sold the customer the product in the first place.

There has been an explosion in partner programs: technical disciplines, or streams, or specialisations – whatever they call them. We need to become more discerning about these programs. There are – and have always been – many emerging vendors with exciting products that we can take to market. However, pretty much every market is saturated with existing vendors. There are very few truly ‘new’ markets today. The challenge is to find those products that will stand the test of time and deliver ongoing revenues and margins to sustain a longer-term relationship.

When entering a vendor program, the right strategy should be the same as any other commercial decision you make for your business: return on investment must be the first thing to consider. If the vendor program does not tick the boxes, better to walk away early and not waste your time.

We get calls weekly from new vendors that want us to sell their products. For example, over the past few years wireless vendors have been popping out of the woodwork. They all have “the best product on the market”. We get bombarded.

Any reseller risks losing a substantial amount of sales capacity by giving time to all of these vendors. We politely tell many of them that we already have a product suite in that market (unless of course they have a significant point of differentiation or fill a technology gap, but even then the established competitors nearly always catch up). We often say thanks, but no thanks.

The maths is pretty simple (see box on the right). In one hypothetical scenario, the cost to certify two salespeople and two technical people could cost up to $80,000 – just to get ready to sell!

And don’t be fooled into thinking that investment covers everything. There is also the cost of sales, the cost of support (can be a big one), management time – the list goes on. Of course, this is all relative to the size of the partner. My example in the box would suit a small partner. For a larger partner with a presence, say, across five states, you would need to multiply the numbers.

If you sell a million dollars’ worth of product in the first year at the vendor’s recommended 20 percent margin, then it might work (hopefully, you can detect the sarcasm). However, realistically you will sell $250,000 or maybe $500,000 in a competitive market at tighter margins. If you have to halve the margins, it all starts to look a little less exciting.

And that is just the due diligence; there are also risks when partner programs are poorly managed.

NEXT: How vendors compare

For the large, established vendors, the issue is that they have expanded the diversity of the solutions they provide, which has caused considerable channel conflict and then taken control.

With most emerging vendors, the challenge is that they start by directly marketing to all customers, then jump on the direct opportunities, then they palm those customers off to their new partners. Many times we have been working with the customer on a longer-term strategy, and a new vendor hits the market while trying to recruit us, puts competitors into our accounts when opportunity knocks.

Unfortunately, I have seen too many cases of bad vendor behaviour. Without being unfair to the vendors, the reality is that they are driven by revenue, not by partners and partner programs. When things turn south from a revenue perspective, all things can change.

There is no doubt that over the years, a number of vendor programs have been instrumental in helping the Somerville organisation grow, both in a sales and technical capacity. Let’s face it, our business is based on solutions developed around our vendor’s products. Being a certified partner has its benefits. Certifications benefit your technical staff and allow them to deliver better outcomes, as well as protecting the vendor from poorly installed solutions that would reflect badly.

Good sales certifications help enable our salespeople to actually sell. Good product sets enable us to build great solutions that customers benefit from. But these outcomes are the results of long-term commitment and partnership development over a sustained period.

HOW TO BUILD THE PERFECT PARTNER PROGRAM

Any good vendor program should contain the following elements:

A strong ROI: The program should deliver sustained return on investment for both the partner and vendor over the longer term.

Loyalty to the partners who invest: Longer-term support of partners who invest in the partnership and drive sales for the vendor. Often the people change at the vendor, as do the associated relationships. Vendors need to maintain the support of the partner.

Long-term market protection: When a partner builds a market segment, we need vendors who support us through the next renewal or refresh, not open it to the partner base.

Consistency: Deliver a product suite and maintain the strategy and product development that is consistent. Investing in R&D to keep their products at or ahead of the game.

Good training materials: These can be both self-paced and instructor-led, and must always be affordable and relevant.

Marketing resources: Provide assistance with resources, people, funding to take the products, services or solutions to market.

The right distributor: Don’t forget the distributors, which have traditionally played a significant roll in the vendor’s go-to market. They can also assist in service delivery, easing the certification path if structured correctly.

Rebates: An integral part of many vendor programs. Unfortunately, it is often at the expense of front-end margin. I would rather the front-end margin.

DOING THE MATHS

The business case for certification is actually pretty simple. Let’s look at a typical entry-level vendor program, one that requires two certified salespeople and two certified technical people. The maths is straightforward (plug in your own real costs).

Technical preparation