No more T-shirts please!

Both vendors and resellers must work harder to nut out all factors contributing to successful channel partnerships, according to speakers at the CRN IT Leaders Summit.

Specialist channel-focused IT consultancy Channel Enablers senior consultant Peter Thatcher says both resellers and vendors need to ask what is expected and lay plans clearly illustrating how each party will fulfil those expectations. 'Vendors tend to sign on partners and say "off you go, sell something", but they often lack a good process to take you from that point to give you all the skills to sell and move that product. There's a lack of clarity in who does what, and who does what in sales processes,' Thatcher says.

Frequently, there is no clear delineation between direct sales on the vendor side and associated channel partners, he says.

Instead, many vendors promote 'irrelevant' channel programs that do not show the partner what is required and have not been mutually agreed. 'No more T-shirts, please. How many mugs and keyrings do you need? These things do not drive revenue,' Thatcher says.

As a result, many channel partners have no idea what the vendor expects from them, while vendors sometimes fail to understand that the reseller supports diverse products from different vendors. '[Vendors] waste time with superfluous meetings and they don't understand that you make money out of selling services not [just] by selling their products,' Thatcher says.

Vendors and partners should take joint responsibility for developing 'whole-product solutions' that meet the needs of different market segments at the lowest possible cost and provide a value-add for the reseller, he says.

Vendor and channel partner objectives must align for any chance of a mutually profitable relationship, he says. 'It's not unreasonable for a vendor to expect a partner to be able to put together a business case that shows clear return on investment [ROI] for both partners,' he says.

Thatcher says vendors could do more to help resellers, some of whom lack formal commercial skills, to put together business plans that clearly show what is expected and the route for achieving the objectives of both partners.

He says that vendors claim, with some justification, the channel needs to improve its product understanding, sales skills and investment in training for staff. 'They say the channel doesn't understand the ways of selling their products and doesn't know how to close deals,' he says.

Thatcher says vendors further complain that resellers have an 'ambulance-chasing' mentality - choosing to chase the same accounts as vendors, and staying 'transaction-focused' rather than opening new accounts or developing older ones. 'They chase [vendor] direct sales forces for leads but [vendors] never get feedback on the leads [vendors] give them,' he says.

Of course, resellers have complaints too. Thatcher notes that many channel players regularly experience inconsistent, confusing behaviour from vendors that causes frequent conflict of goals and obligations. 'There is a lack of clarity on what vendors want.
There's channel conflict, especially between direct sales and indirect sales teams. Vendors take the biggest and best sales deals,' he says.

Some vendors overload channel partners with irrelevant information, he says. Thatcher points out that many vendors only pay attention to business partners towards the end of the quarter when they need to boost their financials. 'They only want to know the channel if they are short of their quarterly numbers,' Thatcher says.

Further, vendors need to ensure that channel partners understand how, when and for what they will be paid. 'Because that drives behaviour,' he says.

For example, deals could be registered by the vendor, with compensation split into separate credits for the proposal, demonstration and fulfilment of the deal or similar, he says. 'Deal registration can help ... stop drive-by shootings,' he says.

Meanwhile, vendors often chase the wrong partners while channel partners chase the wrong vendors, he says. 'It should not be your golf buddy or long-term partner,' Thatcher says.

He says too many channel players in particular go for vendors that promise quick, high returns. Yet the down side of forming relationships with players obviously out for the main chance is increased risk, he says.

'Such vendors are usually erratic, unpredictable and have been known to sell against channel,' Thatcher says.

Vendors that promised higher profits often fail to deliver on such promises or deliver on sales targets, although they often offer higher market development funding (MDF), rebate exclusivity and big margins - maybe even as large as 20 percent, he says. 'These vendors are exciting and generally sales leaders,' he says. '[But] if they promise a big pay day, that should be the first red flag in today's market.'

Instead, channel players should look for slower-acting, more cautious vendors that offer a lower but more consistent return, Thatcher says.

Such vendors might offer some MDF, rebates and consistent territory management, but will require resellers to invest in business development and planning, he says.

Such a vendor would be characterised by a history of fulfilling channel commitments and might give the reseller ownership of sales leads. 'You might not get a lot, but a fair return ... This type of vendor makes its sales targets because they have a channel who will want to sell their products,' Thatcher says.

He says resellers could tell if a vendor was likely to fulfil its promises by examining that vendor's history with its channel. 'The moral of this story is that vendor behaviour is predictable, nearly always,' Thatcher says.

A vendor representative speaking at the summit, Andrew Cook, director of enterprise sales support in Australia and New Zealand at Nortel Networks, agreed with most of what Thatcher says. 'It's my experience that channel companies tend to go for the flash, high-revenue partner,' Cook says. As a result, many channel players wound up disappointed.

However, resellers should remember that vendors need the channel, he says. 'The direct sales model has high cost per transaction,' he says.

Further, the direct sales approach limited market coverage and was bad at offering complete or customised packages, he adds.

Vendors seek channel partners that enable them to counter general margin erosion and the need for increased sales volumes, Cook says.

An ideal partner, from a vendor perspective, would have a solid financial background, employee strategy and management base. 'We look for low staff turnover. Employee strategy is important,' Cook says.

He says a good market reputation adds to strong sales and support must be balanced by a willingness to invest further in training, marketing and vendor programs.

Cook says channel-vendor conflicts were 'inevitable' but could be solved by drawing clear lines of responsibility and expectation. Vendors and partners alike should engage in ongoing discussion of issues at senior levels that focus on how to obtain mutual benefits.
'There needs to be trust and clear accountability, well-defined rules of engagement, establishment and commitment, and ongoing review of performance and goals,' Cook says.