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Managing a Reseller Channel in the

Software Industry

Whitepaper from TBK Consult

Hans Peter Bech, M.Sc. (econ)

modification. storage in a retrieval system or retransmission. Hans Peter Bech copyrights all materials on these pages.© Hans Peter Bech 2014 First edition Unless otherwise indicated. All rights reserved. Therefore. in any form or by any means.tbkpublishing. is strictly prohibited without prior written permission. mechanical or otherwise. either text or image may be used for any purpose other than personal use. No part of these pages.com ISBN: 978-87-93116-06-1 . electronic. reproduction. Published by TBK Publishing® (a division of TBK Consult Holding ApS) Strandvejen 724
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tbkconsult.Managing a Reseller Channel in the Software Industry Table of contents: Targeted audience Abstract Author Acknowledgements 4 4 4 Introduction 5 The Channel 5 Reseller Idiosyncrasies 6 A.com Final Remarks 3 4 12 About the author 13 . B and C Partners 7 7 The Partner Portal The Partner Account Manager Managing the Stars 8 8 Managing the Growth Potential Managing “The Rest” 9 9 The Partner Relationship Management System 10 10 Tools for Improved Channel Partner Management 11 ValuePartner Business Model Management 11 12 The Partner Communities ® www.

com 4 1 Independent Software Vendors (ISVs) .com Proof reading: Emma Crabtree. ecr@tbkconsult. Author Hans Peter Bech Acknowledgements Design and lay-out: Flier Disainistuudio.flier.tbkconsult. The whitepaper explains how the business models of the software vendor differ completely from the business models of his resellers and how this affects the way channel partners must be managed.ee www. the CEO and the sales and marketing executives of software driven companies1 with ambitions for achieving global market leadership. The whitepaper discusses how to design and execute effective frameworks for managing independent resellers in the software industry. This whitepaper therefore assumes that a channel partner management framework must support a business strategy aimed at becoming the market leader. Finally the whitepaper makes specific recommendations for strategy frameworks for supporting channels partners with growth potential. Tallinn. www.Managing a Reseller Channel in the Software Industry Targeted audience The target audience for this whitepaper is the board of directors. Estonia. The whitepaper primarily addresses the challenges of software companies with long value chains. Abstract With only very few exceptions the software industry is a “grow or die” type industry. The whitepaper address the challenge that 85% of channel partners have no growth potential.

The term ”reseller” is here used for any type of 3rd party company engaged in selling a software brand to his customers irrespective of the degree of value add. this is not the case. 2 5 . training and support. 3 In channels designed as franchises however.com The software industry is blessed with the lack of a need for manufacturing and logistics infrastructures. The word “channel” is used in the software industry to describe independent companies that assume various roles and obligations in bringing a software product to the customers. www. Getting a software product from Finland to Australia in principle only takes a few seconds or minutes. project management. since the roles and obligations can vary substantially from “simple” reselling to system integration. The Channel The business models of software companies have some substantial differences to those of most other industries. The common denominator is the fundamental condition that the individual channel Partner is an independent contractor operating in his own name3. implementation in terms of consulting. The definition is rather broad.Managing a Reseller Channel in the Software Industry Introduction Software companies have historically had a very strong preference for selling their software indirectly through a channel of resellers2. customization.tbkconsult. solution development on top of the software. at his own expense and at his own risk.

What many software companies fail to realize is the vast differences between themselves and their resellers. Your resellers do not consider themselves as your sales channel. All available for free at www. A few changes to the previous sentence will provide a much more operational foundation for the relationship with resellers: www. Thus the value may be tightly associated with the services provided alongside the software and the customer’s own ability to take advantage of the functionality. The value propositions of software companies and those of their resellers are completely different.” “The Software Partner Channel and the Customer Value Propositions.com 4 6 .com Resellers are independent businesses. Leaving the sales of your products to 3rd party companies operating in such an environment is a risky endeavour. Reseller Idiosyncrasies When software vendors choose to sell their products through a channel of independent resellers they actually put their lives in the hands of people over whom they exercise very little control.” “Channel Partner Recruitment in the Software Industry” and “Designing Effective Channel Partner Programs in the Software Industry4. I suggest you also read these whitepapers to fully comprehend these fundamental differences: “Growth Through Partners – The path to market dominance through a channel of partners in the software industry.” Most software companies consider their resellers as their channel to the market. The value of software is heavily dependent on how the customer perceives the risk of implementing and the benefits of using it.Managing a Reseller Channel in the Software Industry The software industry is cursed with a few other characteristics.” “The Software Partner Channel in a Business Model Context. Software is invisible.tbkconsult.tbkpublishing. The word “independent” makes a huge difference. The actual value is then also heavily dependent on how the customer actually uses it. Thus their business models and the way they think and act are also completely different.

their own value propositions etc. You can choose to ignore them if you want. 5 7 . The administrative overhead associated with providing standard documentation and answering trivial questions can by reduced substantially by providing a user I give that these numbers based on my personal experience from 30 years in the software industry. Designing your channel management programs must be based on these facts5. but as soon as that brand starts to fade they will look elsewhere to protect their own business interests. Resellers may associate very closely with a specific software brand.Managing a Reseller Channel in the Software Industry Resellers run their own businesses with their own ambitions. With your assistance they may be able to grow and become stars. The remaining 85% are either without ambitions or their management skill sets are so weak that no external support will have any impact on their growth capabilities. Their leadership is ambitious and they have the management skills to execute their strategies. Resellers consider their software vendors as their Key Partners – not as their superiors. Growth Potential: Approximately 10% of your resellers are genuinely ambitious.tbkconsult. their own P&L. but please then tell me what you experience. 1 below. their own target market segments. Stars: Approximately 5% of your resellers will possess the ability to grow their businesses without your support. B and C Partners 5% 10% 85% Figure 1: The Performance in a Reseller Channel www.com The Partner Portal All software reseller channels will gravitate towards the structure illustrated in fig. All information and logistic services provided by the software vendor to his channel partners should be available through a web based portal. A. but they lack the management skills required to execute.

The Partner Account Managers are business people with a strong commercial background.com The Partner Account Manager must be well connected with the top executive team of the Stars and use his liaison opportunities to build and strengthen the ties between his own executive management and the management of the Stars. the value proposition(s). They are not product specialists! The main objective of the Partner Account Managers is to understand the business model7 of his individual channel partners and help them grow their business with his own product as the core component. www. social media type applications. Thus the Partner Account Manager is a coach and a management consultant when working on the channel partner’s executive level and a senior sales person when working with the channel partner’s sales staff in the field. They do not want to “waste time” on people who do not have decisionmaking power. The Partner Account Manager Software companies must assign Partner Account Managers6 to support the growth of their Stars and their Growth Potential. Partner Recruitment Managers and Partner Account Managers are not the same.” 7 Including the strategy. As channel partners hire new or additional staff to support the activities around your product the partner portal should accommodate most of the initial educational requirements.Managing a Reseller Channel in the Software Industry friendly self-service “Partner Portal. Please see the whitepaper “Channel Partner Recruitment in the Software Industry. the key market segments etc. Managing the Stars The Stars set their own agenda and drive their own growth.” At the same time “partner satisfaction” will increase with the degree of self-service opportunities.tbkconsult. The management team of a Star type channel partner need and appreciate executive attendance from the software vendor. With chat functionality. videos and search functionality it is possible to satisfy most information requirements instantly and with very little human interference. 6 8 .

Only this way can the software company continuously improve.tbkconsult.com Managing “The Rest” Don’t waste Partner Account Manager resources managing channel partners with no growth potential! The cost/benefit ratio will not justify the effort. www. The Partner Account Manager will have to take the initiative to and also facilitate the strategy review and planning sessions. They should primarily 9 .Managing a Reseller Channel in the Software Industry The Partner Account Manager must explore all opportunities for strategic cooperation and alliances between his own company and the Stars making sure that all the energy and potential of the Stars fuel the growth of his own company. which provides the basis for the growth. The Partner Account Manager will have weekly communication and activities with channel partners in this category. There will be at least an annual strategy review and planning session plus monthly or quarterly follow up meetings. The Growth Potential needs organisational support to release Managing the the growth. The Partner Account Manager should apply the “strategy framework” and help drive the effort until the channel partner becomes self-sufficient. Although the majority of channel partners do not have any growth potential. fine-tune and scale the effort. There will be at least an annual strategy review and planning workshop and monthly or quarterly follow up meetings. Growth Potential The software vendor must have a framework for supporting the Growth Potential. There will be daily communication and activities between the Partner Account Manager and his Stars. which all Partner Account Managers should use. they still represent an important source of revenue and a market coverage resource.

com The biggest impact from the partner conferences may be the impact on morale. their performance and their issues if all the data is in the head of individual people who come and go. software vendors with mere sales channel partners can also benefit from bringing their partners together. call centre and email communication. 8 10 . Partner conferences are opportunities for announcements. There is no way a software company can enforce ”best-practice” approaches and share crucial information on their partners. All your channel partners should be invited to participate. However. Having the personal experience of being a member of a huge global “family” is extremely reassuring for most people. www.tbkconsult. an equivalent approach is required for managing channel partner relationships. training session. which help improve the productivity of an indirect channel. Attendees will pay their own travel and accommodation In the eco-system your partners are enhancing and enriching your product and providing services around you product enlarging your market reach way over what you could ever achieve by your own means. thus you must define these first and then implement the system afterwards.   The Partner Communities If you are building and maintaining a true eco-system8 then you must provide the members of your ecosystem with opportunities for meeting and getting acquainted. business development workshops and other activities. The PRM supports the partner relationship management processes.Managing a Reseller Channel in the Software Industry be managed through the partner portal with opportunities for chat. Just as most companies have CRM processes and systems to manage their customer relationships. The Partner Relationship Management System Making it to market leadership through a channel of resellers requires a Partner Relationship Management system (PRM).

www.valuemaker.com ValuePartner® ValuePartner9 is already in use by many software vendors helping their top performing partners grow faster and more profitable.eu 9 11 . Tools for Improved Channel Partner Management TBK Consult recommends using the following tools for effective strategy review and planning sessions with your top channel partners.tbkconsult. Ideal curve Importance average ValuePartner® is owned by ValueMaker: www. special training sessions). Partner Conferences are excellent opportunities for meeting and recognizing your entire top performing partners.Managing a Reseller Channel in the Software Industry expenses and you can charge a fee for attending the conference and associated events (e.g.

It doesn’t mean that your product doesn’t play a role.tbkconsult. The workshop also reviews the business model environment. key activities.” Successful channel partner management is business management and thus requires solid commercial understanding. the ideal customer profile(s). Business Model Management Alexander Osterwalder with his Business Model Generation book from 2010 operationalized the business model framework. key partnerships and the P&L10. The 3-day business model exercise includes a review of the customer segmentation. It certainly does and all your tools and programs must support the product you are offering. key resources. . However. TBK Consult has developed a 3-day workshop helping channel partners review and optimize their businesses based on Osterwalder’s framework. which includes all the external factors which have an impact on the business including the competitive situation. ValuePartner is an excellent tool for starting any strategy review process aiming at improving growth and profitability. a ½ day workshop and a 1-day workshop. successful reseller channels are not built with excellent products alone. The entire exercise can be completed in less than a week. Final Remarks Contradictory to the perception of many software company executives channel partner management has very little “product content.com Combining an excellent product with a professional channel partner program is the best insurance you can take out to protect all the investments you have made in R&D and help you make it to market leadership. business acumen and salesmanship. www. customer relationships. sales and marketing approaches. 10 12 Profit & Loss: Review and analysis of revenue and expenses. customer value proposition(s).Managing a Reseller Channel in the Software Industry ValuePartner is a strategy review and planning tool based on a questionnaire.

tbkconsult. He started his career as a management consultant in 2003 and founded TBK Consult in 2007. ValuePartner and Business Model Generation consultant. English and German and is a certified ValuePerform. As a management consultant Hans Peter has been providing consulting on channel development and management issues to companies such as Microsoft. eMailSignature. RE Technology (now Barco). Hans Peter built the partner channels for companies such as Dataco (now Intel). He speaks Danish. www. Since then he has built the company to its present position with 24 senior consultants in 16 countries. Hans Peter oversees the development of TBK Consult as well as performs management consulting assignments for selected clients. Danfoss. Netop. Hans Peter holds a M. in macroeconomics and political science from the University of Copenhagen. Mercante.Sc. Dansk Data Elektronik (now CSC). Proekspert. EG A/S. and Damgaard/Navision (now Microsoft). SoftScan (now Symatec). Hans Peter is the author of several whitepapers on channel development and management and he frequently writes articles on the subject. Jeeves Information Systems.com More about Hans Peter Bech 13 TBK-WIPA-015 .Managing a Reseller Channel in the Software Industry About the author Hans Peter Bech has been developing and managing global partner channels in the software industry for more than 30 years. CSC Scandihealth and Secunia.