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In A Recession, Do You Need Channel Partners?
During the recession -- as direct sales teams work overtime to close deals -- I am sure many high-tech companies have asked themselves: “Why have channel partners?” While it is a valid question that elicits lots of healthy debate, there is really only one right answer – it’s the revenue.
January 28, 2009
3 Min Read
By Scott Dahlgren
During the recession — as direct sales teams work overtime to close deals — I am sure many high-tech companies have asked themselves: “Why have channel partners?” While it is a valid question that elicits lots of healthy debate, there is really only one right answer – it’s the revenue. This may be obvious to some, but when you look closely at many partner programs — especially open source partner programs — it is sometimes difficult to determine how partner initiatives drive revenue for the company.
If your partners and your partner program do not have a strong link to the bottom line (revenue) then they will never be taken seriously by executives, sales people and others involved in partner success — and they will ultimately conclude that partners aren’t helping the bottom line.
This should include both direct and indirect (influence) revenue. The point here is that if you want a successful partner program, there must be a direct or fairly tight indirect link to revenue that is measurable so that everyone understands the value being delivered.
Beyond Licensing
Traditionally, license revenue was the bulk of the revenue equation. But in the open source world, it’s not that simple and that “value proposition” becomes a bit more complex. So where is the revenue?
Software Licenses: Partner receives discount on software and you get the net. Easy to understand but usually doesn’t add up to much.
Technical Support: Good partners have “trusted advisor” status with their clients who expect them to have the backing and support from the solution vendor and expect them to include technical support with the solution delivered. Most customers expect to pay for this.
Partner Competency & Training: Getting partners trained and competent is a big investment, is valuable to partners, and shouldn’t be given away for free. Serious partners will pay for formal product training and to learn from you proper methodologies and best practices when delivering services and deploying the solution.
Customer Training: Formal product training is important. Customers will pay for this and partners want to deliver it. If formal online training exists partners can sell that and receive a discount or better yet you can expand your training delivery capability through partners and receive revenue each time they deliver your training to their customers.
Service Delivery: This is perhaps the biggest revenue opportunity but probably the most challenging but there are a variety of ways to drive incremental revenue. Expanding your service delivery capability (delivering more projects or bigger projects) can be accomplished through a virtual bench of reliable and trained partners for much less than the cost of doing it yourself. Partners can sell their own services in support of your solution and pull you in when there is a need for expertise that only you can provide. Finally, leads and opportunities provided to partners that result in service revenue only for the partner should result in referral fee to you. Your brand and investments in market awareness is valuable and create leads that should result in some financial return.
While all of that can drive revenue for you, it must be measured and recognized for it to mean anything. In addition to direct revenue from the areas above, make sure you track pipeline growth resulting from partner deals, and opportunities where partner influence or support are critical to closing the deal.
Contributing blogger Scott Dahlgren is an independent consultant helping small and mid-size technology companies extract greater value from their partner and channel relationships. And he also runs marathons through the woods of Connecticut. The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS feed, Twitter feed and Resource Center.
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