Risk and Reward of Channel Alignment

As more master agencies court VARs, they’re rolling out enablement programs to ensure resellers’ success selling network services (see table, Master Agent VAR Programs Vary). One of the popular approaches is channel alignment the pairing of VARs with experienced telecom agents throughout the sales and support phases. On the surface it seems a straightforward solution to speeding revenue generation, but under the covers, it is quite complex. Considerations include revenue splitting, personality fits, client control, the possibility of one side stealing a customer and whether a smaller agent can offer the sufficient backing a larger VAR requires. What’s more, master agents risk alienating either their traditional base and/or new entrants if channel alignment is not done well.

Channel alignment is not new, but the issue is growing more prevalent as thousands of IT partners, spurred by dwindling hardware margins and the advent of the cloud, sign with master agents to add network services to their portfolios. Of course, this trend expands master agents’ partner base, but it also forces them to decide whether to work VARs directly or to pair them with experienced agents. Each approach carries its own uncertainties. For example, the direct model can stir up resentments among existing partners, who may feel they’re getting less attention from their longtime partners. It also can be costly for the master agency if a VAR can’t close deals and support sales on its own, and instead leans on a master’s internal staff for extensive help.

Channel alignment holds risk, too. Here, master agents have to tread with care, vetting agent partners well in preparation for an alignment initiative. After all, if an agent doesn’t have enough staff, resources or time, it won’t be able to provide the support the VAR expects. As a result, master agents know they need to keep finessing their channel alignment initiatives. “I’d like to sit here and say it’s roses but it’s really hit and miss,” said Patrick Oborn, vice president of marketing at master agency Telarus Inc. “Some relationships flourish and produce fantastic results for the VAR, agent and Telarus. Others fail because the agent doesn’t know how to effectively work with VARs or the VAR is so focused on their core business, the agent’s attempts to communicate and work together go ignored.”

Brad Miehl, CEO of master agency MicroCorp, agreed. “There is natural synergy between the two distribution groups,” he said. But channel alignment “is not as simple as a commission split between parties. There are a lot of details that need to be considered.” And for Digital Planet Communications CEO Shawn Schmidt, that’s where the rubber meets the road. “If both parties establish common ground and set realistic expectations, the relationship can be rewarding,” he said. “However, if there is not complete trust and collaboration, then the outcome is bleak.”

Given the delicacies, some master agencies avoid channel alignment altogether. “Agent partners do not provide the level of support needed to keep the VAR, not to mention the client, happy,” said Ron Dunworth, chairman and CEO of  master agency ADVODA Communications. That’s because many agents run small shops that don’t have the people, back-office tools or time to invest in an opportunity that likely will yield 35 or 40 percent of the commissions, rather than the 70 or 80 percent they normally get, he said. “Asking them to split their commissions with a VAR and work just as hard isn’t a model for success.” Master agency Converged Network Services Group (CNSG), also takes a direct approach. The company pairs its VARs with internal, local managing partners who know the carrier services world inside and out. “We listen to their short-term and long-term goals, and create a road map,” said Matt Harty, president and CEO of CNSG. “It is all about success and taking care of the end user.”

Other master agencies Channel Partners polled have implemented channel alignment programs that bring VARs and agents together. Several pointed out that VARs lack the sales and support infrastructure needed to manage complex network solutions, which is where experienced agents come in. “So few VARs are able to function as agents out of the gate that it just makes sense to put them with someone who can hold their hands, close some sales and make them feel confident in making telecom a piece of their business,” said Telarus’ Oborn. But there’s also a need to assure voice and data VARs that they can continue to own their customers. Here are some ways master agencies have structured their channel alignment to achieve these goals.  

No competition. There must be absolute comprehension of the rules of engagement, said MicroCorp’s Miehl.”If a VAR brings an agent in on an account, the agent has to clearly understand the scope of his/her involvement in each deal. For example, the agent cannot sell IaaS and compete with the VAR in their infrastructure solution.”

Remain flexible. VARs need to be able to choose on a deal-by-deal basis how they want to team with an agent, said Andrew Pryfogle, senior vice president and general manager at master agency Intelisys. On each opportunity, the VAR may decide if it wants a pre-vetted agent in its area, with the appropriate skills, to help close and support the deal, That way, the reseller is not forced into a model it may quickly outgrow, Pryfogle said. At Digital Planet Communications, VARs and agents are paired on every deal. The arrangement, however, starts out as a temporary one, with the option to end if the VAR decides to go it alone. And master agency WTG‘s VAR Connectivity Program allows resellers to move at their own pace, whether as a referral partner or fully in control of sales and support. The master agent needs to make sure the process is “really simple or VARs will walk away from it,” said Vince Bradley, president and CEO of WTG. Many of the master agents selling through VARs have bought into the idea of flexibility, and so give those partners several ways to team up, including referral, sell-with and sell-through options. Each method features a different compensation tier, which depends on the level of VAR involvement. On the whole, the more involvement, the more reward.

Watch the money. VARs often don’t want to team with agents due to fear of being cut out of a deal. One way to address the problem is by pre-negotiating commission splits. Telarus, for instance, lets agents and VARs lock in an agreed-upon split through its CRM software. That eliminates any trepidation on the VAR’s side, said Oborn, and frees partners to pursue a deal without worry about the financials.

Foster trust. Another ingredient for success is to match VARs with local agents who share similar business cultures and values. All of the master agents with channel alignment programs consulted for this article have such requirements. For its part, master agency Concierge Core Services takes the idea of trust a step further, through a collaborative community it has developed for its brokers. These partners be they a VAR, telecom agent, copier rep or even a banker or waitress undergo the same training, ascribe to the same mission statement and meet often, and therefore know what to expect when engaging fellow brokers in a deal. “Pairing people with someone that can support them, creating a collaborative community environment, and giving them the tools and resources they need to grow and succeed is absolutely effective,” said Clark Atwood, president of Concierge.

Kelly Teal is senior editor of Channel Partners.
Twitter: @kellymteal
LinkedIn: linkedin.com/in/kellyteal