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Channel Topics

Resellers (VARS) Distributors
OEMs Systems Integrators
Agents Deal Registration
Partner Business Planning Discounting
(Front Line) Support Mixing Direct and Indirect Models


Resellers (VARs)

"We've already signed up a 100 partners to resell our software. Sales should start coming in a few months, this is easy". The business world is filled with resellers, especially in the EMEA and APAC regions. The reseller relationship starts with what you do after the agreement is signed, while most companies think signing the agreement is the achievement. Reseller agreements are notorious for lack of business commitment and are easily signed by both parties (most resellers won't sign a document that requests revenue commitments). Without accountability, which most resellers avoid, especially with young products (or markets), the ability to count on their future achievements to fund the growth stages of a young company tends not to pan out.

Resellers are an essential and viable component of any sales strategy. It's not practical to reach a global market from a centralized business structure nor is it often prudent business practice to open offices all over the world (to say nothing of the investment cost). Resellers help your organization reach territories you would not otherwise have any competent access to.

They can be granted with certain levels of exclusivity. They can be very loyal if they believe you have the potential for generating lots of business in their territory. Great resellers market your products in their regions, take you to key customers, provide at least informal product support, coach you on roadmap issues and more. Poor resellers sign your paper, take a few leads, give up if they don't close business in a short period of time ("if the pitch did not cause the product to be sold, it must not be sellable").

We'll look extensively at the Reseller model. Probably the most common and crucial to any indirect sales strategy. We'll look at the key components of reseller agreements, aspects of business planning and how to incorporate reseller activity into overall business forecasting. More


Distributors primarily manage relationships with resellers. They act as a funneling house for many products providing a way to manage a group of resellers through one relationship. They are very commonly used for North American companies building an off-shore business -- one distributor relationship to establish in each major territory. The alternative is often to manage a high volume of small reseller relationships. The trade off is margin over management cost -- normally worthwhile if the distributor comes through with the needed value-add services.

For young North American companies it would be uncommon to start with a distributor versus manage some direct VAR relationships. You often need the more direct contact with the people selling (and ultimately visibility of the end user). It is also common for North American distributors to only want to represent established product lines with revenue potential beyond what you might be able to generate with early entry products.

You need to be clear in terms of what you expect from a distributor. They carry many products and deal with many VAR's and large suppliers -- it's hard to be above the noise level when just starting out. Formal business planning with go-to-market goals set out tends to be the most prudent way to work with distributors. You may also need to invest in marketing funds to combine with the distributors investments to get a new business off the ground.

A good distributor will offer you visibility into their partner base (through events and other similar methods), introduce you personally to their key partners, make sure you have the right sales materials to support the partners and have infrastructure to manage SKU's. Some distributors may also offer some level of customer support (rare) but will usually act as a collection house for revenues so you only have the one point of risk in managing receivables.

Distributors are a very valuable avenue for expanding a channel program but they do not have to be in the plans at the start of a business. We'll explore the evolution of a channel program and how distributors might fit in, some options around how discounting might work and some common T&Cs for contracting More


OEM (Original Equipment Manufacturer) generally means you. Hard core technology companies often envisage establishing a technology licensing business which is largely what the OEM process is all about. Few companies in the software industry can make a living exclusively through OEM licenses (royalty rates tend to be small and there are often only a few possible licensing customers), but it can be a significant part of the overall revenue stream if done at the right time in the development of a market. OEM licensing is common place in the hardware business. Companies like Dell and HP OEM many components of their computer hardware and software products. An OEM relationship is often privately labeled which means the supplier (you) is not always visible to the end customer -- not ideal for building market brand awareness.

Sometimes an OEM model becomes the only viable path to sell a technology that otherwise did not have success as a packaged product -- the whole product is adequate but the underlying technology is advanced -- licensing the underlying technology to a group of competitors becomes viable. You use the revenue to fund other initiatives expanding the business perhaps to adjacent areas where your competitive advantage can be stronger. Examples of pure software OEM licensing businesses include Certicom (encryption technology, now part of RIM) and Microsoft (licensing Windows for use inside hand held devices as just one of their OEM products).

Establishing an OEM program tends to require a full-time OEM experienced sales leader and a strong sales support engineer (SE). OEM agreements can be complex to establish as they must protect a variety of key areas including technology or IP ownership, a typically complex licensing model, terms for support and on-going technology maintenance as well as guidelines as to how the technology under license is to be used. It's not uncommon to license core technology to a competitive partner within your market space but restrict its use to market areas way from where you sell your products, also based on the same technology.

Finding a sufficient quality of OEM leads through marketing tends to be challenging, especially in emerging markets. The more common approach is to identify the leads through market research and pursue them through classic cold calling techniques (or referrals). Each lead can take months or even years to close, revenues can be large and commitment tends to be long term.

The OEM licensing business is complex and tends to be viewed as a specialty, let's explore it in more detail to reveal as much as we can about how it operates More

Systems Integrators

The Systems Integrator world is filled with but a handful of good companies. They gather together a group of technologies and/or solutions and build a large scale consulting practice around them. Young markets tend to be avoided by the big systems integrators as the business cases to develop new service practices rarely rise above the required financial thresholds. SIs often want the supplier (that's you) to bring them customers -- not a likely scenario if you're just starting out (or even several years along in your business model).

Once an SI enters a market, if they build a practice around your technology or solution to do so, you tend to have a valuable and profitable long term business relationship at hand. Most young companies find it's a bit of a double-edged sword to own an SI relationship -- they are very demanding, tend to want to drive product direction, swamp support, want on-site service according to service levels they need to commit to and more. You can learn a lot from this type of relationship -- lessons that can drive product maturity well beyond that of your nearest competition. The real challenge is whether or not you can muster enough energy to do more than just service the systems integrator.

This section will explore the SI relationship, when it typically enters a market, how to structure a relationship and some of the common do's and don'ts, More


Agents come in a few flavors -- the truly individual representative who takes on a few products and sells them to a network of known companies they likely have worked with in their past. They can bring some fast developing leads to your organization, they can sometimes bring some quick sales. Given they are rarely exclusive, they share their time amongst the handful of products they offer, so they should not be counted on to be as productive in the same way as a full-time sales resource.

Agents can also be viewed as 3rd party organizations that help companies enter new markets. It's hard to quantify whether this is a good type of engagement to enter, it may depend on whether or not you are able to muster together your own sales force. If you feel you need the assistance of a temporary sales force, agents may be the way to go -- it may also mean you do not have a competent sales team to depend on.

Given nothing is for free, making agents successful does require real commitment on behalf of your organization. You need to train, support, meet and otherwise assist agents in the activities they undertake on your behalf -- even if they say they don't need it. An agent who says -- "I can sell this without your help, I'm familiar with your industry, your type of product ..." will probably not really do much that is meaningful for you. One of the hardest things to work out is who manages agent relationships. If the sales team takes this on, they will likely ignore the agent preferring to work with their own team members.

We'll look at the agent model in more detail and try to identify the scenarios where it might work for your organization. More

Deal Registration

Deal Registration provides a way for partners or agents to register with you the deals they are working on -- a valuable way to help manage conflict in the channel, become more aware of what deals are in the overall pipeline, monitor overall partner activity, track partner effectiveness and more. It is also a way to establish communication rhythm between your sales support team and a partner -- a deal is registered, you call up to explore the opportunity and see if you can help in any way.

Formalized infrastructure for deal registration can be involved. There are not many effective ones in the market to license, although web solutions like are great places to start if you have the time and resources to configure it properly. For low volumes of registration, you might be able to have the sales support team manage it directly, otherwise investing in the right infrastructure is worth it. Everything needs to ultimately tie into the sales forecasting system, something easily forgotten. Too many manual forecasting elements reduces overall forecast effectiveness and reduces how frequently you can take a look at how the pipeline is forming up behind specific targets.

Partners will expect a reward for registering deals, typically increased margins. It's fair to also include reward conditions, the most common is to have a time frame on closing the deal. Once the time frame expires, the lead is up for grabs. Don't be too onerous on the conditions though, losing track of the bigger picture which is increased market share. A few points of margin loss should not break a young company looking to establish itself. Never steal the lead from the partner even if you end up doing all the work -- unless of course you do not see value in the partner, now or later. In the latter case, you are better off terminating the relationship then setting bad business practice precedents that other partners start to fear.

We'll look at the basics of deal registration, including the types of information to capture and some of the common terms and conditions that help encourage it to be a successful element of sales excellence More

Partner Business Planning

Ideally you would meet with your business partners with the same frequency as your own sales team meets to review business planning. Good partner managers meet at least quarterly to formally review business plans and set measurable goals for the next planning period. Good partner managers stay in contact with their partners and build strong trust relationships.

Not all partners will do business planning or even need to. It depends on what type of channel program you are setting up, whether you are going wide or deep (many or few partners), what information you need from them, what support you are providing them, what type of product you are selling (e.g. highly shrink wrap versus complex selling). It's a tedious process but when done effectively, tends to add detail and confidence to your forecast allowing other key decisions in your business to be made with confidence (e.g. spend, grow, spend, grow).

We'll look at the core elements of a great partner business plan. We'll also look at the relationship that needs to be established with partners so that they also value business planning. We'll also touch on when you should consider incenting your partner through achievements related to the business plan -- great moments for both organizations (win-win). More


Given your business is not Wal-Mart, competing for business through discounting is not a game to get into. There is no need, especially in early stage markets or early stage companies, to use price as a way to win business. Partners look for discounting to recoup costs related to building a sales practice around your products. There are many ways to approach this, including cost sharing. What you must protect first and foremost is the value of your product, so offering extensive discounting thinking it will motivate the partner more tends to result in lower overall price points down stream.

There are situations where discounting, extensive discounting, is necessary to get those first customers. Ideally, those first wins are not coming from partners but from business you are engaging directly.

We'll look at this important subject in detail with specific focus on how to establish discounting policies for a global business strategy. How various types of channel partners fit into the model, especially one where a hierarchy of relationships exist (e.g. master distributor, regional partner). We'll also look at when discounting is a bad thing to do, even if it means walking away from a business opportunity. More

(Front Line) Support

Providing global front line support, especially 24x7, is challenging to take on. It's not uncommon to have business partners suggest they could take on front line support and ask for a (high) percentage of the revenues for doing so. It's also not uncommon for those same partners to be unable to actually provide formalized front line support, meaning they do not deserve any special commissions for selling it.

Partners bring two singular advantages to this discussion -- local language capability and physical presence in the regional market. The former is often important when the user is non-technical in nature (e.g not an IT specialist who is often conditioned to accept English support), the latter is relevant to providing service during the work hours of the customer, something hard to do from a single time zone.

If heading in this direction, make sure the proper due diligence is performed by finding out things like -- is the partner providing front line support for other products (check references), do they have a formalized SLA, how do they work with the OEM (you) for escalations, etc. More often than not, it is an informal support provided that would not otherwise line up with your own goals and objectives for business excellence. You may need to use partners in this way during the startup years of a business, but the direction should near always be to provide global support with your own team ultimately More

Mixing Direct and Indirect Models

In the end, it's hard for a young company to settle on just one path to market. It's equally hard to know when to abandon one initiative in favor of another. It's easy to settle on a sales model where you try a variety of relationships and never really focus where the best results come from. The mixed model becomes the default instead of the deliberate strategy.

Mixed models can work well if managed with eyes open. Key issues to deal with include how conflict is handled (e.g. lead conflict), how pricing works given channels have discounts and direct tends not to (at least, not publicized), how team structure is organized (is the direct team in conflict with the indirect team), how overall compensation is structured given the sales team often want credit for all sales in a territory. It's challenging, but can be sorted out if the key issues are well understood. More