Driving Business Growth through Effective Channel Partner Management
Manufacturers need to be able to qualify and forecast opportunities in their channel partner’s sales pipeline.
by Sanjiv Chopra, April 2011
Over the past few years, Original Equipment Manufacturers (OEMs) in the computing, telecom and networking equipment sectors have improved their ability to sell directly to customers or resellers, either online or through their own sales forces. The approach has worked well for selling to large customers in developed economies.
However, as OEMs look for growth in new markets, such as reaching customers in emerging economies, or selling to small and midsize businesses, they need to invest in processes and systems to enable and optimize the indirect sales channel, which involves sales done by business partners. At most companies indirect/partner channel business does not get the same attention as direct sales done by the company itself. While most companies have made varying levels of investment in systems and processes to streamline the direct sales channel — for instance, through investments in Customer Relationship Management systems — the same cannot be said about the indirect/partner channel. As a result many organizations are not doing all they can to optimize this go-to-market strategy. A framework that assesses the entire partner management lifecycle for effectively managing channel partners can drive business growth.
There are three key business imperatives to improving partner relationship management processes.
1. Reaching new customers: Channel partners are extremely valuable in reaching customers in emerging markets and small and midsize customers. Deal sizes are smaller, so the cost of a manufacturer’s direct sales force is prohibitive in comparison with the cost of using a partner. Such distributors sell multiple brands of hardware and software so they can gain scale and serve these markets more effectively. There are also value-added resellers (VARs) who focus on specific customer segments, geographies, and industries. Small and midsize enterprises prefer to buy from these small resellers, which understand their needs and are often located nearby. Furthermore, local resellers, due to local market knowledge, can assess the credit risk of smaller customers and finance smaller deals, thereby mitigating credit risk for manufacturers. Manufacturers should view these distributors as a strategic asset and invest in them to build strong and mutually beneficial partnerships.
2. Growing Partner Channel Complexity: Another reality for enterprises is the increasing complexity of partner channels. OEMs selling business-to-business (B2B) equipment, such as networking or printing equipment, may rely on several different partner types for adequate market coverage. These partner types may include distributors, resellers, service dealers, enterprise alliances, and marketing partners. In addition to the various partner types, there are different tiers, or levels, of partners. An OEM may have a range of sales coverage models to service the needs of these various partner types and tiers. While the OEM may choose to service the “strategic” partner tier with a 1-to-1 sales coverage model, the lower partner tiers may be serviced with a 1-to-few or 1-to-many sales coverage model. The "tiering" of partners may be done on the basis of factors such as sales or service performance. Given this channel complexity, a successful partner strategy and the underlying infrastructure must allow an enterprise to identify, track and support a wide variety of partner types and tiers in a cost-effective, personalized and flexible manner.
3. Operational Inefficiencies Limit Partner Objective Achievement: In order to effectively manage and enable the partner channel, numerous partner processes must be executed across the partner lifecycle. These processes include partner recruiting and registration, training and certification, program planning and execution, channel sales/point-of-service data management, and partner performance tracking. Companies that struggle with effective partner management have inconsistent business processes across the various partner types and tiers, use homegrown tools and portals to manage partners, and have highly manual processes. Manual processes have too much information latency to affect channel behavior and performance in a timely fashion to impact end-of-quarter or end-of-year financial targets. The resulting lack of end-to-end visibility into the partner business causes poor alignment between the manufacturer and the channel partners.
Partner Lifecycle Management Processes
Recognizing that a successful channel is critical to continued corporate growth, Oracle leverages an end-to-end partner lifecycle management framework to assess customers’ partner relationship capabilities. The key elements of this framework are indicated below.
A systematic analysis of the partner processes that are needed along the entire partner lifecycle will help identify the key capability gaps and opportunities for improvement. The OEM can then create a roadmap for improvement, prioritized based on value to the business. Fortunately, manufacturers no longer have to rely on trial and error to find optimum solutions. Oracle has the solutions that embody proven methodologies, processes, and tools to help manufacturers identify, recruit, onboard, coach, and manage channel partners so they will sell more strategically and effectively.
Characteristics of the Best-In-Class
Successful channel management is about influencing channel partners on how they develop, manage and optimize sales opportunities, while also influencing and leading change initiatives and investments that drive indirect channel revenue. Manufacturers need to be able to qualify and forecast opportunities in their channel partner’s sales pipeline.
Best-in-class companies differentiate themselves along the following channel management competencies.
They manage the channel partner relationship, engagement, and achievement of joint objectives through the partner planning process.
They understand the business model and investment criteria of channel partners, and are able to have a business conversation about investment initiatives.
They can articulate the key issues and business priorities that affect partners’ stakeholders, and have the influencing skills to manage partners to change and invest as required.
They execute a channel partner lifecycle management strategy to identify, profile, recruit, enable, manage and transition channel partners in their territory.
They lead and manage partners to identify and resolve their own barriers to success, and enable them to generate higher sales revenue.
In today’s competitive B2B environment, more and more complex sales will come through third-party reseller channels. Effective, efficient channel management will be a critical success factor for OEMs who just a few years ago were engaged only in direct sales.
Sanjiv Chopra is a senior director in Oracle’s Industry Strategy and Insight group. Sanjiv can be reached at firstname.lastname@example.org.