At our Software Channels council meeting a couple of weeks ago I shared some channel lessons learned from the last economic down turn (think bursting Bubbles), and also facilitated a discussion on the topic. I observed some ah, interesting approaches and tactics by vendors during 2001-2002, and yes its understandable that desperate times sometimes call for desperate measures but I found myself in the "shaking my head at the crazy thing they did" and what did they think that would do to our partners more than a few times. My point is that we need to learn from the mistakes of the past, especially when it comes to managing an effective channel, and try to avoid some of the craziness this time. So here are a few things that we discussed in the meeting and that I've learned about SW channel and effective management:
- First, don't forget that your "partner" is a business person whose first responsibility is to their OWN business, not yours.
- The "shiny object" syndrome - you've invested quite a bit of time and money in getting your channel to focus on something specific, maybe its a specific industry vertical or a specific product line, whatever it is, in many cases the business plans of vendors have included getting its channel partners to FOCUS. Unfortunately in an economic focus can be one of the first things to go away when your partner is worried about business survival. Its very easy for a VAR to start taking on ANY work they can find. What can you do? Remember the focus and make sure your incentive plans are designed to reward focus for one thing...and design promotions to reward focus, make sure training is there and being consumed as well.
- "Whip-saw" promotions - The current economic climate is very tough and getting sales for most software vendors (and partners) will be tough for the next couple of years but don't fall into a trap that I've often seen from vendors when they get desperate to figure out ANY way to generate revenue; that is start throwing promotions around, changing mid-quarter, mid-month, or even building promotions that cause internal competition among product lines. Look at this from the partner perspective, not only is it almost impossible to manage that many promo changes (its often almost impossible to decipher and manage your promotions in good times, little lone now). but there is a thing called a sales cycle and you are asking your VARs to focus on the business they have tried to build over the last few years. I've seen this happen so many times, a VAR has a very good prospect, they put together a reasonable proposal and before the deal closes the vendor changes the promotion, maybe its a new 2 for 1 offer, the prospect sees it and not only does the deal shrink but the VAR may loose credibility with its customer (or worse loose the deal because of the damage done to the relationship). Remember when you wag your tail there's a bunch of businesses out there on the tip going for a thrill ride...stay the course, build good, reasonable promotions and give them a chance to work.
- Remember 2001/2002, how many partners did you loose that went out of business or defected? There will be fall out, don't doubt it. If you have to cut costs, and I suspect most of you will, then prioritize to keep your most loyal partners healthy. They will be around when things get good again and they will stick with you through the next crisis.
- It's about MARGIN, not revenue. Yes I know that as vendor sales teams (both direct and indirect) we're mostly incented on revenue, well it doesn't really work that way for a small business. Most of your VARs are watching the bottom line way more than the top line...what's left after they pay their costs, if its $0 (or close to it) why are they in business? If you want to help the small or mid-size VAR, come up with a way for them to increase profit, and revenue will follow.
- Times are hard, you and your partners may have to adjust your business models to meet changing customer needs and desires. If customers can't spend capital or get financing then offer them a subscription (from their operating budget), or come up with something else to help customers buy. See my post on SaaS and open source software and the crisis.
- If you're a SaaS vendor perhaps you need to look for some non-traditional distribution partners. see this post
- Or get creative with your partnerships and find ways for you and your VARs to expand. Here's a write up on an innovative partnership between Netsuite and HP that does just that.
There are a lot of best practices out there, I've seen some very innovative new ideas over the last few years. That said. you have to remember the lessons from the past...
