Tuesday, March 16, 2004

ISSUE: Channel Loyalty up for Grabs

Yesterday I had a long discussion with Joe Debold, a channel consultant in greater NY, about the channel. After a 1 hour discussion of vendors, partners, trends, etc., we agreed that the vendors really have an opportunity to impact their channel right now. Below is a quick summary of our conversation and our agreement on the likely areas of impact for vendors.

The small business and medium business spaces are very hot right now. (See my post on Friday, Jan 30, 2004) Many leading hardware, software and service vendors are looking to expand into this space right now. Further, the traditional VAR/SI channel is a primary route to market to reach these key user targets.

However, many of these same VARs are having trouble with their businesses right now. It is not just the economy. That is improving. Rather it is a maturation of the Technology Life Cycle. Unlike the past where resellers made transitions from LANs to WANs to IP to Wi-Fi, there is no major technology driving the channel right now, leading to continued margin decreases and channel consolidation. Even emerging markets such as Russia and China will see considerable consolidation over the next few years.

So what is a vendor to do? Joe and I hypothesized that the biggest area of impact for vendors will be to impact the sales performance of the VAR. No easy task. If they liked being managed, many of these people would not be running their own businesses. So, while both the Vendor and the Channel believe that more productive and professional sales are required, there is no consensus on the next steps.

The motto of Executive Conversation is “It takes more to improve sales performance than training the account manager.” To be successful in the channel, vendors will have to do the following:

1) Change Their Programs: Existing programs are reactive and administrative in nature. The cutting edge program will explicitly target sales productivity as the prime objective of the partnership and align resources to help the VAR make the required leap in capability.

2) Define a Sales Process: We need a comprehensive process. A new way of managing sales in the channel. We need to take advantage of the tools available on the market such as CRP and ERP. Time to grow up and go after the market like the big boys.

3) Train the Account Managers: The ability of CAMs and TAMs to talk business issues is very low. Vendors will have to increase the competence not only of their own CAMs, but also of the account mangers of each of their covered accounts. Level one training such as Sandler Sales is not enough. To win business in the medium enterprise space, account reps will have to establish equal business stature (to use an Executive Conversation term) with executive at the user accounts.

4) Change the Conversation: Our Channel Performance Index (CPI) and Provider Comparative Analysis Process (PCAP) get the facts out on the table. One participant called me at 2:00 AM his time after receiving his report and told me how angry he was to find out that his sales productivity CPI was only half the normal. He had just finished yelling at his sales manager and was going to yell at him some more as soon as we got done talking. My column in ChannelZone last month, How to Get More Out of Your Strategic Vendors, has started some momentum with providers already.

Dell loves the fact that none of the vendors is stepping up to the BAR. Go ahead and cut costs. Dell will copy that move and take more market share. Go ahead and wait until someone else figures it out. Dell will drive your channel providers out of business in the mean time. Tackle this issues successfully and you change the industry as profoundly as Novell did with program segmentation, as Microsoft did with incentives and Cisco did with certification.

Scott Karren, The Channel Pro

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