Using the channel model as part of an overall sales and growth strategy is a hot topic—unfortunately in a lot of cases for the wrong reasons. I’d like to clear up a few misconceptions:

It’s Not a Field of Dreams

In case you don’t remember the Kevin Costner movie, my point is that if you build the channel, they won’t necessarily come. Establishing the channel without carefully considering everything it means for your company will lead to a lot of wasted time and resources, not more sales. You have to go into the channel because it’s the right move at the right time for your business and product.

Companies should look at how their company is structured and what internal resources can be brought to bear in support of the channel. That’s because the channel needs a lot of support—training, marketing, sales management partnership management, analytics and performance reporting. Also, look at the ease-of-use of your product. How much instruction is required for a sales person or prospect to understand what it does? And think about what value the channel could bring to your product—and what value does your product bring to the channel? 

If you don’t have a clear understanding of and answers to all of those questions, you’re not quite ready to dive into the channel.

It’s Not a Cost-Savings Move

A lot of people want to move to the channel right now because they think, “We can just get rid of a lot of our internal salespeople. We can just get into the channel and sell that way.” They think it’s a way to reduce their internal head count and thereby cut expenses.

In fact, companies that are most successful working with the channel are those that have a sales force to sell with and enable the channel. Companies that have a skeleton sales force, or a direct salesforce that’s not engaged with and supporting the channel efforts, are not going to succeed.

It’s Not Going to Make Any Money in Year one

You’re going to be investing a lot before you show any return from the channel. For starters, you need the infrastructure that’s going to enable your partners to learn how to sell it: things like your portal, training options, internal resources who will work with and support the channel. Channel marketing managers, for example, play a big role in the success of the channel. (Look for our post next week on how to hire the right channel manager for your organization.)

Margin is another area where you’ll need to be ready to invest. If your current price point is, let’s say, $1,000, selling in the channel means your price to your partners is now $600. That invites another question: can you sell enough through the channel to make that profitable?

And you also now have a sales force whose job is no longer to go out and sell directly to end users, but rather to secure, close, and nurture the channel partners – all while you are still paying them commission.

So launching a channel strategy means a lot of different investments. Like most investments, if they’re made wisely and with informed consideration and careful planning, they can pay off handsomely.

It’s Not a Set-It-and-Forget-It Kind of Thing

Implementing a fruitful channel is like caring for a small child. They require tender loving care, attention, reassurance, guidance, direction, toys (aka marketing and sales collateral) and constant support.  If the relationships of each partner within the channel are not fostered, they are likely to wither on the vine.  Once prodigious partners may wane in their production or be wooed by competitors who are willing to “wine and dine” them. Or at least call them frequently and make sure they have the support they need.  This again reinforces the need for a strong channel manager as well as partner relationship management software that can provide insight into each partner’s performance.

A few weeks ago, I read an interesting blog by Jay McBain from Autotask about a World with 100,000 channel vendors and started thinking about how the channel landscape will change with more vendors emerging in these upcoming years. We have already seen increases in vendors in the channel with vertical specialties like Healthcare, Pro AV, Digital Signage and the boom of cloud computing.  This trend, which has started to occur over the last few years, will continue as new business practices lead the way for emerging vendors while barriers to entry continue to decrease. We have even begun to see some solution providers in the channel creating their own products and building their own channels. Not only will these new vendors and solution providers need to develop themselves in the market, but in order to do so, they need to build their channel programs and establish partnerships to drive indirect sales.

The channel is constantly changing, and will continue to change. The challenge that we face is how to accommodate and maintain the larger networks of partnerships and communication across the channel when it is expanding with each emerging vendor.   As each vendor grows, its system to manage their partner’s needs has to be scalable to accommodate the growth. Communication becomes increasingly more difficult and companies struggle to keep up. The traditional methods of personally managing partners using spreadsheets or separate CRM databases to maintain contact information and respond to all partner’s requests are inadequate with the growth of channel programs. The same way a CRM helps to track and streamline direct sales engagements, it is equally important to have a system for managing indirect sales operations and partnerships.

But these challenges are not limited the only new vendors, existing vendors face them, too. Not only is it hard to manage a rapidly expanding partner network, but it is equally difficult to maintain proper communication with an extensive network of partners. On both the partner’s end, and on the vendor themselves, there is a lot of time and money that is going into managing these channel programs – it seems like this is an area for automation.

Today, successful vendors have exceeded the number of partners they are able to manage manually – they need a software solution to manage their influx of channel information. With the predominance of cloud applications, it’s easy to implement a SaaS based portal, or Partner Relationship Management system (PRM), where both the vendor and its partners can access the information they need to manage the channel. A PRM is specially designed to manage the complex ecosystem of partnered companies and organizations to align both the vendors and partners on the same page.

While these solutions have been readily available on the market for the last decade or more, few companies have opted to implement a high-end, enterprise level PRM, in their business. Most have been running their channel programs from spreadsheets and emails or have tried to mold a CRM; however, this does not do the job effectively or scaled to meet the needs of today’s vendors. New solutions have emerged, such as Channeltivity (Partner Relationship Management for emerging size vendors) and Relayware (for enterprise level vendors), which leverage the cloud to make it affordable to deliver a powerful PRM system. Now, any vendor, regardless of size, can implement a PRM to manage their channel.

In a world with 100,000 vendors, or even in today’s channel, it’s going to be hard to stand out in the crowd. At the end of the day, vendors with the strongest channel programs will ultimately have the most opportunity to get in front of end customers. So, how do they do this? Simple, the vendors that automate their business processes and are able to manage the channel most effectively have the best chance. The winners will be the ones that have the strongest channel program and implement a PRM to manage their partners. And, the most successful will implement it before they need it.

So… is your business ready?