All too often, IT companies fail to capitalize on one of their most valuable routes to market - their Channel Partners. These Channel Partners are third party organisations that offer a range of complimentary products and/or services that can dramatically enhance the overall value proposition. It is anticipated that Alliances will become as critical as Direct Sales Forces over the next 5 years. Partners generate as much as 50% of software revenues for a software vendor, yet they are consistently mismanaged, have limited resources to support them, and are treated, not as partners, but as a necessary evil.

Companies need to differentiate themselves to maximize revenues. One way to do this is by building strong partnerships. Yet, all too often, an unproductive alliance exists between the IT companies and their supposed business partners. Mistrust exists on both sides and the partnership becomes driven, in part, by a fear of failure that results in an inevitable lack of activity. There are many reasons for this and these must be addressed in order to develop, manage and maintain a strong Partner programme whilst maximising the business potential for all parties.

By way of an introduction, we should first ask a question: Why are IT companies generally so bad at building business partnerships and implementing effective alliance programmes? There are many different reasons for this, but the common themes are:

• Inexperience - The IT companies have developed new products and services but have very little experience of taking these products to market.
  
  
• Incompetence - The IT companies actually don't know what to do to create an effective partner network.
  
  
• Impatience - The IT companies are seeking immediate results and often this is not aligned with their partners' business model.
  
  
• Ignorance - The IT companies do not understand the offerings of the partner market, resulting in the establishment of alliances with the wrong expectations and objectives.

Why do IT companies actually need a Partner Programme and a network of business partners at all?

Although some IT companies can exist in isolation, independent of third party alliances, this is extremely rare and usually results in limited success. Having a network of Channel Partners is therefore universally recognised as the standard modus operandi and, indeed, is seen as a disadvantage if it doesn't exist. The benefits of a strong network of Partners are as follows:

• Increased Market Coverage - IT companies can reach a wider client base and hence increase their annual revenues.
  
  
• Higher level relationships with the clients. IT companies can reach clients on a business level rather than languishing in the doldrums of their clients' IT departments.
  
  
• Larger Average Order Values and increased margins.
  
  
• Stronger Value Propositions. Clients are looking for solutions to business problems that are simple to implement and easy to source. Forming Partnerships means that a solution can be presented to the clients. Without Partners, IT companies are really nothing more than exciting pieces of new technology without a business context.
  
  
• Tailored solutions to address the individual needs of specific industry sectors. Partners - especially the large consultancies and systems integrators - possess extensive domain knowledge and can apply this expertise to address the individual needs of their clients in the context of the industry sectors.
  
  
• Reduced Cost of Sales. This particular point is more of a side effect than a major benefit. Sometimes selling solutions with a Partner is more cost effective, especially when the terms of engaging with a client are clearly defined.
  
  
• Competitive Differentiation. It is undeniable that selling business solutions (rather than technology) in conjunction with a Partner, that can really add value, provides a competitive advantage for IT companies. When undertaken correctly, this route to market can provide insulation from competitive activity.
  
  
  

Despite all of these positive commercial benefits available through a strong network of Partners; it is interesting to note that many IT companies populate their Partner Channel Teams with their second-rate sales people. In some instances the Partner Channel teams are a dumping ground for failed Direct Sales people and Account Managers. This is a fundamental error and one that has a marked impact on the Partner Programme as a whole.

It is positive that the IT companies actually recognise the need to have a dedicated sales team to manage the Partners. Unfortunately, many of these teams are severely understaffed. Thus, rather than investing in a strong, dedicated sales team with specific skills, it is often cheaper and quicker to establish the Partner Channel team using mediocre internal resources. Why sack a poor salesperson when you can move them to the Channel Team and avoid the cost of recruitment and severance?

Regardless of the salesperson's level of competency, the fact remains that there are key differences between the skills of a successful direct sales person and a successful Partner Manager. In general, direct sales people are tactical and deal-by-deal driven, whereas Partner Managers are more strategic and relationship oriented. Needless to say, if you expect a successful direct salesperson to manage a Channel Partner you will not maximise the effectiveness of the inter-company relationship and commercial rewards will be disappointing.

So far we have referred to the Third Party Channel Partners as a single entity. The reality is that potential partners for IT companies fall into various categories. These categories are primarily as follows:

• Major Systems Integrators (SI's) - These are the traditional, large scale consulting companies that have global presence and significant, high-level influence throughout industry and their clients.
  
  
• The Major Application providers - These are IT companies that provide major software applications which clients deploy across their entire organisation. These enterprise-wide technologies include ERP, CRM, HR and Finance packages. If one considers one such application provider - SAP - an entire network of relevant adjunct technologies has evolved to enhance the functionality of core ERP software application.
  
  
• Complementary Technology Partners. IT companies have to make their software available on a range of different platforms and operating systems in order to fit in with the clients' existing IT infrastructures. For example, it is expected that products are available in both a UNIX and Windows environment. Therefore, the IT companies need to have alliances with the operating system manufacturers as well as the database vendors. These alliances can quite successfully exist at an R&D level rather than at a Sales & Marketing level.
  
  
• Bespoke Systems Integrators. These Systems Integrators are specialists who develop solutions tailored for a specific, vertical industry sector or offer a particular solution to a particular business problem.
  
  
• Niche Players. These organisations provide products and/or services to a specific industry sector. This includes local vendors operating in limited geographies.
  
  
• Development Partners and Independent Software Vendor's (ISVs). These are organisations which embrace core technology components and develop applications.
  
  
• Commercial Partners - IT companies often overlook these organisations, as, on the face of it, there is very little synergy. A typical example of a potential alliance partner in this area is a Finance House, an organisation that can provide funding and flexible financing for clients. These organisations have established clients and influence and forming an alliance with them often brings surprising commercial benefits.
  

How do you determine which types of Partners are best for your company?

1. Clearly define your objectives in establishing the partnership. Are you looking for a company to help you implement software once your sales people have finalised the sale? Or do you want a channel to act as an extension of your existing sales force? The type of partner required for each of these approaches is dramatically different.
   
   
2. Determine your available resources to commit to each of the partner models you are considering. If you cannot commit the appropriate resources, scale back your expectations. Lack of resources is one of the main reasons partnerships fail.
   
   
3. Does your technology lend itself to being part of a large scale Systems Integration Project? If so, you should consider partnering with the Major Systems Integrators. If not, smaller partners may be more appropriate.
   
   
4. Can the software be developed into a solution offering by a Niche Player, or a Bespoke Systems Integrator? A great deal of investment by your company is required to ensure the application is properly developed, repeatable and upgrade-able to new versions. You must be prepared to work closely with the Partner's Development team. That said, the rewards for this approach can be dramatic, opening up new markets in specific application areas.
   
   
5. Are you trying to establish partnerships to share contacts and increase exposure for your products, but maintain control of sales with your internal team? Then Complementary Technology Partners and ISVs are the preferred route.
   
   
6. Do you need an outside company to offer something that you cannot manage internally, but that your customers are requesting, such as leasing and special financing? Then Commercial Partners may be the appropriate channel.
   

There is no single partner model to fit all companies. Each software company will have a mix of the various types of Partners. The key to a successful Partner Programme is to focus on your objectives, then define the appropriate partners to help you meet those objectives. Trying to manage all types of partnerships without a large infrastructure to support them, is ineffective and will yield poor results. However, with well-defined objectives, good resources and a focused approach, your Partner programme has the best chance of success. You will also reap benefits to your bottom line.

What are the keys to success for a Partner Programme?

• Clearly define your objectives with the Partners
• Keep the number and type of partners in line with your available resources
• Be ruthless in your determination of appropriate partners. (Just because everyone seems to have a partnership with Accenture does not mean you should too.)
• Make sure you understand your value to the partners. What is the benefit they will receive by partnering with you?
• Be realistic in your revenue expectations in the short term. Partnerships take time to develop.
• Work with the partner to set revenue targets and expectations.
• Be willing to continually review the Partnership, including an exit strategy for both parties if things don't go as planned.
• Understand how to create joint value propositions in conjunction with your Alliance Partners.
• Develop a joint business plan with your Alliance Partners.
• Assess the suitability and applicability of your existing Partner Channel resources.
• Create a comprehensive programme for managing your Alliance Partners on a day-to-day basis.
• Establish the goals and objectives for the Channel Programme.
• Obtain executive level commitment to access the resources that you need.
• Work with Alliance Partners on business development and marketing activities in order to generate a pipeline of business.

What next?

Document Boss offers a new service called "Boss Connect" to quickly help you establish healthy sales revenue via your Partner Sales Channel. Boss Connect is a series of service modules tailored to your specific requirements enabling you to develop or increase your channel sales without the pain.

Included within the range of services that we offer are:

• Helping you to identify which partners to work with.
• Working with you to develop your value propositions in the context of potential Alliances.
• Developing a multi-channel sales strategy
• Build a training and education programme for your Partner Channel sales team.
• Partner introduction service

For further information about Boss Connect or to discuss your individual requirements, please email BossConnect@documentboss.com to book a free telephone consultation or to request an electronic brochure.