In order to expand your presence in the Asia Pacific, you will need to use an indirect model that involves channel partners. There are many ways to recruit, enable, and manage your channel partners. There are also many agreements types that you can work with. All of these options are well documented and well researched. Over our many years of experience, we have seen the ones that work and those that don’t. Many IT companies have struggled for thirty years with the challenges of an indirect route to market. This is especially true in the Asia Pacific, where many IT firms are still struggling.
There will be academic nomenclatures available for specific scenarios, but we have tried to provide a more descriptive classification of those that we encounter frequently. All have something missing.
“Dump and Run” Model
Mr. Vendor hires Mr. Channel Partner. It seems that all the criteria are followed to select the perfect partner. After the agreement has been negotiated and signed, there are handshakes and bows. The Vendor gives Mr. Vendor a box of collateral, manuals, CDs, and a help desk number. He then gets on the next plane home and heads straight to the fax machine in order to receive the flood of orders. Although this is a slight exaggeration, it is not uncommon to use partner recruitment.
Partnerships require both partners to be committed. Both parties must be committed to enabling and sharing skills and knowledge. On the other hand, they should also agree to provide talented resources and focus.
Model: “Show me yours first – Standoff”
These agreements are in the form that Mr. Vendor will not provide any information or make any significant commitments until Mr. Channel Partner shows some commitment to Mr. Channel Partner’s ’cause.’ This could include hiring dedicated staff, allocating marketing funds, or opening the kimono up to customers.
Mr. Channel Partner, on the other side, is reluctant to commit or provide precious funds or resources. Mr. Vendor, however, shows active desire support by supplying qualified leads and committing to free training. After waiting for each other to move and failing to live up to their expectations, there is little to no business written. Both parties then move on to new pastures.
Model ‘Indirect is Cheaper’
Unfortunately, many still view the indirect channel model in a way that allows them to enter a market for a low cost or free with high expectations of success. Indirect models in all forms require infrastructure, support, and discounts. It should never be considered gratuitous.
Any indirect channel model should have a wider reach and access to previously untapped markets, as well as regional expertise and/or experience. This will ensure a higher return on investment. It seems simple enough, right? Unfortunately, not for everyone.
A typical example of a well-established and successful organization making the switch to an indirect model is the closing or downsizing of local operations. They also fail to implement a support infrastructure and channel enablement system and manage customer expectations. It was expected that revenue and maintenance renewals would continue to grow and that partners would continue their business as usual. Not surprisingly, the results are often dramatic drops in revenue, customer dissatisfaction, and staff morale, as well as defections, employee dissatisfaction, and success stories from competitors.
Model ‘The Silver Bullet’
Many companies enter markets like the Asia Pacific in search of the “silver bullet” channel partner. This is the partner that has the contacts and the relationships to sell their products and supports them. This is the ideal scenario. It is important to remember that channel partner (often larger companies) will have a sales team paid on gross profit. They are already committed to selling products from multiple vendors and will target the same sales targets as any other sales force.
Ask yourself this question: Will a salesperson be more focused on a difficult-to-sell product with a higher margin, or will they focus on what they already know and what is selling well?
‘Committed Start-Up’ Model
This seems to be a reasonable approach in relation to the previous. Mr. Start Up Partner will be eager to prove himself, hungry for revenue, and eager to impress. You can have everything you need in a sales team. Sometimes. How about quality and resource availability? How about scalability? The challenges faced by smaller organizations are cash flow, relationships, and contacts. There are many examples of well-intentioned “partnerships” that have gone wrong.
Model: “You Need Us More Than You Need Me”
Most often, Mr. Vendor or Mr. Channel Partner is a well-known brand in their market. Sometimes they are both. One is more well-known in the market than the other, and the other, more often, the person who has the responsibility for the relationship, wants to prove their worth and play hardball. An animosity-based relationship that was built from the beginning is destined to be a ‘good idea at the time’ pile. If they are done correctly, these relationships can have a lot to offer but can be hard to manage and negotiate if one party feels that they have the upper hand.
If you find any of these scenarios confusing, then credit your channel people. They should be rewarded handsomely, as your channel is most likely working for you with mutual benefit.
If any of these sound familiar, then the big question is! “What is missing from my indirect channel?”
It is easy to find the vast array of information on the ‘6’ and ’12’ things you need to do in order to make channel partnerships work. You can also find information on how to choose your channel partners and what criteria. These guidelines will all be valid and will include essential points you need to consider when developing your channel strategy. Many will focus on aspects such as company alignment, market segmentation, and sales processes. Some will also highlight the need for constant open communication and clear rules of engagement. Others will identify the need to support your channel partner with resources and infrastructure. All of this is true and essential.
Personally, I prefer to reduce things to the most superficial level. This is the case where the entire mental state that will determine whether or not the partnership succeeds or fails is what is missing in the above scenarios.
You have the desire and ability to invest.
All of these scenarios are unable to be realized due to a lack of investment. We don’t just mean financial investment. Investment in all forms, including time, resources, and commitment, is what we mean.
The ‘dump-and-run’ model does not invest in support and commitment. ‘Show me yours first’ doesn’t invest in building trust and relationships. ‘Indirect is cheaper’ has no investment in many areas. You’ll see the point.
It’s like expecting your bank to pay you dividends or interest income even if there are zero dollars in your account. It is both amusing and worrying to see seasoned, successful executives who are looking to expand their reach into the Asia Pacific. They actively avoid investing in channel development and yet have high expectations. This is especially true in the Asia Pacific, where it is accepted that success requires a robust indirect channel strategy. It must be based on trust, commitment, and relationships.
A commitment to investing appropriately based on expected returns is the key to a successful channel partnership strategy. You can find these areas:
o Segmentation and research to understand the market
o Partner selection and due diligence
o Partner enablement (resource allocation & execution support).
o Partner management and support infrastructure
Communication, trust, and relationship building
– Regular, focused reviews.
As with all good things, successful and mutually beneficial relationships require dedication, focus, and effort. There are no shortcuts, and there is no money for nothing. The amount of money you are willing to invest in your channels will directly affect your results, returns, and profit.