Is your partner checking out the competition?

Quick question:  Which would you expect to be better at managing their partnership portfolios?  Professionally managed, metrics-focused software vendors (ISVs) who run their businesses like finely tuned machines? Or their channel partners - those scrappy, opportunistic SIs, MSPs and VARs?  The ISVs, right?  Wrong!

In a survey of 87 channel partners commissioned by the Cloud Technology Alliance, 90% said they “frequently” conduct strategic reviews of the vendors in their portfolios.  When we asked the same question of over 92 ISVs, 60% said they ever review and cut non-performing partners, with only 14% says they do it systematically.  So your channel partners are over 6x more likely than you are to strategically review their vendor partnerships.  This should make any ISV paranoid and pay more attention to the quality of their channel relationships and programs.

It is important to understand why channel partners are more disciplined about evaluating vendor relationships.  Simply put, they have more to lose.  To a channel partner, the cost of adding a new partnerships is high.  In addition to the time required to understand if the solution is a fit for their clients, channel partners have to invest on training, certifications, etc. (often distracting staff from billable hours).  In many cases the principals are involved in the decision to partner and in managing the relationships themselves.

And channel partners are often to closer to the market and know what problems their clients are trying to solve (and what solutions or technologies will solve them).  They aren’t going to waste time on vendor relationships if the market demand isn’t there, regardless of the quality of the relationships or the underlying program itself.

For software vendors, the incremental costs of adding additional partners is low.  We’ve all seen situations where the barriers of program entry are lowered just to get a partner’s client on-board (only to see no promised follow-on business materialize).  Channel executives are conditioned to think that 20% of their channel will produce 80% of the revenue, and that is just the way it is.  In many cases channel programs are only judged by the revenue that they produce (or that their partners’ influence) with little to no accounting for the average revenues per partner.  You can bet that your channel partners are tracking which vendors solutions lead to the most revenues (or billable hours) or profits.

ISVs, are you seeing revenues from the channel fall off, or partners switch or go silent?  Then you need to understand if your solution is no longer relevant to their customers or if your program no longer meets their needs.  Talk to them.  Don’t just make your annual or quarterly reviews (you are doing those, right?) be about revenues.  Use them to pull more information from your partners about what they are seeing in the market itself.

Last week I got this message from the VP of Business Development at a premier AWS Consulting Partner - “We’re going through an exercise right how to figure out partners that are a great fit fo where we’re going.”  VARs and MSPs, if you aren’t taking a good look at your vendor portfolio, now is a good time to start.  Because your competition is taking a disciplined approach to reviewing their vendor relationships.