Why Channels Don't Work: A Self-Assessment

May 7 2013

It is not uncommon to see ISVs with business solutions (ERP, CRM, SCM, ECM) to be disappointed with their reseller partner channel's performance. The issues they highlight with their partners commonly relate to some or all of the following:

About Paul Solski

Paul Solski (paulsolski@aimcorpinternational.com) is the Managing Director of AIM International, a management consulting firm specializing in assisting software companies to enter and grow in new markets. Mr. Solski has over 25 years' experience in international business development having held executive positions at Microsoft, HP, Intel, and Compaq.

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eklauss's picture

I've been on both sides of the ISV world, starting first as the Sales/Channel Manager for a CRM provider (back before MS had Dynamics CRM)that was integrated with GP and SL. More recently I've spent many years now on the partner side. In my current role as Sales & Marketing Manager for a Dynamics AX, GP & CRM partner I get daily calls from ISVs from all over the world. The truth is most of them want something from me...access to my customer and prospect base but have little to offer me. Oh sure...there's some margin on sales. That's not much of a reason for me to take on a new ISV unless I've got some unique selling situation that's probably a 'one off' deal. Let's face some facts. Most ISVs replicate some functionality that exists already with some other ISV. Maybe your "mousetrap" is slightly better but if it's not a radical improvement there's not much incentive. You've got Sales/Use tax management...great, so do several other ISVs. Bar Code Scanning/WMS? Yep...it's covered. Process Manufacturing, Retail, Non-profit, Marketing Automation, Expense Management, Project Accounting...yep, yep, yep..someone's got that covered. What makes you different from the other ISVs? Do you even know who your competitors are? I probably have a relationship with them so why are you better? Why the heck should I do business with you? Are you going to bring me leads? You don't do any of your own industry Marketing, have no brand recognition and just expect partners to hand you business? You're not adding any value to me. I manage our stack of ISVs today. The overwhelming majority of them we not only market and sell but we implement them as well. We've invested dozens, maybe hundreds of hours getting our team members up to speed. Sometimes this has come with painful experience with our customers as well. Many times because the ISV oversold their capability and/or didn't provide adequate documentation. Taking on a new ISV solution is an expensive proposition. There's a lengthy training curve, both pre-sale and from an implementation standpoint. How are you going to help us get over that? Do you provide free online/on-demand training? Great!! If not what's your plan? You want me to go close a deal with your solution and we can learn while you do the services? Now you're eating my profits plus I've still got a cost of the time of the consultant who's supposed to "shadow" you during that implementation since I probably can't bill for their time and yours. Do you have good documentation for your product? Do you provide unlimited partner support calls/emails and are you responsive to support calls in my timezone? Can we learn to implement your solution or are you thinking you'll do all of the sales and implementation and just give me a small "piece of the action". On that note...your "all" is never really "all". I've still got to find the lead, nurture it, coordinate and bring it to you to demo, then propose and close. I'd argue I'm doing all the work here...you "show up and throw up" in a 1 hour demo and want to get paid a big chunk! Additionally, Services is where we make our profits so if you're going to take that on...again...why do I want to continue to do business with you regularly? You're wanting the lion's share of the revenue and expecting me to do all the work of Marketing and selling/closing to feed you. Why would I do that? Lastly...does your solution actually fit my market? Here's another fact that most ISVs have completely and utterly failed to recognize. Margins and pricing for software are being driven down radically by the market. Microsoft is responding. The days of six figure implementations for SMBs are done and gone (the AX market is obviously different). I need to sell new business. When Microsoft is offering a 3-user GP system for $3,000 and you want me to add an ISV solution with a starting price tag of $20k or $30k you've probably lost me. It's an "app" world out there now. You're a GP or CRM ISV who doesn't have subscription/SaaS pricing? Done...moving on. If you get me on the phone or meet me at an event you've got about 30 seconds to tell me some reason why I should do business with you. If you've got something interesting in that 30 seconds, I'll give you more time...but probably about another 1-2 minutes to impress me. By way of example. Just last week I got a call from a company I've not worked with who has a stack of solutions for Distribution. I've got solutions that already cover this...but the salesperson who blindly cold called me quickly said something about their solution that got my attention. I gave him my email address, told him to send me info and follow up in a week. Now we're scheduling a demo for me and my team to take a further look. It may be bad news for one of my current ISVs but they've failed me so I'm looking for someone else. Maybe that's you!

paulsolski's picture

Great insight and practical feedback eKlauss - thank you for sharing.

jglathe's picture

@eKlauss: I concur with most of your points. Except for the "App World". I know all vendors are driving like mad in this direction, but I'm not convinced. ERP is not a jigsaw puzzle from different vendors... at least, as a customer, I would seek to avoid buying this way. IMO you get lots of interfacing problems, and nobody wants to solve them. A good AddOn is well integrated into the standard ERP you're selling, doesn't limit the standard functionality, and requires some knowledge on the partner side, too. If not, you might score some sales, and have a lot of finger-pointing and blaming afterwards. To build a good AddOn it takes a lot of experience, restraint, development/maintenance time and feedback from several customers. The sad part is: which ISV (or NAV partner for that matter) is willing to invest that much up front? So you see what you see now.

RhodaBernstein's picture

A great article that describes the state of most channel programs. It all stems from having an inside-out view. The tech world knows how important the buyer's view is when it comes to software, but seems to have selective memory loss when it comes to distribution channels. Another adverse impact is that it makes it so much harder for programs that do have good answers for the value proposition questions! We're in the first year of launching a partner program and fortunately, we ARE able to - offer a unique data quality solution, - drive substantial sales value through 2x to 10x more services, - enable our partners to differentiate from their competitors, - simplify and shorten the sales cycle, and - onboard quickly and cost-effectively. And yes, we are recruiting partners selectively. While our data solution helps any B2B company, not every Dynamics CRM partner focuses on and offers expertise in data quality. It has to be a good fit. We took the best practices from the most respected partner programs of the past 20 years and we are making significant investments in our partners with online, self-service training, joint marketing, etc. So, we have to be selective. But, as eklauss said, "The truth is most of them want something from me...access to my customer and prospect base". Despite all the problems, I am still strong on channels. In my mind, it has to be a home run... a win for the partner , a win for Microsoft (we help sell more CRM seats faster) , a win for us (D&B) , but most importantly, a win for the customer by delivering significant value and results. Rhoda Bernstein D&B

paulsolski's picture

Hi Rhonda - I always thought that a partnership was like marriage but you have taken it to another level :) Thanks for sharing. Paul

Jono99's picture

Hi Folks, eklauss is speaking the truth, and the truth is sometimes hard to take. Here at Jet Reports we've had an ongoing conversation about this for a while and our partner program is starting to look a lot like Rhonda's. Its hard work, but it will pay off. Take a look at the articles I wrote on the topic some months ago: http://www2.jetreports.com/l/3692/2012-10-10/2qcq88 http://www2.jetreports.com/l/3692/2012-12-20/2zvthl These are a slightly different take on the earlier views, but might lend some practical advice. eklauss - where are you hiding? :) I'd love to have you reach out to me for more conversation on this. Jon Oesch Jet Reports

jemrunner's picture

Have to completely agree with the thoughts provided here. Over the last 15 years I have enjoyed working with many ISV's and spent a good tour of duty as an executive with one very prominent ISV in the AX & NAV channels. Quite honestly, most ISV solution providers don't want to invest the effort to understand and then specifically speak to how they add value to a reseller (hint: it's not about the software margins on the ISV product itself, the costs usually outweigh any revenue benefit) - and there is a big difference between doing that as an ISV with a breadth solution versus one with a depth solution. One aspect not spoken to yet in this thread is the future of the channel and how it is likely to impact on the ISV / reeller relationship. As Microsoft steps in more aggressively on the software side, resellers that are still selling software themselves, as well as those that opt out of this model entirely, are going to be spending much more time finding ways to make money on services. That inherently changes the conversation between an ISV and a reseller.