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July 10, 2007

Partner Programs

10 July, 2007
By Research and Article Provided By: Amazon Consulting

This report examines information specific to the vendors' partner programs, including core benefits (portals, communications, deal registration, MDF, etc), rewards and recognition, and the challenges ahead.

Key Takeaways
IT vendors continue to execute partner programs that they have previously developed. However, the research shows that they are enhancing these programs by creating better tools to support the program elements, feedback and rewards.

This report reflects on a number of noteworthy items:

There is a disparity between the programs in place and the tools necessary to ensure the success of the programs and the partners.
Partner-to-partner collaboration programs and points-based tracking and reward systems are just beginning to catch on with high technology vendors.
In addition to new customer acquisition, vendors are specifically rewarding trained and certified resources, as well as partner growth.
Vendors face challenges in training, partner enablement and program resources.

The Data
From the 250 organizations polled, we received a 22 percent response rate. Of the 55 respondents, 62 percent were from software companies, and the majority (58 percent) were from large companies (with revenues over $500M) versus 22 percent from "mid-sized companies" ($200M - $500M); and 20 percent from "small companies" (under $200M).

[See figures 1 and 2]

Figure 1

Figure 2

Program Elements
Peer-to-peer or partner-to-partner collaboration programs and points-based tracking and reward systems are starting to be implemented by high technology vendors.

Respondents were asked which of 11 partner program elements they had in place. Not surprisingly, 96 percent of the respondents have a partner portal -- only two do not. The question is whether those portals are effective at engaging, empowering and managing partners.

Figure 3: Which of the following elements does your company currently have in place?

Surprising Results

75 percent have a partner conference but only 68 percent have a partner feedback system. If vendors are interested in gathering feedback from partners, we'd suggest leveraging on-going methods such as a feedback form on the portal and a regular survey or Total Partner Experience (TPE) metric that tracks the relationships with many partners throughout the year, rather than relying on just a handful of top partners or your own assumptions to help set priorities and needs.
65 percent of the respondents noted having sales incentive programs in place, but only 60 percent have a partner locator or directory solution for customers to find possible partners. It highlights a disparity between the program goals and the tools necessary to ensure the success of the partners.
More companies had lead distribution than deal registration programs and very few, less than a third, have peer-to-peer programs.
Nine companies, 17 percent of the respondents, have "points-based programs." Points-based programs are a relatively new concept in the channel and require a significant focus on defining and tracking key performance metrics plus a heavy investment in infrastructure for successful implementation. In our work, we see only companies with really complex markets, product lines and partner programs reap the rewards of a program, where partners earn their way to higher levels by the accumulation of points that are awarded for a variety of partnering activities. These activities often include training and certification, and some innovative companies have begun to reward variables like market penetration and customer satisfaction as well.

Figure 4: As a percent of partner revenue, how much does your organization spend on partner and channel programs, management, support, etc.?

Figure 5: Number of personnel employed to support partners?

The study also found that vendor investment (as a percentage of partner revenue) varied widely (Figure 4).

21 percent of respondents funnel more than 20 percent of the partner-driven revenue back into growing and supporting the partners. That means 79 percent reinvest less than 20 percent of the partner-driven revenue for supporting partners. These funds cover the costs of program activities, partner management and joint selling activities. However, these numbers do not take into account the discount or compensation to the partner, just the program elements and management resources.
Many organizations are increasing their program investment in partners while keeping their hiring investments stable for 2007. These investments in program support seem to be growing slightly.
45 percent expect stable investment in 2007
25 percent expect growth (up to 50 percent)

There are a large number of personnel employed to support partners. (Figure 5)

33 percent of the companies have more than 100 people to support partners
33 percent have more than 5000 partners worldwide.
67 percent have less than 100 people and less than 5,000 partners worldwide.

Coincidental? Probably. However, we do see that the more well defined the program and clear the performance metrics and self-serve tools are, the more freedom the vendor has to reduce the variable staffing in partner management roles. Incremental program and automation investments tend to lower the requirements for staffing needs.

Recognition and Reward
New customer acquisition, trained and certified resources and partner growth are specifically rewarded.

Respondents were asked if they provided specific financial incentives to partners (in addition to their margin dollars) and for which activities (figure 6). New customer acquisition made the top of the list, which isn't startling since that most likely refers to rewarding for deal registration.

Figure 6: For which activities does your company pay specific financial incentives to partners?

Very few companies specifically rewarded on customer satisfaction scores. The companies that reported rewarding on customer satisfaction are smaller software vendors, although we know from our work that some of the larger vendors have incorporated customer satisfaction in their overall program attainment. We'd like to see more vendors recognize and reward the customer's satisfaction with partners. Although it can be difficult to obtain, it is the best measurement of partner capabilities and competency, both with understanding the products and in running a business. We believe that partners producing satisfied clients are generating higher revenue and sustaining their businesses successfully. In addition, if partners are not producing satisfied customers, they're not likely positioning the vendor or the products in the best light.

Since training and enablement scored high on the respondents' list of priorities, it makes sense that 40 percent paid financial incentives for training. Other activities vendors prefer to reward include: year-to-year revenue growth, competitive knockouts and managing non-named accounts.

We also see that several companies have employed initiatives regarding partner exclusivity. This exclusivity typically defines specific requirements around regional sales rights or the ability to sell certain products. Most vendors are either transitioning away from exclusivity or are adding other more diverse incentive programs to encourage more broad-based value-driven activities.

Program Challenges
The challenges vendors are facing in their programs are as diverse as their markets, product lines and channel maturity.

The partnering teams at the responding companies report they are facing a myriad of challenges in 2007 (figure 7). Their answers to the open text question ranged from channel conflict and margin erosion, to distribution migration and growth to automation solutions. The three challenges cited most often

Training
Partner enablement
Program resources.

We believe the first two issues go hand in hand with partner enablement as well as providing the tools, materials and resources for partners to be effective selling and supporting the vendors' products - and, of course, training is a part of that. Enablement also includes making marketing tools, field and corporate resources accessible to partners, as well as pre- and post-sale technical support, and the processes to develop quotes and source products with the correct pricing.

Ample program resources to effectively engage and enable partners are a challenge for all companies. We all want more resources (as well as time.) However, even with the deepest pockets, organizations still might not be successful at empowering and managing partners to either party's complete satisfaction.

Conclusion
Partner programs are only successful when they serve the channel strategy and partner growth plan and can be effectively executed.

Partner-to-partner ecosystems are going to become increasingly popular and important to the overall partnering development and effectiveness cycle. As the IT industry continues to move from delivering hardware and software products, to providing solutions and value to customers; and as the vendor community continues to consolidate and strive for incremental marketshare, programs developed for a vast partner ecosystem are essential to a vendor's health and growth.

We envision partner development beginning with a partners' readiness to sell the products (training), then growing to a focus on partner enablement through the tools, materials and resources to be effective with your products. The partner development capabilities mature to a stage of partner empowerment - helping partners succeed through offering deeper resources and mentoring on how to run profitable businesses. Thus, organizations typically start with partner readiness - the core training needed to have partners prepared or available for sales and services. As the vendor matures they focus on partner enablement - supplying partners with the means, knowledge and opportunity to be effective. And to us, the most advanced stage of empowerment encompasses not just a one-way push for your products, but a two-way relationship around profitability and success. An empowered partner will be around to work with you for a long time.

Points-based systems will continue to be interesting, but won't become popular as a way to track, reward and manage partners until the infrastructure and systems evolve to support this level of complexity. We see that only companies with really complex markets, product lines and partner programs reap the rewards of a program where partners earn their way to higher program levels by the accumulation of points that are awarded for a variety of partnering activities from training and certification, to market penetration and customer satisfaction. Of course, recognizing and rewarding partners on the value they bring to both the vendor and the customer will continue to be the mainstay of partner programs - but its bigger brother "points-based tracking" is still a ways off from becoming mainstream, because of the complex system requirements surrounding the administration of the programs.

Based on the data in this report, we see IT product vendors and their programs as evolutionary rather than revolutionary. Organizations are focused on incremental improvements in processes and initiatives to increase revenue and profitably rather than radical new channel strategies. Many of the IT vendors we talk to are focusing their differentiation in the channel on their ability to execute flawlessly, rather than innovative program initiatives.

About Amazon Consulting, LLC helps high technology companies develop and leverage partners for increased sales and profitability. Amazon Consulting answers the broadest level of partner development needs, designing and implementing strategies, plans and programs that support client channel and alliances relationships. Amazon Consulting services range from partnering strategy, coverage planning and program frameworks to program implementation, channel marketing and partner collaboration tools. For more information on their services contact info@amazonconsulting.com or go to www.amazonconsulting.com

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