Category Archives: Indirect

Walk a mile in a partner’s shoes

My daughter just got a new pair of chargeable running shoes and because the cable is the same as that for her phone, I was half expecting the shoes to do a little more than light up.  They just light up. No bluetooth, IoT, music, GPS, step counting, dance steps or hover capabilities.  Just some overly bright coloured LEDs.  If I walk a mile in her shoes to understand what makes her tick, it will be on a deserted road. Understanding daughters is a lot tougher than understanding sales people.

For the past five years I have been helping large global enterprises to bridge the gaps between where their marketing departments want their direct and indirect sales forces to focus or what to learn and what those sales people want to focus on and learn.  And one of the key elements to successfully bridge that gap is to align the priorities of Marketing and sales people. And that is mostly done by getting Marketing to adjust rather than sales people.  Marketing, so focused on what customers want, often don’t accommodate what their sales people need sufficiently.  Marketing, just as they would for an ideal customer, must always walk a mile in a sales person’s shoes, asking themselves the question, as if they were that ideal sales person, “What’s in it for me?” Because both marketing and direct sales people are working in the same company, those sales people are an easy audience to probe and common ground is relatively easy to establish.  A clear direction from the VP of Sales cascaded down to a local sales manager’s quarterly objectives might be enough (and when it isn’t, that’s the gap I’ve been working on).  Step outside the company into the shoes of an indirect sales person and the rules of the game change – in fact the rules are different for each partner. Each channel partner has their own set of business priorities and the chances of automatic alignment with their vendor’s strategic direction or quarterly objectives are pretty slim.

As an example, one very well known IT vendor behaves as if each of its business partners has a financial year end identical to its own and each is a public company that needs to meet a forecast the partner gave to analysts three months ago. Every year, every Q4, new promotions are announced by this vendor to partners in an effort to pump up the numbers.  Often they take the form of peculiar bundle deals.  Many years ago, customers became wise to this and delayed any Q3 spend to take advantage of year end price cuts, but there is little most business partner sales people can do to positively influence their customers to take advantage of a Q4 promotion that their customers wouldn’t do on their own.   The best thing the vendor could do would be to change its year end to March 31st. At least that way, most of its customers won’t have spent all their IT budgets by the end of their own financial years.

Walking a mile in a partner’s shoes and having an answer for “What’s in it for me?” are challenges – but challenges that can be met. Listen to partners – not just roundtables with a select few, but broader, in depth, qualitative feedback through a formal system across the entire partner ecosystem. And I’m not talking about online surveys.  Really understand how sales people in the channel and their sales managers are compensated and how their objectives are set.   Understand how they wish to communicate with you. Ask whose views they respect – who inspires them!  Deliver the messages and in depth content they need in a format that will not just keep them awake but enthusiastic.   I’m pretty sure it’s not your average webinar or weekly newsletter.

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On launching a new product

Having been brought in by a client recently to sanity check their routes to market prior to launching a new set of products, I was reminded on an old piece of marketing advice – first, walk a mile in the customer’s shoes. In the context of routes to market, that means being completely aware of how customers already buy products and services like yours -who they transact with and to whom they turn to for advice that leads to a brand decision. So often, companies launch new offerings into their existing channels because it is what they know best and and can manage best.  Existing routes are their comfort zone.  They have partner account teams that already perform well by servicing those routes.  To establish new routes is a risk.  It takes time to build a trusting partner relationship – and who has time?

Reviewing your routes to market is one of those early fundamental steps required to complete your business plan for a new offering.  One can’t assume that because customers buy one set of products from you this way, they will continue to prefer to buy another set in the same way.  There may already be incumbent competitors who have conditioned the market to expect your type of new offering to arrive at customers in a wholly different way.  For example, customers may prefer a more direct route to market. – a direct relationship. One can’t assume that customers’ future preferences will be based on your past conventions.

And the client? They had done an admirable job prepping their existing channels, as one would expect, and there were entirely appropriate routes that had been overlooked.  A completely sane, but mixed bag with plenty of new opportunity to reach customers.

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Linkedin and Sales Channels

As technology partners tend to be early adopters of some types of social media, I thought it might be interesting to look at how some individuals working in technology partners are using social media.  Now, I have railed on about small samples with big pretentions, but I thought I would share with you some crude observations of the  first 109 individuals I looked at.  They were from around the world working in various job functions in companies varying in size from large enterprises to medium sized businesses, with an even split between those with technical, sales and line management roles. There were 17 individuals from APAC, 48 from EMEA, 1 from Latin America and 43 from the US.  I only looked at whether they had a LinkedIn profile and how many contacts they had.  I may broaden this to 500 individuals, time permitting, to get more a accurate picture.  Though some individuals on LinkedIn keep their profiles hidden, revealing only their job function, I knew enough about these people’s responsibilities  to know there were none like that in this sample.

In the US, 23% had no profile, whilst in Europe that figure rose to 40%.  Of the 6 Germans in the sample, none had LinkedIn profiles.  Checking on Xing, which originated in Germany, I could not find them there either.  Likewise of the 9 people from Singapore, China, Japan and Korea, none had LinkedIn profiles.  In India, France and the US there was much evidence of use.  In the US, of those who had profiles, there were on average 64 contacts, whilst in EMEA it was 65.  The crude observations are these – LinkedIn is popular in India, some European countries and the US.  Penetration is low in most Asian countries and Germany.

How is LinkedIn being used? One can surmise that the most obvious reason contact lists are built  is because people wish to feather their nest in preparation for a company switch, but many people use it as a glorified contact list. As with Plaxo, you can be fairly certain that if someone changes company, you will still be able to get in touch.  But are they using it, as headhunters do, to prospect – to look for contacts of contacts?  I am told that is how it is being used by some partners.  A recommendation from an existing client is a powerful endorsement – but why not just ask the client directly instead?   Perhaps the best endorsement they make will be a phone call to another decision maker not on LinkedIn.

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Leads – SharePoint or ShareSplodge?

I got it again yesterday.  Speaking with a partner they moaned about not getting leads. If I had a nickel for every time….  It is such an old chestnut and this is its root. There is, always has been, and always will be a fundamental schism between how many people in channel partners view vendors’ abilities to generate demand and how many people in vendors view those same abilities in channel partners.

Many people in vendors think that because a partner gets a discount, the partner should be chiefly responsible for generating demand for the vendor’s brand.  They overestimate a partner’s ability to promote a vendor’s brand and the margin that a partner is able to earn.  The smaller the vendor, the more often one hears this view– and it comes most frequently from direct salespeople promoted into roles where they have overall responsibility for direct and indirect sales. Conversely, partners think that because vendors attract prospects, there is a secret honey pot of leads that they only get rare, teasing glimpses of.  They overestimate two things: the ability of a vendor to promote that vendor’s brand; and the vendor’s ability to identify, qualify and manage leads.

Vendors are not well equipped to identify who expresses an interest in their offerings.    That is not just for new prospects. Vendors are often are not very good at identifying opportunity in loyal customers.  There is a gap between touch points – all the times a customer interacts with a brand –  and a potential sale. It often comes from a vendor failing to ask or not having the opportunity to ask “Why?” or “What are you using it for?” or “How will you do things differently in the future?”  Plus, customers, often don’t know those answers either because a need and a solution become recursive.  There is a gap too, because vendors lack processes to turn a download or web visit or a tweet into a frank conversation that could reveal a need that the vendor could profitably fulfil.  That is what keeps marketers up at night. Partners don’t understand how much a vendor doesn’t know. Godot isn’t coming. There is no honey pot. 

Let us say all those touch points could become qualified leads with accurate details on budget allocated, who has authority and a decision influence, what need is being satisfied and the timeframe for the project. How could they be fairly distributed?  A single lead for a single, simple project could be the product of multiple touch points within a number of partners, strategic alliance members and vendors. It is not a simple, closed system.  The honey pot is more like opaque, week old goulash, more ShareSplodge than SharePoint.

As for vendors, understand where your channel partners make their profits and the competitive pressures on their business and you will begin to understand their priorities, their mountains and your molehills.  As a salesperson you know you need to walk a mile in your customer’s shoes.  Try on a business partner’s pair for a change.

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IBM moving away from Sun

IBM has backed off buying Sun, so where does that leave Sun? This may be a negotiating tactic on the part of IBM. Presuming it isn’t and Sun must go solo, it is worth re-examining Sun’s announcements of last week. Sun is laying off staff and announced a channel re-organization. Was that re-org a strategic choice, or a tactical one? Last week the company announced that its primary route to market would be via its indirect sales channel. On the face of it, it looks smart. The company already has a good partner program. Sun said that it had put into place a new inside sales organization in North America to generate leads, a new lead distribution system, training for partners and better partner access to technology. Under the new program, direct sales people will focus on the top 300 accounts. Provided those accounts are named and the direct sales ring fenced, channel partners will be happy – good fences, good neighbours.

In addition, the old sales organization was too complex with too many in-house fingers in a single customer’s pie. An account will now have fewer people involved in selling into an account. That is often the problem with large sales organizations that matrix the customer into confusion – one person for the geographic territory, one person for the customer’s industry, one person for each product line – all commissioned in some way for the sale into that customer. One ends up with an N dimensional sales force and the customer, by being overly served is poorly served through poor coordination and communication. Internally, you can end up with competing fiefdoms.

In the light of all the recent turmoil, are these changes enough to turn the company around or by adopting a more indirect strategy during a downturn, will it accelerate a demise? Anything that involves a major route to market change is going to have a short term negative impact on revenue. No-one can accurately predict the depth or breadth of that dip. Will that Sun be able to ride out the short term to see the long term gain?  Personally I hope so, because the industry is more interesting with an independent Sun than without.

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Microsoft’s Business Productivity Online Suite and Partners

Yesterday I attended a partner briefing at Microsoft UK for their new Business Productivity Online Suite (BPOS) which goes live in a few weeks in Europe and Japan.  The service has already been up and running since November in the US.  I was particularly impressed by the level of investment Microsoft is putting into their data centres – with a primary one in Dublin, a secondary centre in Amsterdam as well as installations in Virginia, Washington State and Singapore with plans for more in APAC.   BPOS is Microsoft’s online offering of Live Meeting, SharePoint, Office Communications Server and Exchange Server with a minimum of 5 seats and around 13,000 seats max for standard (their multi-tenanted version) and a dedicated version intended for larger installs that is also finding favour amongst small customers.  At $15/user/month it is more than three times the price of Google Apps. The types of clients interested in BPOS cluster at the low 5 to 50 seat end, and surprisingly for Microsoft, the very high end blue chip clients. 

It is plainly evident that the company has put a lot of thought and effort into this. It has clear competition from Salesforce.com and Google and is determined to get SaaS right.  It is important to note that the service is not Microsoft Office online (yet) nor does it offer full telephony (yet) or CRM (yet)  but it doesn’t take a crystal ball to predict that they will soon flesh out their offerings.  Their sales projections are, on the other hand, relatively modest.  That is the issue I have with many new Microsoft ventures.  The company is huge and experienced sales hands know how to game the system.  They know to sandbag and slightly over-achieve.  An ambitious sales target presents higher risks – and lower individual rewards.  But that can also mean a new venture fails to find support in the company, and it flounders through lack of investment. That does not seem to be the case here as Microsoft feels the hot breath of competition and still retains much of the DNA that drove them to strive for share and seek choke points. 

By extending BPOS down to 5 users, and offering 5G of mail storage per user, they are competing squarely against their own SharePoint and Exchange hosting partners.  It must be said that if you add up all the company’s hosting partner’s mailboxes it doesn’t amount to more than 20% of the total number of Exchange seats, so though significant, partners have been at that game for a number of years and haven’t grown as quickly as Microsoft or they had hoped.   And that is because hosting Exchange technically isn’t easy – as Microsoft is finding out, because these partners started small and have been  growing organically, and because, importantly – most customers mid tier and up are loathe to give up their data.  For small companies, who don’t have an IT person, there isn’t a choice, so the data issue is not significant – but those small companies can be as difficult to service as ones 10 and 100 times their size – and can have the same cost of sale.    

It looks like there are significant teething problems for Microsoft at the low end. Microsoft needs partners in that segment. Their infrastructure software out of the box needs integration and support.  And it needs a sales force, so it can’t afford to alienate its partners.  By offering partners an 18% finder’s fee the first year and 6% thereafter and pledging not to offer end user help desk support, it is hoping to sweeten the medicine.  But by transacting directly with the end customer, the company is asking the partner to become an agency, and that is a point to which many partners are openly hostile.  Partners hate to lose control of their customer and a vendor transacting is a threat.  Microsoft tried to spin it, saying it was taking the credit risk, but it wasn’t sufficient to disperse the unease in the room. Yet many partners haven’t been transacting for on-premises Microsoft licenses anyway for years. There is no margin in it and they leave that to license specialist resellers.  Microsoft point to a 7:1 partner services vs license revenue ratio of opportunity for partners.    But that is also a problem. If you have to spend another $7 to get value out of $1 of software, that is an opportunity for a competing SaaS vendor to embed value in the service directly,  lower cost of ownership and time to value.  However, if there is one thing I have learnt from 25 years of competing against and working with Microsoft, it is this – they are extremely tenacious.  Eventually, they get things right. It may take five years, it may take ten, but they are determined.  And partners, as they have always done, will first bob and weave, then adapt or close shop.

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Filed under Direct, Google, Indirect, Microsoft, SaaS

Dump your BAD Customers

Today, at a breakfast talk in Bracknell hosted by Mentor Group, Nick Ayton spoke about the challenges facing senior management in this recession. If you are under the age of 45, you will have been hired in a bear market and have no management experience within a bull period. In fact you have to go back two and three decades to find some experiences to draw upon.  Most CFO’s feel their CEO’s are ill-equipped to handle the challenge, and most organizations are still in denial.  What Ayton is seeing in board rooms is paralysis.

Worrying though this may, he offered some very useful pointers to help improve a company’s survival odds.  One was to dump bad customers.  Peppers and Rogers did extensive work in this area beginning in the mid nineties, getting clients to look at the lifetime value of customers, the return that customers generated and your share of their wallet.  A corollary of this is you need to dump low profit, high cost customers.  To me, this suggests you first need to identify what constitutes a bad customer – and  Ayton would argue in today’s climate you need to widen your criteria looking at EBIDT and revenue.  I say there are lots of ways to dump a bad customer without hurting your volumes and without increasing your risk, ways that put your company in a better recovery position. First what is a bad customer?

Dead Duck
A dead duck account is a term used by Ayton to describe any customer in a sector that is beleaguered.  All sectors are affected by the credit crunch, but some are being particularly hard hit. An example is the automotive  parts market where a significant number of suppliers are bankrupt. 

Toxic Account
My term and it covers any customer that used to pay in 30 to 60 days who has now stretched to 90.  They are using you instead of the bank and harming your cash flow. Worse, they could be an imminent bad debt.

Sucker Fish
Again, my term for any account whose cost to service (selling + aftercare + backoffice) is so high that now they are an unprofitable account.

Walking Disaster
A customer, and you probably have a few of these, who is all of the above.

What is a bad customer for you, may be a good customer for one of your customers, an account that can serviced through a lower cost route.  You may not have the industry expertise or focus to offer a profitable custom solution.  You may not have the processes needed to meet that customer’s needs or buying habits and it may not be profitable to change your processes.  For these accounts, you need to move them quickly to a route with lower overheads if you want to keep profits in line with volumes.  The obvious choices are to move them to lower cost inside sales positions, to web transactions or to indirect, more flexible channel partners who can get closer to the customer.

Secondly, what is a bad customer for you, may be a bad customer for your competitors.  Only you know the true cost of servicing your bad customer.  By the time your competitor discovers the true cost of servicing that account, you will have grabbed share elsewhere.

If you can recognize bad customers immediately and move them to a different route to market – or your competitor, you will improve your chances of surviving this crunch.

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