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Brandon Mills
Manager,
ZS Associates
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Jason Bell
Associate Principal,
ZS Associates
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John DeSarbo
Principal,
ZS Associates
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Kyle Heller
Associate Principal,
ZS Associates

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Channel Strategy: Putting Your Money Where Your Mouth Is

Posted by John DeSarbo on Tue, Nov 10, 2015

iStock_000022815167_SmallOver 2,300 years ago, on a dusty plain in Greece, an ambitious general executed an innovative tactic that revolutionized military strategy. In the Battle of Leuctra, the Theban army, led by Epaminondas, was under attack by the merciless Spartans. The Spartans, the 800-pound gorilla of their times, had not lost a battle in years.

At the time, military strategy was in its infancy. In field battles, opposing infantries traditionally lined up across from each other in neat lines and attacked each other head-on. The more spirited (and often better-nourished) army usually won. The loser would retreat, assume the same formation and the sequence would repeat.

Epaminondas realized that he could not defeat the mighty Spartans following this predictable strategy.  Breaking tradition, he took a risk and executed what has since become known as an “oblique order.” He abandoned the traditional formation and concentrated his forces where he saw the greatest opportunity for victory. He created a wedge by shifting his forces to the left, attacked a vulnerable area, killed the Spartan king and emerged victorious. Field generals have studied and adopted the strategy ever since.

Many high-tech channel chiefs today aspire to be a modern-day Epaminondas. They are declaring new channel strategies aimed at capitalizing on booming demand for integrated solutions and cloud services. Channel sales leaders are committing to reposition and refocus their teams by embracing new channel models, reaching out to service-focused channel partners and investing in innovative partner programs. According to many channel chiefs, next year (finally?) will be the year when they capture share and accelerate profitable growth in the channel.

The strategy is sound. Channel sales teams are motivated. There is only one problem. The budgets aren’t changing.

Too many high-tech players are underinvesting in the channel strategies they espouse. Many vendors are still focusing investments on the traditional mix of sales resources, growth incentives and co-op/MDF in legacy partner relationships. They are rewarding the biggest, but not the best, channel partners. Other vendors are choosing not to differentiate investment across their partner base. Rather than risk alienating any partner who might offer growth prospects, these vendors are taking the classic “peanut butter” approach, investing too little in too many partners and not enough to garner mindshare and loyalty from the partners that truly matter. Both strategies lead to the same outcome—a lukewarm reaction from partners, continued stagnant growth in the channel, suboptimal sales and profitability, and for some channel chiefs, the chance to seek “new career opportunities.”

We are in the time of year when many IT vendors are in retreat. In a last-ditch attempt to salvage the year, vendors are taking the classic and uninventive Q4 steps to boost margins: implementing travel freezes, delaying hiring and squeezing marketing budgets. Predictably, many vendors are backing away from the goals and aspirations pronounced so fervently at the Q1 sales kickoffs. The battle cry in November and December has changed to “we’ll get them next year.” Unfortunately, in the face of the Q4 tensions, many vendors will find it hard to make any significant changes to budgets to make it happen.

How do you break the cycle and put in place budgets that will make your channel strategy a reality? There are three steps that vendors should take now to enable an objective, data-driven approach to channel planning next year.

  1. Better understand channel “run rate.” The classic argument against shifting investment from large, legacy partners to small, innovative partners is usually unwillingness to risk upsetting steady revenue streams from established partner-customer relationships. Most vendors prosper from some run-rate business, but few measure it. As a result, many vendors rely on anecdotal evidence and overestimate run rate when considering budget changes. Defining and quantifying run-rate business enables an objective discussion of the true risk of investment shifts.
  1. Prioritize partners that are investing for growth. Many firms are still segmenting their partners primarily based on size. Partner programs are hardwired to reward the biggest partners, not necessarily those that are investing in the vertical expertise, technology capabilities and services offerings that are in demand. By identifying the partners that are independently taking steps to capitalize on market opportunities, vendors can find opportunities to invest where there is already momentum versus spend to help partners with a legacy mindset resist their inertia.
  1. Shift investment to tactics with measurable impact. It is time for many high-tech players to take a hard look at the programs and promotions that were put in place this past year. Which had an impact on growth? Which did not? If it is too hard to measure the impact, than maybe take a different approach this year. Rather than assume that same old program is working when there is no hard evidence it is generating growth, maybe it is time to try something new? And put in place the processes necessary to objectively measure the impact.

When we reach the same point in time next year, we will no doubt be talking about the channel sales leaders who had the intestinal fortitude, like Epaminondas, to place their chips on the partners and programs they believe will generate growth. We won’t be talking about the vendors who retreated into a prevent defense, followed the same old strategy and are hoping for the best as the clock winds down on the year.   

So as you develop your channel budget for next year, will you invest in your strategy or will it be another year of missed opportunities?

Topics: John DeSarbo, tech, sales, Strategy, Channel, Planning Budget, Partners, Ancient Greece

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AUTHORS
Brandon_Mills-10924_headshot_small
Brandon Mills
Manager,
ZS Associates
Jason_Bell_11099_headshot.jpg
Jason Bell
Associate Principal,
ZS Associates
John_DeSarbo_thumbnail
John DeSarbo
Principal,
ZS Associates
Kyle_Heller_thumbnail-1
Kyle Heller
Associate Principal,
ZS Associates
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