This blog post was originally published on ZS's high-tech blog, Tech Bytes & Insights.
As high-tech manufacturers strive to accelerate profitable growth, they’re looking to their channel partners to provide more value to end customers. Successful technology channel partners are transforming their business models accordingly, transitioning from providing value primarily by distributing products to providing business solutions that are delivered in sync with customers’ changing buying and consumption preferences. Executing this transformation doesn’t just require partners to change. High-tech manufacturers must change as well to enable their partners to expand their capabilities. The need to help partners increase their effectiveness has significant implications for channel sales teams.
Following ZS’s 2017 Comp Bytes event, where executives from leading high-tech brands met to discuss sales compensation challenges and innovations, I caught up with Rick Butler, senior director of sales compensation center of excellence at Cisco, to discuss shifts in the company’s channel sales strategy, how high-tech channel partners have to adapt to customers’ changing needs, and the biggest untapped opportunities in channel sales incentives and compensation.
Q: Over the last decade or so, Cisco has transitioned from being a provider of networking infrastructure, primarily routers and switches, to a solutions provider with a broad portfolio of hardware, software and services. What has this change meant for the channel sales organization?
A: Companies like ours recognize that these days, technology buyers are less interested in addressing narrow IT issues with point solutions. They are focused on solving complex business problems with business solutions. To meet customer needs, we and our partners often must integrate multiple products and provide a broad array of services. We have always focused on providing the best networking infrastructure like routers and switches. We’re well past that now, not only in what the company delivers, but in what the marketplace demands of us. Today, Cisco and our partners provide value by helping our customers transform their businesses by utilizing our broad portfolio of products and services. Our channel sales approach has had to evolve to support partners that serve our customers in this way.
Q: As you put it, the new objective is to solve business problems with business solutions. How has that impacted channel partners?
A: Well, it depends. Many partners are transforming their businesses to build new expertise and capabilities. Others are slower to adapt. Partners who started as traditional resellers or distributors were initially focused on selling “things.” Now, as opposed to just selling “things,” they have to understand a client’s business and the problem they’re trying to solve, and then bring the solution to the table. Successful channel partners have invested to build teams that can do this well.
Q: So the channel partners are at different points of this evolution, and some are moving faster than others. What are the implications of this trend on the channel sales team?
A: Our role in supporting our partners is evolving. In the past, the primary focus was on making sure the partners had the products they needed to fulfill orders. Now we are more focused on enabling partners to be more successful with their business strategy. We have a different relationship. We want to help partners understand and capitalize on market trends so that they can better identify customer opportunities and bring more value to the table. Our channel sales team works with our partners to understand how they want to grow their businesses and how to maximize their relationship with Cisco.
Q: At Comp Bytes, you noted that you think the industry is still struggling to capitalize on the demand for cloud services. How is Cisco utilizing channel sales and partner incentives to tackle this issue?
A: To be successful in cloud services, channel partners typically need to invest to shift their business model and build new sales and delivery capabilities. We provide enablement capabilities, incentives and support to help partners do this. Partners earn higher discounts for achieving certain objectives, such as hitting volume targets, achieving certifications, selling a broader portfolio of products, or providing a higher level of services. In this way, we reward partners who invest to build their businesses. We also help partners promote new capabilities by providing financial incentives such as market development funds. Our channel sales teams help partners utilize these incentives and support.
Q: What do you think is the biggest untapped opportunity for high-tech manufacturers when it comes to channel sales incentives and compensation?
A: Well, it’s important to first determine where the growth opportunities are in the partner/channel ecosystem. High-tech manufacturers should continuously evaluate their channel to determine where it makes sense to invest, looking beyond sales volume to other factors that indicate growth potential, such as the industry they’re in, who their clients are, what the partners’ current portfolios look like, and whether their offerings are or will be unique. Then consider what value you, as a manufacturer, can bring to help the partners grow. The goal is to find situations where one plus one equals three. Once these situations are known, then incentives and compensation should be structured to encourage channel sales to focus on the right partners, the right products and the right level of support.