Blog Post

The History of Indirect Channels

Feb 13, 2020

How dealers emerged with Ford as resellers and service specialists

Twenty years ago it was quite clear why a technology vendor - or indeed a company in any sector - might want an ‘indirect’ sales channel. It was to scale the sales organisation. Let’s go back further to 1903, to understand the logic.

A company – let’s say the Ford Motor Company – starts up in 1903 making automobiles. At this time automobiles were sold through a variety of channels, including travelling sales representatives employed by Ford, and through Ford mail order. Dealerships did not exist yet. If you wanted a Ford car, you bought it directly from Ford, one way or another.

During the early 1900’s the ‘franchise’ model started to appear. Initially for the sale of Singer sewing machines. Ford saw how this model could scale his sales function and auto dealerships were created. Independent companies who bought vehicles from manufacturers and resold them to local customers at a mark-up.

Interestingly nowadays it’s actually illegal in some US states for automotive manufacturers to sell direct to customers. They have to sell through dealerships. Which is creating issues for Tesla, and that’s another story.

The point of the above history is that indirect routes to market - franchises and dealerships - emerged as a way to scale, by ‘outsourcing’ sales to third parties. It was particularly effective in remote markets. The reason a manufacturer would engage an indirect route to market was to scale the sales function without hiring more sales representatives. 

Dealerships were expected to create their own demand in the market, and to make money from reselling.
There are some in senior sales roles today who might argue this is still the case. At Kovendi, we’d remind them that things have changed since the early 1900’s.

To understand what’s changed it’s worth further picking apart the role of a dealership in the early days. Singer sewing machine dealers during the 1900’s started to do three things -
  • • They sold sewing machines and made money on the resale.
  • • They provided financing options for buyers by offering ‘hire purchase’, and made money on the loan.
  • • They provided training and machine servicing, and they charged for this.
There has, in other words, always been a distinction between the ‘channel partner’ as outsourced sales function, and the channel partner as service and support provider. People simply didn’t know how to use sewing machines and wouldn’t buy one without access to training and service. So the Singer company had to train the dealers to train the end customers.

When we understand the role of the channel partner as a service provider, rather than viewing it as just an outsourced sales function, we start to understand why modern indirect channel relationships are sophisticated and different to the original ‘sales dealerships’. Particularly now that services revenues are becoming more important to most companies than resell revenues.
23 Feb, 2022
Getting the best out of partners through formal advisory boards. Partner Advisory Boards (PAB), also known as Partner Advisory Councils (PAC), have changed a great deal over the last few years. Part of that is due to Covid. But a big part of that also is the increased value that vendors are placing on input from senior channel partners as indirect routes to market evolve. WINE AND DINE TO LISTEN AND LEARN Historically the emphasis for most vendors with Partner Advisory Boards was on recognition and reward. Modern Partner Advisory Boards are less wine and dine, more listen and learn. For most vendors the advent of Covid took away the face-to-face component that made Partner Advisory Boards premium events, moving the meetings online. And that change has allowed vendors to make the meetings more structured, more focused and more valuable, to both the vendor organizer and to the PAB member attendees. How has this been done? THE PARTNER ADVISORY BOARD CHARTER It starts with the who, why and what: the PAB Charter. The Partner Advisory Boards Charter is a short document that sets out the objectives and structure of the PAB. The Charter will explain why the vendor is running the PAB, examples might include: · To share market and customer insights that impact our partner ecosystem. · To highlight opportunities to grow our solution and service revenues. · To discuss our customer offerings and our solutions roadmap. · To identify areas where we can reduce process friction. The Charter will also explain who should attend the PAB and what they should expect, examples might include: · PAB members are likely to hold senior executive positions in their business. · PAB members must commit to attend and actively participate in meetings. · PAB meetings will be twice per year either via conference call or in-person. As with any Board, the PAB has clear structure, objectives and membership. THE PARTNER ADVISORY BOARD AGENDA The agenda for a Partner Advisory Board should not be built by the vendor organizer but by the PAB member attendees. This means that one-to-one pre-calls are required with PAB members well in advance of each meeting to discuss and evaluate potential topics. Typically a draft set of topics is developed by the vendor organizer, which is shared with PAB members during the pre-calls, and important topics are prioritized. Some vendors also use survey tools to gather member feedback on topics. This process is critical to the success of a Partner Advisory Board as otherwise the Board members don’t own the agenda. PARTNER ADVISORY BOARD ATTENDEES Perhaps contrary to popular belief, the Partner Advisory Board is not a forum for the vendor to present information to their channel partners. It is a forum to discuss, listen and learn. Vendor content presented at the PAB should be very limited and designed only to seed discussion. The ideal Partner Advisory Board will have ten to twelve partner members. The vendor attendees are split between ‘observers’ and ‘presenters’. Observers attend to listen and do not participate in discussion. Presenters seed discussions with brief content, often no slideware, and participate in their agenda item. A professional facilitator runs the meeting. The meeting ‘belongs’ to the member attendees, not to the vendor organizer. It is their agenda and their discussion. It is the vendor’s opportunity to listen and learn. PARTNER ADVISORY BOARD FOLLOW UP If it’s an online meeting we recommend not to record the discussion, but to have a note-taker appointed. Detailed notes are prepared following the meeting, with recommended actions, and these are shared with attendee members. The PAB is not an Executive Board, it is an Advisory Board. This means that recommendations are received for review by the vendor organizer and may or may not lead to specific actions or changes, depending on company strategy. PARTNER ADVISORY BOARD VALUE Modern Partner Advisory Boards are a critical component for vendor organizers in developing an effective indirect route to market, with engaged and committed channel partners. PAB members want to participate because it gives them an important voice in how the vendor is evolving its business for the future. Face to face Partner Advisory Boards are returning, post-Covid, and premium locations remain appropriate for senior executives from top channel partners. However the increased focus on meeting structure and value that online PAB’s has brought will not go away. ORGANIZING A PARTNER ADVISORY BOARD Specialist outside expertise is often needed to run successful Partner Advisory Boards. Vendor organizers need help to create the Charter, to build the agenda and to run the meeting on the day. Kovendi offers a proven package of services that delivers a quality experience for partner attendees and that ensures value for vendor organizers. Contact us to learn more.
02 Sept, 2021
THE NEW CISCO PARTNER PROGRAM During 2020 Cisco announced the largest overhaul of its partner program for ten years. The new program will be phased in during 2021 and 2022. What can we learn from the changes that Cisco is making? THE PROGRAM STRUCTURE Cisco has around 60,000 partners worldwide and around 85% of its revenues go through channel partners. Previously Cisco had more than ten separate partner programs, addressing different types of channel partner. Cisco is now moving to a single ‘unified program’ with four program tracks and three program levels, as illustrated in the image below.
16 Jul, 2021
HOW TECHNOLOGY PRACTICES ARE REDEFINING PARTNER PROGRAMS Ten years ago we saw a revolution in partner program design, as technology vendors began to value partner skills as much as revenue. Today a new shift is taking place, as vendors, distributors and solution providers build their own Technology Practices. Here we explore the impact of this. CERTIFICATION AND COMPETENCY We can plot the changes that have taken place using two words: ‘certification’ and ‘competency’. Large vendor programs like Microsoft and Cisco first introduced ‘skills certifications’. These rewarded partners for the capability of their employees. Individuals working for channel partners could train and qualify as specialist in the technical or sales aspects of certain technology solutions. Partners meeting defined criteria for numbers of trained staff were ‘certified’ as specialist, and were recognised and rewarded by the vendor in the Partner Program. The value of vendor certifications increased, as partners sought out individuals with appropriate skills. A qualified Cisco Certified Networking Specialist, for example, would be in demand. In recent years we have seen a clear shift towards ‘partner competency’ in large vendor programs. This is not just re-naming ‘skills certification’, it indicates a much broader approach to assessing partner capability beyond simply employment of qualified staff. Competency is achieved by demonstrating customer experience and expertise in a particular market sector. In the Salesforce Partner Program, for example, partners are evaluated not only based on the number of Certified Developers and Consultants that the partner has, but also based on the partner’s ‘domain expertise’. Domain expertise is measured using customer-validated case studies demonstrating experience in a specific market sector. See our analysis of the Salesforce Partner Program here . ‘Competency’ is much more than simple ‘training certification’. ‘Domain expertise’ criteria are built into most modern large vendor programs, like HP Amplify and the Microsoft Partner Network. See our analysis of HP Amplify here and the Microsoft Partner Network here . THE RISE OF PRACTICES A ‘practice’ is in turn more than just a combination of ‘skills certification’ and ‘domain expertise’. A practice is a defined team of people working together as a sub-unit within the business, who are experts on all aspects of a particular market. They understand customer needs, they offer technical and support excellence, and they provide value added services relevant to the market they focus on. Practices can be defined around vertical industries or technologies. So for example most large integrators and consultants offer vertical industry practices, staffed by specialists in that sector. Or a practice might be built around a technology area, like Security or AI. We are seeing more and more technology programs beginning to encourage or require the development of dedicated practices in partner organizations. We are also seeing vendors developing content to help their partners develop practices, advising on appropriate customer segments, and required skills. There’s a great example with Microsoft here . DISTRIBUTION PRACTICES We’re seeing the impact of practice development right through the indirect partner ecosystem of most vendors. Not only do we see vendors like Microsoft encouraging and enabling partners to build practices. We also see that from distribution companies. The old ‘broadline’ distributor model is disappearing fast, as companies like Ingram, Techdata and Synnex build practices. Distribution practices offer vendors and channel partners a dedicated team of specialists who focus on a particular market sector. The practice team in a distributor leverages the central services of the distribution business for order management and other traditional distribution functions, but it overlays a lot more than this. Synnex ‘SOLV’ business practices for example, focus on specific markets and work more like Value Added Distribution businesses embedded in the main Synnex business. They offer specialist partners business planning services, training, pre-sales support and marketing content to drive customer demand. See here for more on Synnex SOLV business practices. POINTS TO NOTE • Practices are part of a strategic trend for vendors and distribution to engage with channel partners based on their market and customer specialization. Practices are the next step from partner competency measurements built into most large vendor partner programs today. • Less mature partner programs which are based primarily on training certifications, must adapt to include customer success aspects to assess a channel partner’s domain expertise. Counting trained staff is not enough. • Vendors must promote channel partners to end customers based on their vertical market or technology expertise in order to stay relevant. Channel partners who do not develop specializations will get left behind by vendors and by customers.
02 Jun, 2021
HP TURNING UP THE VOLUME. The HP Partner Program then and now. Learnings for channel professionals. At the end of 2020 HP launched its new Amplify Partner Program. That’s HP Inc - Printers and PC - not HP Enterprise. HP Amplify is a whole new approach to working with HP for channel partners, with plenty of learnings for channel professionals. Here we take a look at the history and the future of channel for HP. KEY DATES Until 2015 HP was one business with one all-encompassing partner program called the HP Preferred Partner Program. Those who have been in the industry a while will remember the HP Preferred Partner Program ‘wheel’ shown here with four specializations and eighteen sub-specializations. There were four program tiers. HP split into HP Inc and HP Enterprise in 2015, and two partner programs emerged. For HPE is was the Partner Ready Program. For HP Inc it was the Partner First Program. Partner First was simplified in 2017 to three program tiers (Silver, Platinum, Gold) and three program tracks (Volume Resell, System Integration, ISV). 2020 saw the replacement of the Partner First Program with the HP Amplify Program, which is radically different from its predecessors, and which represents a model for future industry programs. THE AMPLIFY PROGRAM STRUCTURE A lot has changed in ten years. The old HP Preferred Partner Program had four tiers and eighteen specializations. Amplify has two tiers and one specialization. The two tiers are ‘Synergy’ (lower tier) and ‘Power’ (upper tier). The specialization is called ‘Power Services’ and is open to Power partners who have specialist services capabilities. The Power Servicers specialization gives partners access to the HP Managed Services portfolio (e.g. Managed Print Services). Partner level in program (Synergy or Power) is based on three criteria: • PERFORMANCE = revenue metrics, including selling across the HP portfolio. • CAPABILITIES = partner skills certifications, also order management and customer support capabilities. • COLLABORATION = sales and customer data sharing, commitment to joint planning, customer success. Each of the three program levelling criteria above is supported by a scorecard that assesses partner performance across a range of measurements. The stated goal is to focus HP resources on partners who make a strategic choice to align with HP’s channel vision. HP explains that successful partners are likely to be: • Digitally Capable, particularly around marketing and order management. • Customer Centric, gathering and analysing customer success data. • As a Service, able to sell and deliver consumption-based solutions. • Value Added, offer expertise and services that add value. HP AMPLIFY PARTNER IMPACT PROGRAM ‘Amplify Impact’ is a partner assessment and training program add-on that aims to drive behavior around three ‘sustainability impact pillars’: planet, people and community. Amplify Impact is a voluntary specialization and HP aims to enrol half of its partner base by 2025. KEY LEARNINGS • SIMPLICITY. Many vendors talk about simplicity, and few deliver. HP has delivered. Two program tiers and one specialization is a best practice model. • FLEXIBILITY. Use of criteria and scorecards for partner levelling, rather than hard rules, is a growing trend in modern partner programs. See our ServiceNow blog . • ALIGNMENT. HP makes it clear that it’s pivoting channel investment towards partners who commit to strategic alignment with HP. Expect fewer partners in the program driving more revenue. The key challenge for HP will be staying true to these program values. It will be hard for HP to retain simplicity and flexibility. Legacy relationships, sub-programs and local market variations will need to be integrated over time into the new structure. That will not be easy.
12 Mar, 2021
INTRODUCTION TO DISTRIBUTION CLOUD MARKETPLACES Forrester predicts that 17% of all B2B commerce will be through Marketplaces by 2023. That’s a shift of over two trillion US dollars from traditional reseller channels into Marketplaces. Here we focus on the B2B Cloud Marketplaces of the largest technology Distributors: Ingram, Arrow, TechData and Synnex. If you don’t know your CloudBlue from your Stellr, then this piece is for you. Catalogues and Commerce Platforms It’s useful to start out by being clear on what we mean by a B2B Cloud Marketplace. ‘Marketplace’ is a term used to refer to two distinct components, which are ‘Catalogues’ and ‘Commerce Platforms’. Let’s explore these. A Catalogue is an on line list of offers. It’s used by buyers to evaluate and select items to order. The ordering and fulfilment process may or may not be managed on line. The menu of your favourite takeaway food outlet might be on line and could therefore be referred to as a Catalogue. The ordering process may be on line or by phone, and delivery of food is physical. A Commerce Platform is an on line tool used by sellers to collect customer payments, and in the case of on line services, to manage delivery. The delivery process is referred to as ‘Service Provisioning’. If you subscribe to a newspaper on line you are using the publisher’s Commerce Platform, which triggers delivery of the soft-copy newspaper as long as you keep paying the subscription. A B2B Cloud Marketplace has a Catalogue and a Commerce Platform. The Catalogue allows B2B customers to evaluate and select. The Commerce Platform collects payments and manages provisioning of cloud software. Cloud Provisioning and Billing Distributors have had Catalogues for a long time. Back when a Distributor took an order from a technology VAR over the phone, the VAR was selecting software from the Distributor’s catalogue. The distributor would invoice the VAR and send disks to the VAR with the purchased software for installation on the customer’s premises. That process changed when software moved to the cloud. In the cloud model the Distributor now has to manage virtual delivery (provisioning) of software, possibly charging based on usage (consumption). Not only that, but provisioning of the software is often directly to the end customer, not through the VAR. A process is required to ensure that the VAR invoices correctly for what the customer uses. This is all managed by the cloud Commerce Platform. Large Distributors realised early on that by bolting a sophisticated cloud Commerce Platform onto their Catalogues they would be able to offer significant value to VAR’s, who would otherwise have to find other ways to measure their customers’ cloud software consumption and to manage billing. Ingram Micro Cloud Marketplace and CloudBlue Ingram is the world’s largest technology Distributor and the company was first to bolt a cloud Commerce Platform onto its Catalogue. In 2013 Ingram Micro Cloud (IMC) was created through the acquisition of a Canadian company called SoftCom, a cloud software provisioning platform. In 2016 IMC acquired Ensim, which brought in technology to provision AWS, Microsoft Azure and VMware cloud software. IMC today is made up of two parts, the Ingram Cloud Marketplace and CloudBlue, the cloud Commerce Platform. Not only does the CloudBlue platform run the Ingram Cloud Marketplace, but it is also offered as a standalone platform to run other Marketplaces. So for example the Telstra Application Marketplace runs on the CloudBlue Commerce Platform. Ingram is the only Distributor to separate out it’s Cloud Commerce Platform in this way. The Ingram Cloud Marketplace is a public resource and can be seen here . Cloud software offers from a wide range of vendors are presented by category. Registered VAR’s can place an order. The CloudBlue Commerce Platform then provisions the software and offers the VAR a dashboard to monitor customer usage of the software and to manage billing. Arrow and ArrowSphere ArrowSphere was launched in 2012 as a white label solution for VAR’s wanting to offer cloud services to their customers. The tool included a private Catalogue that the VAR could re-brand to their look and feel, and also the associated Cloud Commerce Platform to manage provisioning and billing. ArrowSphere is here and has since evolved into a full-service cloud platform including quoting, ordering, provisioning, subscription management and invoicing. ‘MyCloud Portal’ allows users to create a white-label private Catalogue, and there are open API’s to link ArrowSphere Commerce Platform to existing non-ArrowSphere Catalogues. TechData and StreamOne TechData has two Marketplace offers. StreamOne Cloud Marketplace (SCM) is aimed at smaller VAR selling to SMB customers. It provides all the tools a VAR needs to provision and bill cloud software, and gives the VAR access to pre-configured cloud software bundles from vendors like Microsoft and AWS. StreamOne Enterprise Solution (SES) is here and is aimed at a larger VAR who wants to open up their own public Catalogue which their customers can access. This Catalogue might include offers from cloud vendors like Microsoft and AWS, as well as cloud services offered by the VAR themselves. Synnex and Stellr Synnex launched its cloud Marketplace later than other large Distributors and has taken a different approach. The Stellr Marketplace here , which is a Cloud Commerce Platform for VAR, was launched in 2019 alongside the ‘Stellr Connect’ Partner Program. The Stellr Connect Partner Program has three tiers, offering sales incentives and marketing funds to VAR who generate higher sales volumes through the Stellr Marketplace. Comparing the Distribution Marketplaces Although there are many similarities, there are some key differences between the various Distributor Marketplaces: • ArrowSphere and StreamOne are primarily aimed at VAR wanting to provision, bill and manage subscriptions for cloud solutions that they are selling to their customers. ArrowSphere MyCloud Portal and StreamOne SES offer the VAR the ability to create their own public catalogue. • Ingram is a step ahead. CloudBlue is a highly-scalable stand-alone cloud Commerce Platform, used by a wide range of large businesses to power their Marketplaces. The Ingram Cloud Marketplace, itself powered by CloudBlue is a public Catalogue, and is best practice. • Stellr from Synnex is more than a Marketplace. It’s a three-tier cloud Partner Program connected to a Marketplace. The Synnex Marketplace does not yet offer the sophistication we see in the Commerce Platforms of the other three Distributors.
23 Feb, 2021
Embedding Customer Experience Measures in Partner Programs. Customer Experience and Customer Satisfaction are becoming more and more important as elements in technology partner programs. How are vendors embedding these elements into their partner programs, and how is partner performance being measured? Direct Versus Indirect Measures Customer Satisfaction referred to as CSAT, is a direct measure of the value that customers place on partner-delivered technology solutions. There are various proprietary tools available that measure CSAT. Qualtrics, for example, which is owned by SAP, offers a methodology and software application to measure CSAT. CSAT measures customer satisfaction and should not be confused with Net Promoter Score (NPS) which measures loyalty. There is a good explanation of this from Qualtrics here . Customer Experience is a generic term that can include CSAT, but often includes other indirect measures of the value that customers place on partner-delivered technology solutions. These indirect measures focus on partner capability. As an example, the Salesforce Partner Program has two elements in the ‘Customer Success’ part of its program, which are CSAT (see above) and ‘Navigator Score’. Navigator Score is a measure of partner ‘domain expertise’, Level 1, Level 2 and Expert. Customer Case Studies are also required. Partner capability and customer case studies are measurable program elements that indirectly validate perceived customer value. Program Tiers Versus Points The Microsoft and Cisco Partner Programs require partners to meet defined criteria to attain various tier levels in the program. Direct and indirect measures of Customer Experience are requirements to achieve higher tier levels. The Cisco Partner Program has defined requirements for CSAT and ‘Partner Capability’ to achieve higher program tier levels. The Microsoft Program has similar requirements for Silver and Gold tiers. More on Microsoft below. The Microsoft and Cisco programs contrast with the approach adopted by vendors like Salesforce and ServiceNow. Salesforce and ServiceNow use a points-based approach to partner tiering, and Customer Experience achievement is part of the points calculation. Both Salesforce and ServiceNow include CSAT and partner Domain Expertise within Customer Experience. Our view at Kovendi is that CSAT on its own is inadequate as a well-rounded assessment of a partner’s Customer Experience score for program tiering purposes. Customer Experience assessments should include elements of Domain Expertise, NPS and requirements for Case Studies, as we see in the Salesforce and ServiceNow programs. The Microsoft CSAT Index The Microsoft Customer Satisfaction Index is an easy-to-use, online survey system that provides third-party market research services, delivered by TNS on Microsoft’s behalf. TNS is Taylor Nelson Sofres, a global market research group with offices in over eighty countries. Partners at Silver and Gold level in the Microsoft Partner Program are required to achieve minimum Customer Satisfaction scores and can access the Microsoft Customer Satisfaction Index. Customer contact information is kept confidential by TNS and is not shared with Microsoft. Partners can view detailed survey results and survey results are reported in aggregate to Microsoft. The five-minute survey is designed to provide actionable feedback for partners who provide solutions that use Microsoft technology. The core questions were streamlined based on input from partners and on analyses of which questions most indicated that customers would choose to continue to do business with a partner. Partners can add custom questions about issues that are specific to their businesses. A Gold level Microsoft partner must have ten survey responses each year. Key Points • Measures of Customer Experience are an important element in modern partner programs, and feature in all major technology vendor programs. • Customer Experience measures should include CSAT but should also assess partner Domain Expertise and require customer case studies. NPS may also be included. • Customer Experience can be established as a ‘gate’ to achieve higher program tier levels (like Microsoft) or can contribute program points (like Salesforce). • Easy-to-use tools should be offered by vendors so that partners have access to an independent approved specialist to measure CSAT.
18 Jan, 2021
Customer Success. Is it replacing Sales and Marketing? Over the last few years Customer Success has emerged as a key function in most technology organisations. Customer Success is eclipsing Sales and Marketing functions as the key driver of customer revenue. Why has it suddenly become so important? CLOUD TRANSFORMATION To understand the emergence of Customer Success we must first understand the impact of cloud models on technology vendors. Cloud transformation has impact in three areas: SOFTWARE ACCESS. Software is accessed through a browser and either runs in the public cloud, like Salesforce for example, or is run on a private cloud. The end customer does not run the software on their premises. LICENCE TERMS. End customers no longer pay a one-time license fee for the software installed on their premises. They pay based on usage. This can be either subscription-based or consumption-based. Subscription models (like Salesforce) are paid for over a period for an agreed level of usage. Consumption models (like AWS) are paid for based on actual use. CUSTOMER INVOICING. Revenue is billed by the vendor (or the reseller) based on customer usage over the period to which the customer has committed. New billing processes are required so that regular invoices can be produced. These three transformation areas rolled together drive significant change for the Sales function in a technology vendor. Broadly we can view the impact on the Sales function as being in two areas: Sales Compensation and Renewals. SALES COMPENSATION Salespeople have traditionally been paid as a percentage of deal value. And for software vendors deal values could be large, as one-time on-premise software purchases were invoiced up front. However, deals for cloud software are invoiced based on annual subscriptions or based on actual consumption. It’s not one big sale, but a series of commitments by a customer, over time, with the possibility that the customer might not renew. Vendors must adapt their sales compensation models, increasing commission percentages for cloud revenues, to balance the sales commission opportunity. This is particularly important for ‘transitional’ vendors, who are growing cloud revenues to replace legacy on-premise offers. Sales commissions for cloud need to be at least as attractive as they have been for on-premise offers in order to drive sales focus on cloud offers. RENEWALS AND CUSTOMER SUCCESS Historically the Renewal function in a vendor organisation was low profile, and as a result was often outsourced. Renewal revenue was generally from maintenance contracts which ensured customers had access to customer support in the event of problems, and to latest software upgrades. In the cloud model all this changes. Renewals become front and centre. Failure to renew a cloud subscription means that the vendor loses of all the revenue associated with that customer. And all of the Sales and Marketing investment that might have been put into winning that customer in the first place. Growing a business based on annuity subscriptions entails customer retention, as well as adding new customer names. Furthermore, customers will only renew and increase usage of a cloud solution if they are getting value. So the vendor now has a vested interest in ensuring that the customer is maximising value from the software. Customer experience and customer success have a direct revenue impact. SALES VERSUS CUSTOMER SUCCESS As vendors began to see the importance of cloud renewals and customer experience, the shape of the Sales organisation changed, and the Customer Success function was born. The Sales function has become fully focused on ‘Net New’ customers, adding new names to the customer list, or expanding into new parts of existing customer organisations. Sales is compensated for new Net New deals and is paid commission based on customer commitment. The Customer Success function owns renewals, which are just as important as new sales. Customer Success is not about calling a customer just before a renewal is due. Nor is it about customer service, dealing with issues, which is a reactive process. It’s about proactive and consistent account management over the course of the subscription term, to ensure that the customer is maximising value from the vendor’s software. HubSpot's VP of Customer Success, Eva Klein, says that ‘Customer Success helps customers get maximum value out of a product or service, working closely with sales, marketing, and product to achieve that goal.’ Customer Success is compensated based on customer retention (reducing ‘churn’), on increasing software usage, and on customer satisfaction (CSAT). This can only be done by understanding the goals of the customer, then helping the customer get the most value out of the software in relation to those goals. In the cloud model, because customer retention is as important as Net New sales, the Customer Success function is as important as the Sales function. Annuity subscription businesses simply cannot grow without both in place. MICROSOFT EXAMPLE Like many large software vendors who have transitioned to cloud, Microsoft has invested heavily in building its Customer Success function. Field Sales teams are focused on the ‘land’ component of a sale, winning the customer, then the Customer Success team owns the ‘expand’ component, to drive consumption and renewals. The compensation models have adjusted to support this model. Field Sales are typically compensated on year one Annual Contract Value (ACV) and Customer Success are compensated based on growth in consumption. The consumption ‘growth curve’ for Office 365 is very different to the consumption growth curve for Azure. Azure is a platform, and it typically takes time for end customers to build and scale solutions, so the Azure consumption growth curve is longer. Compensation models have been adjusted for this. KEY TAKEWAYS • The Customer Success function is as important as the Sales function for a company building an annuity subscription cloud business. Both must be in place. • Customer Success is not the same as Customer Service. Customer Success is proactive and is focused on maximising customer value, based on customer goals. • Customer Success is measured and compensated based on customer retention, on increasing software usage and on customer satisfaction. Understanding cloud partner programs is complex and challenging for most technology vendors. At Kovendi we have the insight, experience and expertise to help you. Get in contact if you want to know more.
08 Jan, 2021
No More Tiers. Is Salesforce Showing us the Future of Partner Programs? Salesforce established itself as an innovator way back when the business become synonymous with the ‘No Software’ logo. In the year 2000, when Salesforce launched, Software as a Service was a relatively new concept. The first Dreamforce event took place in 2003 and the Salesforce AppExchange launched in 2005. More recently, in 2018 Salesforce acquired Mulesoft for around $7 billion, and in 2019 Tableau for $16 billion. Today Salesforce revenues are around $20 billion annually, growing around 30% each year. THE SALESFORCE PARTNERING MODEL As a ‘born in the cloud’ vendor, Salesforce has always adopted an ‘ecosystem’ approach to partnering, rather than adopting a classic resell model. What this means is that Salesforce has consistently developed an ecosystem of relationships with companies building software applications that integrate into Salesforce, and with companies that offer services around Salesforce. Resell exists, but is a secondary model, see below. The transactional relationship for a Salesforce end customer is in most cases directly with Salesforce. The end customer contracts with Salesforce and is invoiced by Salesforce based on usage. It’s not a pureplay consumption model (like AWS for example) as customers commit to a fixed level of usage over a fixed period. Partners make money from referral fees and from software or services that they add to the Salesforce deployment. The Salesforce partner program is seen as a model by many vendors as so much on premise software is moving to the cloud and is being billed based on usage. THE PROGRAM STRUCTURE The Salesforce Partner Program underwent a significant overhaul in 2019 and relaunched during 2020. The program has two major tracks, the AppExchange Partner Program for software developers, and the Consulting Partner Program which is for companies who offer value added services practices with associated methodologies and tools. The AppExchange Partner Program is not our focus here. This program allows developers who create applications that integrate with the Salesforce platform to certify their software and then market it supported by Salesforce. Approved applications are featured on the Salesforce AppExchange Marketplace, one of the world’s largest enterprise cloud marketplaces. You can visit the AppExchange Marketplace at https://appexchange.salesforce.com/ The Consulting Partner Program uses a points system to evaluate partner commitment to Salesforce and to trigger rewards. This is explained below. Approved Salesforce Consulting Partners can, if relevant, become resellers by enrolling in the Cloud Reseller sub-program. This is for the relatively small group of Salesforce Consulting Partners who offer license resell and wrap-around managed services. To enter the Cloud Reseller Program partners must meet resell revenue goals based on total customer Annual Contract Value (ACV) and they must meet certification goals for customer support. THE POINTS SYSTEM The Salesforce Consulting Partner Program has four levels and partners are placed into levels based on points as follows: BASE Partners (up to 249 points), CREST Partners (over 250 points), RIDGE Partners (over 500 points), SUMMIT Partners (750 points). To enter the program a partner must have a minimum of two Certified Consultants and pay a program fee of $1k for Base level. Program points are earned based on three categories of criteria which are: CUSTOMER SUCCESS . A maximum of 350 points are available in this area. Points are awarded based on Customer Satisfaction Scores and based on the partner’s NAVIGATOR level. The partner’s Navigator level refers to their domain expertise: Level 1, Level 2 or Expert. INNOVATION . A maximum of 350 points are available in this area. Points are awarded based on the number of Certified Architects, Developers and Consultants that the partner has. ENGAGEMENT . A maximum of 300 points are available in this area. Points are awarded based on the Annual Contract Value (ACV) of partner sourced revenue from new customers or new projects with existing customers. This measure is referred to as COSELL ACV. Salesforce is gradually up-weighting the program points available from Customer Success criteria (CSAT and Navigator) and down-weighting the program points available from Cosell ACV. This means they are placing more emphasis on customer experience, and less on partner sourced revenue. Salesforce offers an extensive partner enablement roadmap and library of content called Trailhead. PROGRAM TIERING An important point to note is that Salesforce no longer (as of early 2020) uses program tiering externally to describe partners. The Base, Crest, Ridge and Summit designations are for internal use to describe partner commitment and to trigger program benefits. You can see this by checking out the Salesforce partner locator, which is embedded in the AppExchange. Go to https://appexchange.salesforce.com/consulting and look at the selection criteria down the left side of the screen. Focus is on partner experience, partner capability and customer satisfaction ratings. Partners cannot be selected based on level in program. KEY LEARNINGS • The Salesforce Partner Program has developed to meet the needs of a born in the cloud SaaS business, so resell is less important. The important program tracks are for developers and consultants. For many vendors this presents a model for the future as they move to SaaS-provisioned software models. • Partners are levelled based on points, which offers structure but flexibility. Other modern programs are adopting this approach, see our blog on ServiceNow here https://www.kovendi.com/-servicenow • Over time Salesforce is increasing program focus on Customer Satisfaction and on Partner Expertise (‘Navigator’) while reducing focus on influenced revenue. This is a key trend to take note of. Partners are promoted to end customers in the partner locator based on Customer Satisfaction and on Partner Expertise, not on program levels. Understanding cloud partner programs is complex and challenging for most technology vendors. At Kovendi we have the insight, experience and expertise to help you. Get in contact if you want to know more.
14 Dec, 2020
Why the ServiceNow go to market model gets so much attention from other vendors. Incorporated in 2004 as Glidesoft by Fred Luddy, ServiceNow attracts a lot of attention as a fast growth cloud vendor. The ServiceNow channel program model is often sited by Kovendi clients as an industry benchmark. How does the ServiceNow go to market model operate, and what makes it stand out as best practice? ABOUT SERVICENOW ServiceNow revenues are in excess of $4bn per year, with growth in excess of 30% per year. 2020 revenues have doubled from $2bn per year in 2017. That’s bound to attract attention. ServiceNow is a cloud software vendor similar to Salesforce, meaning that the application is accessed through a browser and that ServiceNow hosts the software that runs it. Usage is paid for per user. The core of ServiceNow was originally focused on business workflow automation, particularly around IT Service Management (ITSM). Nowadays the scope of ServiceNow has extended to also include Employee Workflow and Customer Workflow, with particular emphasis on customer service and on management of incident ticketing. The company has a thriving ecosystem of developers who build on the Now Platform which underpins the ServiceNow architecture. Service specialists also build integrations between ServiceNow and other CRM/ERP applications. ServiceNow is at the heart of many digital transformation projects for large enterprises. ServiceNow skills are high value for developers so there is a strong market for ServiceNow training. THE SERVICENOW PARTNER ECOSYSTEM ServiceNow operates six partnering tracks. The approach is similar to the Cisco program in that each track is referred to as a Partner Program and operates more or less stand alone. The six Partner Programs are for: SALES PARTNERS . Offers referral fees for opportunities handed off to ServiceNow, and a ServiceNow license resell model. SERVICES PARTNERS . Offers access to training and demo tools for companies selling ServiceNow services to end customers. TECHNOLOGY PARTNERS . Offers application testing and certification for companies developing solutions on the Now Platform. SERVICE PROVIDER PARTNERS . Offers a model for Managed Services Providers who operate ServiceNow instances for end customers and offer support services. PUBLIC SECTOR PARTNERS . A specialist track for partners focusing on public sector customers. TRAINING PARTNERS . Accredits training companies to deliver ServiceNow training content. There is a sub program available to Sales and Services Partners that allows them to accredit as vertical market specialists, like retail, energy and healthcare. This program is called the INDUSTRY SOLUTIONS PROGRAM. THE SALES, SERVICES AND TECHNOLOGY PROGRAMS All three of these programs have the same partner tiering, named REGISTERED, SPECIALIST, PREMIER and ELITE. There is also a GLOBAL ELITE status. ServiceNow is highly unusual in its approach to partner levelling. Rather than issuing a fixed table of requirements for each program tier based on sales volume and skills certifications, levelling is based on a point system using four areas of measurement and specific requirements vary by partner profile. The approach is referred to by ServiceNow as its PARTNER SEGMENTATION FRAMEWORK. There are four levelling criteria called the FOUR C’S, referring to: COMMITTED CAPACITY . The partner’s commitment to attaining skills certifications for its team. COMPETENCY . The partner gaining ServiceNow product specializations, measured using the ServiceNow Digital Badging System. CUSTOMER SUCCESS . Based on published customer satisfaction criteria. CAPABILITY . A qualitative assessment of the partner’s industry expertise and global scale. As an example, an Elite Partner is likely to have a large team of certified consultants, five or more ServiceNow product specializations and to operate across multiple regions. A Specialist partner on the other hand might have deep expertise in one product in one region. Additional bonus program points are awarded for published customer success stories, promoted product certifications and other tactical offers. PROGRAM BENEFITS A partner in any of the three core programs can register deals for handoff to the ServiceNow sales team for a referral fee using the Deal Registration portal. Only Sales Partners can register deals for resell discounts using the Deal Registration portal . Partners at higher tier levels benefit from ServiceNow account management, co-marketing investment, reduced training costs, and access to demo tools. Higher tier partners are also included in product roadmap planning. Accredited Technology Partners can load approved applications to the ServiceNow Store, the application marketplace. There is a $5k fee to become a Technology Partner. THE SERVICE PROVIDER PROGRAM In order to enter the Service Provider Program a partner must already have status in one of the other three programs at Specialist or higher level. A business review is undertaken by ServiceNow and minimum revenue thresholds must be met. If approved the partner gains access to a standardised Service Provider pricing model. BEST PRACTICE ASPECTS OF SERVICENOW The ServiceNow partner go to market model is an ecosystem play. It’s designed to develop relationships with developers and referral partners as much as with resell partners. This puts the model in the same category as programs run by other born in the cloud vendors like Salesforce. Programs of this type are highly relevant for cloud vendors using consumption pricing models. ServiceNow’s approach to partner levelling is highly innovative and effective for an ecosystem model. Focus is not on achieving sales and certification goals to gain access to higher program tiers that offer bigger discounts. Instead, partners are ‘tiered’ based on their commitment to the ServiceNow channel opportunity, which places them in the program based on their business profile, rather than based on their business size. The ServiceNow Partner Segmentation Framework uses points to score achievement, not absolute achievement values, so it's structured but flexible to meet the needs of the various types of partner in the ecosystem. Few technology partner programs currently feature this approach to levelling. We may well see more that adopt it in the future.
16 Nov, 2020
Many of our clients look to the channel programs of large vendors for leadership. Vendors like Microsoft, Cisco and IBM. Our ‘Four Minute Expert’ series is designed to get you up to speed with the structure of these key programs quickly and simply. In this ‘Four Minute Expert’ guide we’re looking at the Intel partner program. PROGRAM POSITIONING • The Intel partner program is not one program, but a portfolio of program options to suit the needs of each category of channel partner. • Intel’s program model is particularly interesting because Intel is an ‘embedded vendor’. In other words, Intel technology is an ‘ingredient brand’ sold as part of other vendor’s hardware. • For any company that has technology that is or can be sold embedded inside another vendor’s solution then Intel is a great model to learn from. • Intel has an ecosystem of around 300,000 partners worldwide, who are System Builders, Integrators and Solution Providers. • Intel has two major programs called the Intel Technology Provider Program (ITP) and the Intel Cloud Insider Program (CIP), as well as specialist programs for partners working with Programable Devices and AI Solutions. • Intel Solution Marketplaces offer a best practice model for other vendors building resources to promote solutions that embed or integrate with their technology. THE INTEL TECHNOLOGY PROVIDER PROGRAM (ITP) This core Intel partner program engages partners who embed Intel chips in PC, Data Centre and AI solutions which they are building for end customers. It is a reseller-type program, in the sense that benefits are accrued based on purchases of Intel products from authorized distribution. It has three levels: Registered, Gold and Platinum. Fifty training credits are required for Gold, and one hundred for Platinum. Platinum also required $250k or more per year of Intel purchases through authorised distribution. Training credits are earned by attending trainings and completing on line courses. Partners accredited in the Intel Technology Program with appropriate experience can apply for specialist recognition for AI, Data Center or Specialist PC (for builders of PC’s for gaming or 3D content management). Partners at Gold and Platinum level can earn and redeem points. Points are earned based on purchases from Intel authorized distribution, and a points catalogue is published each quarter with details of points earned for each product, and details of quarterly promotions. Points are redeemed as credit from authorized distribution or as retailer gift cards. INTEL CLOUD INSIDER PROGRAM (CIP) Unlike ITP, the Cloud Insider Program is not a resell program. It is aimed at companies that are building cloud solutions for end customers, and who might influence the inclusion of Intel technologies. It would therefore be categorized as an ‘influencer’ program. Partners benefit from access to reference architectures, case studies and specialist events. Partners get access to tools like the Advanced Technology Sandbox and ROI Calculator. Partners can also access joint marketing content to drive demand with the Intel brand. Points are earned for customer testimonials, Intel training completion and Intel marketing activities. Points are redeemed as gift certificates. INTEL SOLUTIONS MARKETPLACE Intel operates a best practice marketplace which promotes the cloud solutions offered by partners in the Cloud Insider Program, and the solutions offered by ITP partners with specialisms in AI, Data Center or Specialist PC. The link to the marketplace is https://marketplace.intel.com/ The Intel Solutions Marketplace is divided into sections that present: • Component Providers: like motherboards, to build PC’s or servers. • System Providers: complete hardware solutions, including laptops. • Software Providers: software optimised to run on Intel technology. • Solution Providers: integrated hardware and software solutions. The marketplace has advanced search capability and includes profiles of technology providers and their offers. STAND OUT FEATURES The Intel Technology Provider (ITP) program works to a classic model, with tiers, requirements and benefits. The Intel Cloud Insider Program (CIP) and the associated Solutions Marketplace are best in breed examples of how to engage and reward partners who influence deals by building on the vendor’s technology, or who develop solutions or services optimised to work with the vendor’s technology. This type of program is a model for programs of the future, particularly programs for cloud vendors, where resell models are less relevant. As with all large vendor programs, the Intel partner program is sophisticated, offering a wide range of best practices for other vendors building out their partner models. At Kovendi we understand these best practices, and can help you apply them in your business. Contact us to find out more.
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