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Managing channel partner relationships to drive growth for tech companies
April 24, 2023
Authored by RSM Canada LLP
Joel A. Humphrey, CPA, CA shared this article
ARTICLE | April 24, 2023
Rapidly growing or expanding technology companies—especially in the software space—can find enormous strategic value in forging relationships with partners and/or resellers to access new markets and drive growth. But simply having channel partners is not necessarily valuable on its own; leadership teams need to ensure that the company’s partners are truly additive to the organization’s growth goals and other targets, and not cannibalizing sales from the primary business. Companies also need to have clarity about how they will effectively manage programs with their partners.
Fostering these partnerships is a growth strategy that companies increasingly cannot afford to overlook; “Companies with the most mature partnership programs are growing overall company revenue nearly two times as fast as companies with less mature programs,” according to research from Forrester in 2019. Additionally, a 2022 Demand Gen Report survey found “66% of business-to-business leaders anticipate [a] more than 11% gain in revenue attributable to channel partners” over the next year.
Having partnerships with multiple organizations also necessitates rules of engagement. Even for tech companies that already have partnerships in place, there is often room for improvement within those relationships to drive more sales and grow the customer base. Below we look at how organizations can manage and optimize their channel partnerships for sustained scalability.
A symbiotic relationship
Channel partners can take the form of direct sales channels, pure resellers, distributors and system integrators, to name a few. For example, working with an organization that can resell licenses for programs such as Oracle NetSuite and various Microsoft solutions can allow tech companies to have access to those solutions without having to sacrifice their teams’ core focus on product development.
Independent channel partners operate their own business models and choose their own business model environments. While software companies might focus 70% of their efforts on product leadership and 20% on customer intimacy, potential channel partners often flip that, focusing more on customer intimacy and operational excellence, and less on product leadership. That balance can be symbiotic for both parties embarking on a partnership together.
While channel partnerships enable faster scaling, companies cannot take a ‘set it and forget it’ approach to these relationships if they want to keep growing and increasing revenue.
Kim Susko, Management consulting principal, RSM US LLP
Recruitment, ramp up and growth
Formalizing an agreement with a channel partner is only the first step in harnessing the potential of these relationships. Companies should keep the rules of engagement simple and as uniform as possible across all their partnerships not just for ease of management and communication but also to ensure various partners aren’t competing against one another.
There are three key areas tech companies should keep in mind when they are looking to maximize the effectiveness of their relationships with channel partners:
- Recruitment: This stage straightforwardly centers around motivating partners to sign up and include products in their customer value proposition. Partners should clearly document their interest and both sides should understand the investment and risks involved. Teams might consider a strategy workshop as a management alignment tool.
- Ramp-up and enablement: Once partners have signed on, the primary company must motivate the partner to invest in ramping up operations. This might take the form of a certification program and/or a training program for employees within the partner organization to master the product they are reselling.
- Management and growth: While channel partnerships enable faster scaling, companies cannot take a “set it and forget it” approach to these relationships if they want to keep growing and increasing revenue. If channel partner teams are implementing another company’s product, they need to feel comfortable with the service levels they can provide. If it’s a sales relationship, both parties need to have a clear understanding of how customers are using the product. Both parties should be attuned to how the partnership may need to evolve as it continues.
Assessing international opportunities
Some tech companies' first foray into partner programs is for international expansion because it’s often easier to team up with another organization already operating in a given country than it is to build operations there from scratch. International expansion also brings unique challenges such as navigating new regulations, dealing with talent acquisition issues and understanding the nuances of various markets.
Switching from a direct sales model to an indirect model through a channel partner can be one way for companies to expand internationally with more ease. Tech companies looking to make this shift should consider specific implications for product development, distribution and customer satisfaction. Going through a channel partner can help businesses access a new international market more easily and avoid costly legal and tax fees that would come with setting up core operations internationally.
Channel partners can be an efficient avenue for technology companies to drive revenue, sales growth and volume without heavy customer acquisition costs. On the flip side, it still takes investment to stand up a partner program and monitor and manage its performance.
Some important questions leadership teams may want to ask themselves when assessing the effectiveness of their partnerships with other organizations:
- How do we measure whether this relationship is additive to our business?
- Where are there pain points in how both parties manage the partnership?
- What is our company’s value proposition and how does it make a partnership appealing to potential channel partners?
When considering channel partners as part of a growth strategy, tech companies should determine the areas where partners can provide the biggest return on investment. Those areas might include the potential partner’s geographic reach, existing customer base, value-added services and international presence.
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This article was written by Paul Morgis, Kim Susko and originally appeared on 2023-04-24 RSM Canada, and is available online at https://rsmcanada.com/insights/industries/technology-companies/managing-channel-partner-relationships-to-drive-growth-for-tech-.html.
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