Channel partners have always been huge drivers for product sales in the high-tech industry, but the importance of channel strategies has been largely underplayed. In fact, many companies have not had the visibility or control necessary to track and manage their contracts effectively, leaving channel sales largely in the hands of their channel partners and losing significant revenue in the long run. But not anymore.
HP, Dell, EMC, and Oracle all dropped channel transformation bombs within the last year, announcing huge overhauls of their channel strategies that are expected to boost overall revenue. With some of the world's leading high-tech companies announcing huge channel transformation projects, we have to wonder what's driving this change of heart? Why are high-tech companies now taking their channel processes seriously?
There's no single factor that's responsible for this swift channel overhaul. Instead, multiple industry drivers have catapulted the importance of an effective channel strategy into the spotlight. I've spoken with executives, analysts, and partners. With their insight, combined with my more than 20 years of experience in the high-tech industry, I've uncovered five main causes contributing to these large-scale channel overhauls:
1. Selling the cloud
The high-tech market continues to shift away from standard hardware and toward cloud services. While selling software-as-a-service is relatively easy for these big-name technology companies, it's not as simple for channel partners that previously spent years perfecting how to sell a box or a license. Companies like Oracle and IBM are well aware of this problem, and are working with partners to craft more effective selling systems to boost revenue flows.
2. Turbulent markets
Long gone are the days where one manufacturer would produce one product and sell it directly to one customer. The technology marketplace is constantly in a state of flux, with new products entering and exiting the market at rapid speeds. Take Apple’s failed iPhone 5c, which forced Apple to shrink production volumes after just a few months on the market. While companies might try, no organization knows for sure the next great success or the next big failure. In addition, a recent study predicts that 50% of all consumption of manufactured goods will come from emerging countries by 2025, which means companies will continue to expand into new and developing markets. For those reasons, the need for effective channel partners that can sell various products to various markets is more important than ever.
3. The accelerating pace of business
Competition in the high-tech industry is higher than ever, as companies face shrinking product lifecycles. This fierce competition is forcing manufacturers to speed up all aspects of production, including time to market, adoption, partner performance assessments, and much more. Yet most companies are relying on channel management systems that are at least 10 years old, which hinder operational speed. EMC knows this problem all too well and recently replaced its Velocity channel program with the new EMC Business Partner program. The new system streamlined the path for partners to contact EMC and therefore increased the speed of partner engagement.
4. Channel partner needs
High-tech companies must maneuver a channel partner landscape filled with wholesalers, distributors, retailers, resellers, integrators, and more, who all require specialized support. Since most companies don't have an effective contract management system in place, they're constantly walking their partners through every step of a deal to ensure accurate processing, and this can eat up a lot of time. HP, for example, which acquires 70% of enterprise group revenue through the channel, wants to slash the time spent on each contract. It recently created the role of senior vice president, HP Worldwide Indirect Sales, to work closely with the channel to develop better joint go-to-market plans with partners.
5. A need for visibility
Relying on channel partners isn't enough to grow a company's business. Instead, the company needs to pair with partners who will boost sales and increase revenue. Yet more often than not, high-tech companies lack the visibility into partner performance, incentives, and product lines necessary to ensure their channel relationships are worthwhile. HP understood the sales power its partners held, and for that reason it developed a growth plan for every single partner and held each relationship to verifiable sales quotas. Attaining a transparent view into partner performance was a key driver in HP's transformation, and remains a need for other high-tech organizations.
How to transform channels
Channel transformations are starting from the top of the pack and trickling down into smaller high-tech organizations. What these organizations are finding is that the key to a successful channel transformation is a robust revenue management solution. High-tech companies should look for systems with automated claims and processing validation capabilities, as well as the ability to analyze and correlate incentives and partner performance, thus providing visibly while meeting channel partner needs. They should also implement systems that streamline the contract lifecycle for all types of contracts in order to increase the overall speed of business.
It's also important that the solution ensures both regulatory and commercial compliance to keep up with ever-changing market regulations. Finally, high-tech companies need to implement solutions that can integrate with current enterprise resource planning (ERP) or contract resource management (CRM) solutions to create a well-rounded system that works together to increase processing speed, improve visibility, and simplify contract creation.
By adopting an integrated and automated revenue management solution, high-tech companies can better manage complex channel contracts and incentives, and in turn boost productivity, ensure compliance, and increase overall revenue. Leading high-tech companies, like HP, Dell, EMC, and Oracle have already accepted the power of their channel partners. They are now transforming their channel processes to ensure optimal performance. Now's the time for your organization to do the same.