Channel Loyalty Tectonics Are Shifting

But the Ottawa-based managed services platform vendor isn't vociferously demanding loyalty from its 600-plus channel partners, as one might presume. Rather, N-able is emphasizing its own loyalty to the partners through comprehensive training, joint sales efforts and business development activities.

It's a nice twist. Call it the new black of channel relationship fashion.

Traditionally, discussions of loyalty in a channel context have revolved around partner allegiance to a particular brand. Though many channel companies consider themselves vendor-agnostic, most have certain brand preferences and steer their customers' purchases accordingly. Some VARs and integrators make no secret of their fealty to a particular brand, be it Cisco Systems, Lenovo, Microsoft, Hewlett-Packard or some other.

But brand loyalty has always hinged on the vendor's ability and willingness to provide sales, marketing and technical support, as well a guarantee that the vendor will not undercut partners by trying to sell direct to their customers.

In essence, honest-to-goodness support from vendors produces loyalty dividends from partners.

But a shift is taking place. Now more than ever, vendors also must show demonstrable loyalty to their partners, rather than expecting VARs and integrators to create demand for their products simply because they have good technology. And that means investing in the partner's business viability.

Partners have to put capital and billable time into technical training and demand generation for the brands to which they choose to be loyal.

This also requires investment from the vendors through subsidies and incentives. So it is in a vendor's best interest to make sure that partners who invest in its brand don't go out of business a couple of months after getting up to speed.

Investing in a partner's viability becomes ever more critical as channel companies move to a consultative solution-selling model. Pushing low-margin product is not a promising business strategy for most.

Research firm Gartner Inc. predicts that 40 percent of channel companies will go out of business between now and 2008. The number seems high and doesn't take into account the new small channel companies that are formed almost daily.

But Gartner makes the important point that vendors have to work hard to retain the loyalty of their partners. The firm is encouraging vendors to take programmatic steps to give partners incentive to do more business with them and less with competitors.

Steps recommended include such things as co-marketing programs, joint sales and business development, profitability enhancement, and avoidance of conflict between direct and partner sales.

A good example of loyalty-building steps by a vendor is IBM's new practice of paying partners "influence fees." These fees are an acknowledgment that even though some partners don't carry product, they still influence sales of the brand through the integration services and application development they offer customers.

Click here to read more about IBM compensating partners for customer influence.

Traditionally, vendors have tied partner compensation to product sales. Not long ago, paying channel partners for their influence with customers would have been unthinkable.

Buell Duncan, IBM's general manager of ISV and developer relation, said influence fees and other demand-generating steps are the vendor's way to earn partner loyalty. Duncan used the term "earn" to emphasize the symbiosis needed for the mutual benefit of partners and vendors.

This symbiotic approach is something companies such as N-able understand. Especially in the case of N-able, which has to evangelize its emerging technology to prospective partners, making a quantifiable commitment to partners is imperative.

In developing new or refining existing channel programs, vendors must keep in mind that if they expect loyalty from partners they must also prove their loyalty to those partners.