Who Needs a Channel? Maybe YouBy Howard M. Cohen | Print
COMMENTARY: Many channel partners have been quietly introducing their own products. Here's why this is happening and what it means.
You may not have noticed it happening all around you, but many channel partners have been quietly introducing their own products. Often, these are software products—applications that do everything from ERP to analytics—designed, developed and marketed by themselves.
This is happening mainly because the behemoths of the IT industry have been stomping around in your territory. If your business is selling, installing and managing servers, storage and other infrastructure products, Amazon, Microsoft, IBM, Google and others will soon make that part of your business extinct. They don’t plan to compete on infrastructure product sales. They are becoming your customers' infrastructure in the cloud.
As they do, you have a choice. You can try to make a living selling their cloud services for them, or you can get yourself into the business of selling your own intellectual property. Develop software or best-practice methodologies, new workflow enhancers or whatever you feel the market is waiting for.
The behemoths will smile upon you. After all, you're now creating new workloads that will demand new cloud services, and there's nothing they like better than anything that drives more billable consumption.
Once you make this major transition, you will discover something that may never have occurred to you. By becoming a product provider yourself, you will realize why all those product providers before you built themselves a channel to sell through. When this realization hits, your first reaction will be to build one yourself.
Almost every software company that enters the market soon builds its own channel because they realize they cannot possibly field enough sales personnel to capture the market that’s waiting out there for them. Selling direct may sound like a good idea, with more direct control over your sales force and all that. But the waiting could kill you.
When you hire salespeople, you have to pay them. It could be a "base salary" or a "draw," but whichever it is, it's still money. You may find yourself paying for quite some time before they actually start bringing in sales, if they ever do.
More than one startup has gone under before they get out of the gate because they invested in salespeople who simply didn't perform soon enough.
The greatest value any channel reseller provides is its installed base of customers. These relationships cut the first half of the sales cycle out allowing them to start selling right away to customers who already know and trust them.
Engaging a reseller makes all of those ready customers available to you. All you need to do is share a portion of the profit with the reseller.
This is the simple reason that the channel continues to flourish through the thick and thin of the IT industry. Channel partners have communities of customers who trust them. If they respect your product, they'll introduce it to those customers creating new sales you would have taken much longer to develop on your own.
Thinking About the Channel From the Other End
For the many resellers who have already seen the infrastructure writing on the wall, they’ve now had their first glimpse of the channel from the other side. Now, they are not a member of someone’s channel, they need to build a channel of their own. They need a pricing chart with reseller discounts or margins built in. They need rebrandable collateral. They need a cooperative marketing program. They need a partner recruiting plan, and so much more.
How many times have you read articles here in Channel Insider or other channel publications that you realize are written for the manufacturers who must build and drive a channel. Very soon, if you heed the signs that infrastructure is being displaced, those articles will be very, very valuable to you as you build a channel of your own.
Howard Cohen has spent 30-plus years as an executive and community leader inside the IT channel. He now writes and presents about it in Channel Insider, Redmond Channel Partner, Insight Technically, Channel Partner and more.