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Because selling only products has become
less profitable and, therefore, less appealing
to resellers, the shift to a more service
oriented and solutions oriented revenue
model will continue to be the focus of
SMB resellers in 2005. Resellers whose
model was traditionally were product sales-based
might now offer systems integration, solution
bundling and application development services.
The traditional model is now becoming
a set of service, solution and/or vertical
offerings as the model of choice in 2005.
Over the years a channel executive could
identify a set of distinct business models
that made up the channel ecosystem: The
traditional VAR (value-added resellers),
SIs (System Integrators) and ISVs (Independent
Software developers). Smaller ISVs sold
vertical specific templates that sat on
top of horizontal software applications
such as ERP and CRM. These were built
on behalf of the software vendors who
had the largest installed bases –
typically Microsoft and SAP. In addition,
they offered integration and training
services. Today, however, we are seeing
more SIs come into the ISV space by developing
their software competencies and practices
to leverage their expertise in vertical
markets.
For vendors targeting the SMB space (and
who isn’t?) you must consider how
your channel partners are evolving their
business models and evolve your offerings
as a result. This makes the importance
of a “Channel Ready” product
set all the more important. In addition,
vendors must evaluate how you are rewarding
your partners and develop programs that
leverage this evolution.
Compensation Models Beyond Revenue
A vendor selling to an SMB reseller realizes
that the ideal partner is one that can
offer solutions. The most successful partnerships
are those with resellers that can attract
and retain a loyal following by providing
local support and vertical specialization.
This requires a compensation model that
goes beyond the normal revenue rewards
and recognizes equally important attributes
such as customer satisfaction, vertical
focus and an expanded customer base.
The New Power in the Channel
The number of IT vendors that want to
sell to SMBs is increasing every day.
The number of resellers that have relationships
with the SMBs and are capable of selling
your solutions is relatively fixed. This
“supply and demand” dynamic
favors the channel and it is the channel
that maintains the most powerful local
relationships, vertical specializations
and contacts. As a vendor, developing
these relationships is neither a cost
nor time effective endeavor – the
channel is the only way to succeed with
SMBs.
Another reason that the channel is so
important in this space is that SMBs are
looking for the most cost efficient way
to implement and support their IT infrastructures.
Vendors, therefore, must minimize the
amount of customization that must occur
to integrate and deploy a solution. Solutions,
therefore, must become more SMB appropriate
based on the business need, integration
and cost. However, as a vendor, you may
not be able to address each of these vertical
markets (such as retail banking vs. financial
services or small hospitals vs. healthcare
companies). Therefore, you must rely on
your channels to address these areas of
specialization. The good news is that
the channel is ready and willing to help!
Core Strategies is ready to help as well
and can assist your company in developing
your SMB Channel Strategy. For more information,
contact us at info@corestragties.com
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