Part of a Series: Are Your Alliances Missing the Money?
- 3 Steps to Monetize Your Strategic Alliances
- Step 1 – Build a Complete ATM Bridge to Your Customers
- Step 2 – Set up your Alliance and Bus Dev organizations to both “hunt” and “farm”
- Step 3 – Choose the Business Model that Matches How Alliance Solutions are Sold
- Measuring Alliance Impact:
In recent blog posts, we’ve been talking about how to drive revenue from strategic alliances. It’s fair to say that for many tech companies, alliances tend to start with great promise but often have underwhelming results in terms of revenue impact. Earlier posts in this series describe the problem and the opportunity and outlined 3 key steps to take to assure that your alliances drive measurable revenue. As we discussed in last week’s post, most alliances are not well-suited to an OEM or resall business model and a better option is a soft bundle sale with a GTM model that is often called “meet in the channel”.
But how do you measure revenue impact for soft bundle through channels?
Before I jump to the solution, let’s set context on some of the fallacies that exist in the industry around measuring impact of a GTM program. If you ask a marketing team how to measure sales impact of a program, they will point you toward data generated from their marketing automation system (e.g. Eloqua, Responsys) to see what the response rate is to emails and how those responses track back to closed deals.
Figure 1 below shows how this model works for tracking lead to close, but there are two big problems with this approach when working with channels:
- The leads to close model and marketing as practiced by many tech companies is based on the mental model of a direct sale by the vendor sales rep. In today’s IT world, 80%+ of infrastructure hardware and software are sold via channel, but my observation is that many of these vendors still create marketing campaigns that feel like they were designed for a direct sale (talk about “products” rather than solution, rarely include information on other products or services needed to create a “whole product”, etc…)
- Many tech vendor systems don’t allow them to connect marketing leads to closed deals – particularly for deals sold by the channel. This tends to work better for smaller vendors with newer data and SaaS systems, but at larger vendors with older systems and legacy data (like Cisco, HP or IBM) – good luck linking a marketing campaign to a closed deal by the channel for your alliance solution…
Figure 1: Measuring Sales Impact of Alliances and Solutions through Channels
Why is marketing a smaller percentage of a channel business? As we’ve all noticed, many channel partners were founded by technologists and are sales and technology focused. Most partners do not really have a big marketing engine and the math tends to doom measuring sales impact purely through marketing lead generation. Example:
- Regional VAR with mailing list of 20,000 contacts
- 2% response rate with a 5% request for follow up
- Leads to 20 deals in the pipeline
- At a high close rate of 40% that still is only 8 closed deals
- At $50K ASP that leads to $400K in closed deals…
The missing link is that most Channel deals are sales-led, and are not a result of marketing programs. Instead, they are the result of account-based Sales Reps introducing solutions to their house accounts. This dynamic is illustrated in the bottom graphic in Figure 1. What most vendors do to measure impact for a sales-led program is put an incentive in place and track the sales impact through Distribution. They will typically provide additional margin up front or a back end incentive payment and in each case the Distributor works with the reseller to promote the program/incentive, and track eligible deals. The issue with this approach is manual complexity that demotivates your channel and does not get the focus vendors want (and your Distributor may want to charge you to administer the program).
So where does that leave you as a technology vendor trying to measure alliance impact and focus solutions?
For Smaller Companies…
There are some simple approaches that can work for smaller companies to track alliance and solutions impact. Nearly all companies track their sales pipeline through a CRM system where the sales team enters data on opportunities and forecasts closed opportunities. As new opportunities are created in a CRM system, like Salesforce, a small vendor can require the sales team to enter data or check boxes on the alliance components of a deal, or the specific use case (e.g. security for SAP). Once this information is entered (hopefully in a customized field but possibly in a pre-configured comments field), then you can track closed deals by running reports on your CRM system. Not pretty but workable when you have 20-30 sales reps and a few alliance partners or key solutions…
For Larger Companies…
Unfortunately, the approach of adding required CRM fields does not scale as your business grows. Imagine a CRM form where you have 20 alliances and 20 solutions that define the deal that is in pipeline. What do you expect your sales team would do with all these fields? You nailed it – the data in your CRM will immediately look random, because salespeople may not even know the alliance / solution impact, and EVEN IF THEY DID, THEY WON’T REPORT ON IT CONSISTENTLY.
You need an approach that is separate from CRM where the data gets input into the system without manual intervention from your sales team. Tracking of channel deals was one of the drivers for the creation and standardization on Deal Registration programs in the early 2000’s, and these systems now give many vendors good visibility into their sales pipeline through channels. Bot for alliances and solutions, Deal Reg does not solve the measurement problem for Alliances, because it tracks the registered deals for your product – and does not have visibility to whether the reseller registered the rest of the alliance solution.
What’s New: Solution Registration
There is a new approach to this age-old problem that extends deal registration to alliances and this approach is called “Solution Registration” As we’ve discussed in many previous posts, a solution often includes products from multiple vendors, plus professional services. A new class of SaaS vendor has emerged to solve this problem and the leading example is a company called VARtopia.
Figure 2 shows the approach used by emerging vendors such as VARtopia. This approach has been adopted by leading vendors such as Cisco and NetApp to measure the sales pipeline for their huge investment in FlexPod solutions for converged infrastructure. “FlexPod” is not a product from Cisco, or a product from NetApp, or a product from VMware – it is a solution that needs all three vendors to deliver the value – and that is where “solution registration” comes in.
Figure 2: Solution Registration – VAR Perspective (Source: VARtopia)
Figure 3: Solution Registration – Alliances Perspective (Source: VARtopia)
I will talk more about the value of “Deal Registration” and the emerging category of “Solution Registration” next week – but the key takeaway is that there is now an option to reliably measure sales impact of alliances and solutions. It is an emerging area, but don’t be the last company on the block to evaluate whether this approach would work for your business…
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