Rules for partner profitability

partner profitability 74707159It is one thing to walk away from an unprofitable partner and quite another to realise the importance of enabling your partners to be profitable. After all, a profitable partner means that enterprise vendors too are making money. Why, then, if it is so simple, do we ignore this crucial aspect of the channel business?

Agreeing that vendors have a role to play in partners’ profitability, Scott Hagenus, Director of Channel at GFI Software, says, “Vendors should be mindful of their partners’ needs and help them navigate the daily business decision processes. Many smaller partners struggle with the resources and knowledge it takes to grow a business cost-effectively.”
This also helps build a tangible, loyal partner following, according to Hagenus.

The first rule to consider for partner profitability is the criteria for partner selection. More often than not, vendors are mesmerised by the numbers game and simply want to stretch their partner list, without thinking if the partner coming on board is bringing enough commitment, value and expertise to the table. And more than that, sometimes little thought is given to whether the partner matches the company’s objectives.
Taj El Khayat, General Manager, Middle East & North Africa, Riverbed Technology, says that, apart from ensuring that the partner is one of the top systems integrators or a specialised partner in a technology that the company can leverage, it is important to ensure partners are compatible with your business. “One of the criteria we look at is if the portfolio of the partner integrates and complements our business,” Khayat explains. Riverbed even makes it a point to interview customers before it selects a partner because a satisfied customer would speak volumes of the partner’s quality.

The basis for selection will differ from company to company. While many will look at parameters such as local market experience, financial strengths, channel coverage and geographical presence, others such as SanDisk would consider the ability to sell fast-moving consumer goods such as flash storage important.

“Our criteria is to find partners who have the bandwidth to support independent retailers across multiple channels and localities. We look for partners who have the right attitude towards efficient account servicing, fast deliveries and stock holding,” says Tareq Husseini, Regional Sales Director, Mediterranean Middle East and Africa, SanDisk.

Vendors must identify why the partnership is being made in the first place and rope in those partners with the specific skills and expertise. This way, for both parties—the partner and vendor—understanding the objective of the collaboration can work better towards a profitable ecosystem. John Banks, Director, Software Group, GBM, says the onus is on partners, too. “Partners need to be clear which industry they want to operate in. However, some of them want to be in any category but that doesn’t work here. Customers are knowledgeable and partners must take that into consideration,” he explains.

Having partner programmes that are consistently evaluated and updated is another rule to ensure partner profitability. To support its expansive partner network, QlikTech’s Qonnect partner programme provides its partners with the tools to help them grow a sustainable and profitable business intelligence practice based on delivering rapid time-to-value for customers, says Brooke Cunningham, Senior Director, Global Partner Market, QlikTech.

“Partners are enabled to develop new opportunities with Qonnect sales, marketing, support and learning resources. With a focus on self-sufficiency and flexibility, partners become the QlikView experts and have several opportunities to earn higher margins based on performance rewards such as the Bonus Margin Program and Elite level performance rewards, which are highly profitable with up to 51 percent margin available for partners,” Cunningham explains.
While learning and training programmes need to be integrated into the system, rebates programmes can also do wonders in encouraging partners to perform better. “We have target-based rebate programmes to ensure the partners are paid on performance in these countries. So we see this as an additional reason for our partners to grow the business,” explains Vineeth Sebastian, Regionals Sales Director, MEA, at MMD and AOC.

Ultimately, it comes down to business strategies but for Joe Schramm, Director, Strategic Alliances, Core Security, aligning incentives with 2014 strategic goals around go-to-market is something the company is considering seriously. He adds, “Items such as increasing spend within our existing customer-base (cross-selling new products and increasing scope of existing products) as well as incentives for customer acquisition in targeted industries are both areas where we want to provide some additional incentives for our partners.” These incentives could be a combination of fixed-fee incentives, additional margin or rebates.

And the final rule is to measure a partner’s performance and growth. Although, this may seem intrusive and unnecessary, it is a key point to factor in, as it helps to drive growth and value. Vendors will be surprised to know that sometimes large partners are not, in fact, the most profitable—it could very well be the smaller ones. And understanding this could make all the difference to overall growth. But it’s important to bear in mind that continuing with an unprofitable partner, after trying to understand and resolve issues, is not logical and vendors shouldn’t hesitate to let go of them.
Profitability can be measured in quantitative or qualitative ways. Vendors need to decide what the best way is, considering business goals and the relationship that they share with partners. “Each investment made has to be analysed and maximising the return on those investments improves profitability of both the vendor and the partner. Paying attention to these investments and other elements in terms of measurable metrics makes it possible to measure profitability,” says Khwaja Saifuddin, Senior Sales Director, Middle East, Africa & South Asia, WD.

For Citrix, profitability is measured by the revenue generated from the entire project. “That could include Citrix and its services, but it also includes other complementary solutions like servers, storage, and networking infrastructure to put in place to support the Citrix environment,” says Noman Abdul Qadir, Director of Channel, Citrix Middle East and Africa.

By selecting partners appropriately, keeping them updated and encouraged through partner programmes that revolve around rebates or learning, and by measuring their profitability regularly, vendors and distributors can help them to drive sustainable and rewarding growth, which in turn will impact the vendor’s business positively.

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