Beware the pitfalls of poorly policed partner programs

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This article appeared in the September 2014 issue of CRN magazine.

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Beware the pitfalls of poorly policed partner programs
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Somerville Group has been in the industry for over 30 years and seen many vendors and vendor programs over that time. We have been a very loyal partner to those vendors who have demonstrated a long-term view to delivering good products, a good partner program and been fair in their treatment of their partners and customers.

In our typical solution mix, our primary vendors are HP, IBM, Cisco, Microsoft, Checkpoint and McAfee, as well as more focused solutions such as Riverbed.

If you’re a reseller, remember that a vendor’s treatment of your customer can adversely impact your long-term relationship with your own customer. That’s an important consideration, and one that often changes through the life of a partnership. We have dumped a number of vendors over the years simply because of their treatment of our customers, whether due to issues with support or the product, or because they didn’t work with us to try to rectify these issues first.

A vendor needs to remember that we are the ones who recommended, endorsed and sold the customer the product in the first place.

There has been an explosion in partner programs: technical disciplines, or streams, or specialisations – whatever they call them. We need to become more discerning about these programs. There are – and have always been – many emerging vendors with exciting products that we can take to market. However, pretty much every market is saturated with existing vendors. There are very few truly ‘new’ markets today. The challenge is to find those products that will stand the test of time and deliver ongoing revenues and margins to sustain a longer-term relationship.

When entering a vendor program, the right strategy should be the same as any other commercial decision you make for your business: return on investment must be the first thing to consider. If the vendor program does not tick the boxes, better to walk away early and not waste your time.

We get calls weekly from new vendors that want us to sell their products. For example, over the past few years wireless vendors have been popping out of the woodwork. They all have “the best product on the market”. We get bombarded.

Any reseller risks losing a substantial amount of sales capacity by giving time to all of these vendors. We politely tell many of them that we already have a product suite in that market (unless of course they have a significant point of differentiation or fill a technology gap, but even then the established competitors nearly always catch up). We often say thanks, but no thanks.

The maths is pretty simple (see box on the right). In one hypothetical scenario, the cost to certify two salespeople and two technical people could cost up to $80,000 – just to get ready to sell!

And don’t be fooled into thinking that investment covers everything. There is also the cost of sales, the cost of support (can be a big one), management time – the list goes on. Of course, this is all relative to the size of the partner. My example in the box would suit a small partner. For a larger partner with a presence, say, across five states, you would need to multiply the numbers.

If you sell a million dollars’ worth of product in the first year at the vendor’s recommended 20 percent margin, then it might work (hopefully, you can detect the sarcasm). However, realistically you will sell $250,000 or maybe $500,000 in a competitive market at tighter margins. If you have to halve the margins, it all starts to look a little less exciting.

And that is just the due diligence; there are also risks when partner programs are poorly managed.

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