Redefining the Value of Partnership
The 2112 Group releases 2112 Investor, a new service that helps vendors and partners understand the total cost of partnership and relative value of technology channel relationships.
By Larry Walsh
If you’re like me, you’ve heard more than a few vendors testify to their commitment to partner’s fiscal health, usually with utterances to the effect of “we care about partner profitability.” They usually go on to discuss a detailed breakdown of product margin structures and back-end incentives.
It’s true that partner profitability is important. If solution providers can’t make money selling a vendor’s products and services, there’s no real foundation for a successful and sustainable relationship. On the other hand, vendors and solution providers often place too much emphasis on margins and incentives as the true path to profitability. Those aren’t the only factors to take into consideration.
The problem lies in thinking that fat margins are the sole motivator of partner behavior. Vendors complain to 2112 all the time about offering their partners products with hefty margins, only to see a single deal transpire and no prospects for future sales. More often than not, partners look at such products as opportunistic and have no real sense of how to incorporate them into their strategic plans.
Partners, too, rely too much on margins as a means of measuring a vendor’s value. Partners frequently tell 2112 about how margins on products are too low. They rarely take into consideration the volume of sales required to achieve measurable success or the cost of goods and services relative to operating expenses. Product margins are a factor in profitability, but partners have more costs and potential margin enhancements beyond what the vendor surrenders on price.
What vendors often fail to talk about, and partners fail to consider, is the full profitability equation and how it translates into business models. This is why The 2112 Group has developed 2112 Investor, a new service that quantifies the Total Cost of Partnership (TCOP) and translates it into profitability equations.
2112 developed the 2112 Investor methodology and algorithm to capture this information and use it to calculate new profitability equations. The result provides vendors with a true sense of what it takes for a solution provider to become and remain a partner. On the flip side, it provides partners with guidance on the Minimum Investment Level (MIL) for achieving success with a vendor – on a program or product level.
The benefit of 2112 Investor is providing vendors and solution providers with a realistic measure of Return on Channel Investment (ROCI). With this tool, vendors can provide existing and future partners with guidance on how to achieve profitability, extending the conversation beyond just margins and incentives.
The 2112 Investor results in several tangible benefits for vendors. They get a full breakdown of partnership costs relative to different types of markets, products, and partners. They gain the ability to offer partners guidance on sales objectives for achieving ROI and sustaining profitability. And they get a sense of how profitable a vendor relationship can be, relative to TCOP and internal effort.
There’s a lot more to 2112 Investor, and the early adopters are providing tremendous feedback on the utility and value of this product. 2112 Investor is now generally available to all vendors in the United States, Canada, and Europe. For more information about 2112 Investor and other 2112 services, please contact [email protected].