As Economy Slows, It’s Time to Double-Down on Partners
At times like these, vendors should invest more – not less – in building their channel resources.
By Larry Walsh
Let’s get real: The economy isn’t healthy. Asian economies are trending down, while Europe has been flat-lined for much of the past two years. In the United States, the housing market is in a bubble. Oil prices continue to flirt with collapse. Ships are lining up outside of harbors around the world, unable to offload their goods. Manufacturing orders are declining, and factories are idling. Corporate earnings are in their fourth straight negative quarter. And it’s a presidential election year, which always brings some level of instability.
In the tech industry, the hardware segment is virtually dead, as more IT budgets shift to the cloud. The software market isn’t much better; pipelines are lightening up as the cloud cannibalizes legacy license sales. Even professional services are under pressure as customers seek to acquire access to technology without paying for the support.
All of this adds up to a recession or, at the very least, a less-than-robust economy that will pressure expenses.
At The 2112 Group, we’re already seeing many technology vendors cut back spending in lieu of laying off. Yet some vendors – most notably, Intel – are slashing thousands of jobs to realign their operations with new economic realities.
Within the tech community, pressure will mount to cut expenses – particularly in sales, marketing, and operations. And the biggest expense, of course, is people.
Now is not the time to cheap out on the channel. When times get tough, the channel is the saving grace. The channel is a cost-deferment medium, allowing vendors to leverage the scale and reach of partners without adding fixed costs. While the inclination is to cut costs across the board, the practical reality is that vendors will continue to need sales and field engagements. The channel can deliver both at a lower cost than would be required to maintain large, direct-sales organizations.
As the economic engines start to cool down, here are a few things vendors need to do to increase channel engagement and performance to compensate for shifts in spending priorities.
- Increase Market Intelligence
Market intelligence is one of those things that’s difficult to produce and often underappreciated. Good market intelligence, while always a tremendous sales facilitator, is invaluable during economic downturns. Partners will need help identifying and addressing opportunities during tough times. Market intelligence can shine a light to blaze the trail for partner-led sales.
- Expand Technical and Sales Training
If internal sales and technical support resources are cut to conserve expenses, partners will have to pick up the load to keep revenue streams open. Vendors shouldn’t cut partner training; rather, they should increase access to training in sales, technical support, and marketing. By empowering partners with knowledge and know-how, vendors will reap greater returns on their channel investment.
- Support Partner Marketing
Notoriously bad at marketing, partners often lean heavily on vendors for marketing planning, funding, and execution. During an economic downturn, vendors should shift marketing responsibility to their partners. This shift should come with increased resources such as marketing materials, marketing program templates, and funding. Vendors should help partners craft marketing plans so they can carry the value message of products and services to the market in their stead.
- Prioritize Partners for Resource Allocation
No two partners are created equal, and economic downturns will further separate the performers from the laggards. Vendors should conduct thorough evaluations of their partners, profiling them for capabilities and potential for future performance. Vendors should give priority to partners that demonstrate not just ability but also a willingness to take on greater responsibility for meeting and exceeding performance expectations.
- Engage in Joint Business Planning
A successful channel never happens by chance, especially in a soft economy. Vendors should engage partners in joint business planning, establishing expectations and assigning resources. Through joint business plans, vendors and partners will define what they’re taking to market, the target customers, and expectations for each party in the sales process. Joint business planning is about establishing commitments – by vendors and partners alike – as much as setting direction.
- Simplify Processes
A differentiator in sales volume and partner profitability is ease of doing business. In shifting greater sales loads to partners, vendors need to review their processes to ensure they’re relatively easy. Partners loathe complexity in ordering, compensation, and support. By simplifying processes, vendors will clear the road of obstacles that inhibit partner success and dampen return on channel investment.
- Seed Partners with Displaced Staff
Today, partners are challenged in finding good technical and sales professionals. Even more important, partners often lack managerial talent for directing go-to-market strategies and activities. As vendors downsize, they should look to their displaced staff to fill in those gaps at partner organizations. Partners don’t need just human resources; they need people who understand and have experience with vendor processes. They also need marketing professionals who know how to craft messages and reach new customers. And they need sales professionals who can proactively reach into the market to uncover new opportunities.
These tips aren’t good advice just for when the economy turns sour. They pose good advice for any time. The entire reason the channel exists is to provide vendors with go-to-market reach and scale they couldn’t otherwise afford with a large, direct-sales organization. Partners operate at lower costs than vendors, and only get compensated when they sell. Vendors need to rethink their channel strategies to better leverage the value of indirect sales – particularly as the economy slows.