Channel managers are often the eyes organisations use to look at the world. They fulfil a difficult role and, sometimes, a thankless one, which pitches them against powerful internal forces who would sometimes prefer not to hear what partners really think. Often these internal struggles are glossed over and very rarely are they talked about.  Even at conferences, presentations focus on the perfect project or the new initiative. 

The Routes to Market Association exists to help channel managers grapple with these issues.  Here we look at the problems they face. And we are also launching forums at www.the-rtma.com , where people involved in running and selling through channels can meet and discuss these issues.

Organisation and culture
Some, but not all of those we interviewed, said they faced huge internal problems.  In some cases, these wrecked plans or delayed effective implementation by anything up to a year. 

Just working for an American company could be a huge handicap, according to a senior channels manager who had worked his way to the top.  "Americans think that channels outside America are the same as channels inside America.  They fail to understand that the physical channel may be different.  And this manifests itself right down the line.  They want the same contract, the same terms of doing business, the same margins, the same relationships."

Conflict with direct
The second huge issue is conflict with direct.  Said one manager: "I have seen this at both field and management level.  People who have never worked in channels are always deeply distrustful of partners.  They assume they will screw things up and they assume they will be very expensive."  An early education is that potential partners are often larger than the supplier.  "You end up saying you want to hand over all the small accounts to this company which is twice our size.  Why ever would they want to sell to them?"

You know things are really bad when, as one person put it: "the direct sales force decides that the real competition is their own channel!"

Understanding channel profitability
One way of dealing with this was to prove the profitability of channels to senior management.  "We got to the point where we showed at board level that we had two managers running a partner with sales of $100m on 35% margin. The direct sales force was giving away 50%, had much higher costs and were doing half the revenue.  The presentation was followed by a long silence."  Most of the worst-affected suppliers say that they have not, as yet, measured profitability in this way.  Perhaps they should!

Rules of engagement
Many companies claim to have dealt with the conflict between direct and indirect over the last three years.  A channel manager in an enterprise software vendor said: "We have clear rules about which accounts go indirect.  Direct sales people simply get no commission from orders of less than 100 seats."

Another said: "Yes there was huge conflict a year ago, but now we have a new VP Sales for Europe who comes from a channel-centric supplier."  Indeed, one of those we interviewed has risen from channels to become managing director of a substantial software business.  In any case, several of the companies we surveyed have sold 100% through the channel for years, and in one case for decades.
 
Unsurprisingly, the more senior the manager, the less impotent he or she claimed to feel.

A sales for Europe VP said: "We have all the power we want.  The Americans leave it up to us, as long as we deliver the numbers." 

Number blindness
The other common gripe from channel managers was a feeling that senior management didn’t care how the numbers came in, as long as they did.  "Our president quips that the quarter we are in is always the most significant quarter in the year," said one channel manager.  "Top managers often don’t care as long as the headline sales figure is there." But there are clear signs that this attitude is also passing as more channel-centric senior managers climb the greasy pole.

Second class citizens
Almost everyone felt that those managing channels have lower status than the sales people who sell direct to customers.  A channel manager in a substantial software vendor with a long-established channel said: "Channel guys are perceived as not getting credit and kudos because the channel is invisible.  The salespeople who sell direct to large enterprises are seen as the heroes bringing in the big-ticket items."  Almost everyone agreed that this was still the case, with direct salespeople being lauded and recognised at sales conferences.

Short-termism
Short-termism has deep implications.  As one put it: "The sales cycle is perceived to be longer for the direct sales force, so its commission plan is annual.  The channel sales force is paid quarterly, and so is quarterly driven.  That means the importance of long-term relationships is not recognised and rewarded."

Many channel people felt that partner account manager is a role that typically goes to less able salespeople who have failed in direct.  One manager said: "Over and over again I see this problem.  My solution is to treat partners as important key accounts and insist they get the crème de la crème of the sales force."  As he is now a director, this respondent was in a position to insist upon this.  Most channel managers do not have that power!

Winning channel mindshare
This problem is particularly acute for small vendors.  But, somewhat surprisingly, it is also a big issue for many very large vendors.  A channel manager at a market-leading IT company, whose product is a platform builder which defines the business of many of its dealers, said: "We are sold by thousands of resellers, but I wish we had just 100 who were dedicated to our product.  For good business reasons, our partners sell a whole range of other stuff.  Typically, when times are tough they stop proactively selling our product and concentrate on their existing user base."

Smaller vendors put the problem slightly differently: "How do we get mindshare and commitment from our partners which is disproportionate to our importance to their sales and business?"

Channel managers say the problem is made worse by the way many intermediaries are treated by other suppliers.  An enterprise software channel manager said: "They always say to me ‘Things didn’t work out with supplier A and B.  Why should it be different with you?’  This is a major barrier to recruitment."

A whole range of issues and goals spring from this central task of winning mindshare with resellers, e.g. how accounts are managed, what training is offered to partners, how to counteract the negative impression left by other suppliers.

Resource alignment
How do problems and issues vary from small to large companies?  A channel manager in a small company may have to spend a year educating senior management about channels and their significance.  That is a battle that has been won, at least on paper, in most large companies.  But problems are more intractable in larger companies. A small supplier can swiftly ensure that its best salespeople talk to partners.  A large vendor with an international sales force numbering in the thousands will find this much harder.

Recognising and rewarding value-add
Companies with a product mix that includes commodity and complex products have to wrestle with the issue of how to reward channels that create real value-add. "How do I ensure that distributors with real product knowledge and marketing skills don’t lose out to box-shifters?"  This leads to functional discounts and extra fees for extra competence.  But this is not a big issue for companies that either sell only complex or simple products.

Perhaps unsurprisingly, channel people think that channels and channel skills are becoming increasingly important.  "Even in enterprise software I see a move away from ‘sell our product because it is hot’ to ‘sell our product because we have a relationship with you which will consistently add value’.  The relationship becomes more important than the product."

Do IT channel managers think that the companies they work for are becoming better educated and more sophisticated about channels?  

Most think the answer is yes, and some point to recent changes in mindset – often linked to senior management changes. 

Said one: "Senior management changed here about six months ago and that has led to a massive change in attitude.  We no longer see the channel as a sales tool, but as a partner who delivers solutions.  Before, we would lay down the law; now we consult before making any changes.  And guess what?  When 20 resellers agree on something it is a good idea to listen.  This change in attitude is a real shift."

Solution orientation
Certainly most channel managers no longer think in terms of pipes down which product is shoved.  Most have the humility to recognise that their product is transformed into solutions by their partners.

But it is questionable whether this new mindset has yet  filtered down  to the coalface of account management.  One veteran said: "Every time I see a new reseller I ask them ‘what are the good and bad things about your existing suppliers?’  Talk of direct competition, sudden and unheralded shifts in strategy and lack of trust remains a constant."

The Routes to Market journal plans to write more about these issues. In our next issue you will find a similar survey of alliance managers.

Meanwhile, look at www.the-rtma.com where there are forums on a wide variety of channel issues.