It is important at this stage for the company to have direct contact with customers, but as these elements solidify, scaling through a direct sales model can become challenging. This is where startups start to think about how to scale through indirect models. The expectation is that a company can leverage partners to grow their business faster and expand their reach.
However, during execution, many of these strategies do not live up to expectations. For example, if a software company’s product requires specialized selling and implementation services, and their reselling partners are not geared for these specialized services, the mismatch can be catastrophic. Another example is when a company decides to leverage service based partners but have not built the sales pipeline to support that route.
In this post, we’ll give a brief overview of indirect routes to market, and a high-level framework for considering which route is best for a given company. In later posts, we’ll go into each route individually and examine some case studies of how these routes play out in practice, both in success and in failure.
When looking at an indirect route to market we need to first categorize the type of routes that are available and then decide which routes are the right fit for the company (a.k.a. the vendor) based on the maturity of the product, the state of evolution of the vendor, and the vendor’s expectations for growth.
The most important elements are the first two: product and company stage. We begin this topic by breaking out the following indirect markets: Alliances partners, Channel partners, System Integration partners, Technology partners, OEM partners, and finally, Managed Service providers.
- Alliance Partners — These partners tend to be the smallest group but with the largest influence when it comes to Fortune 1000 companies. These partners make up the big consulting houses like Deloitte, Accenture, Pricewaterhouse, KPMG just to name a few. These partners service the Fortune 1000 as strategic advisors on key business initiatives and often are in the position to define the framework for key technology decisions. So they have a strong, influential role in the marketplace.
- Channel Partners — These partners make up the largest community of partners and encompass resellers, value-added resellers, and distribution partners. Examples of partners that fall into this category are CDW, Insight, Carahsoft, and Optiv. The main focus of these partners is to resell a company’s products and offer key services on top of the products that they resell. These partners often have technical expertise on staff to help their customers install and achieve the benefits that the vendor claim about their products.
- Distribution Partners — These partners provide a powerful scaling effect for vendors as they build relationships with all of the channel partners and can take on the responsibilities of enabling their channel partner ecosystem to drive a vendor’s product in the marketplace. Examples of partners that fall into this category are Arrow Electronics, Synnex, and Ingram Micro. Many of these partners also have subsidiaries based around the world. They can act as a powerful extension of a vendor’s sales organization to scale the awareness and enablement of a vendor’s products. Distribution partners play a pivotal role in the channel but it is critical that the products and the company are setup to support their ability to scale.
- System Integrators — These are partners that are focused purely on services and are less interested in reselling products. Examples of partners that fall into this category are CGI Group, Booz Allen, and Redapt. They are often positioning themselves as “trusted” advisors to their clients and do not want to be seen as receiving any benefit from the companies they may be advocating. However, these companies do have a strong affinity towards products that require services to implement and operate.
- Technology Partners — These are partners that have an “integration” relationship between a product they sell in the marketplace and the vendor’s product. These companies are interested in partnerships that enable them to fill a gap in their product that is not a core competency for them.
- OEM Partners — These partners embed a vendor’s technology into their own. These partnerships tend to be highly custom and can be very lucrative if the relationship has been crafted to enable growth for the OEM partner.
- Managed Service Providers — These partners are a new and growing group of partners that buy a vendor’s product and set it up in their data center and offer services to end customers. This indirect model is becoming more prevalent with the growth of cloud based services.
Now that we have defined a few routes, we should think about what makes the ideal route for a vendor. There is no simple formulaic method for making the decision. However, as the framework above implies, the internal process should start with a thorough evaluation of the maturity of the product and company, not to mention the market landscape. In the next set of posts we’ll dig into the impact of a product’s complexity and a company’s stage in choosing the right indirect route to market.