Myth-Stakes of Partner Building 107: Independent PLM software providers expecting that selling through an indirect reseller channel will take less time, skill, or investment than with a direct sales strategy.
Over the years I have spoken with a variety of managers at new and old, small and large software providers across the many solution market segments that populate the PLM ecosystem (e.g., CAD, PDM, CAE, EDA, CM, PPM, AMT, PCM, etc.). In our conversations about market strategies I often heard their hope, or dream, that selling through channel partners would instantly be easier, faster, and more profitable than through their own direct sales force. As many veteran channel managers know, that expectation of an indirect channel is often misguided as a motivation.
The truth is that for unprepared or unrealistic independent software vendors (ISVs) the process of going-to-market through a channel takes more calendar time and managerial attention to make work than standing up their own sales force. It’s hard, not easy work even with the most attractive products in the hottest new market. And rarely is it less costly or more profitable in the beginning.
What’s the primary difference between successful versus struggling channel programs? Those ISVs who have first stood up, invested in, and enabled their own direct sales force to be successful are far more likely to have created the special recipe to make a channel work.
There is simply no substitute for the hard lessons learned by watching your own sales force encounter obstacles, overcome challenges, adjust from failures, and eventually find success as they introduce a new product, a new technology, or even a new company into noisy, crowded technology markets. The insights gained from an all-executives-on-deck sales journey is a prerequisite for enabling a channel program to be equally successful.
This is not a stage along the business maturity learning curve to be avoided or leapt over, but a necessary phase to be embraced and valued. By going through this direct sales process a software development company is able to transform itself into a product sales company. That means confronting the reality that the “software code” which their visionary technologists create is not the same as the “market product” which their real-world sales force needs to sell.
The product that is sold – and which customers perceive in their mind to have sufficient value to take the risk to acquire – includes many elements that can take as much talent and effort to develop, test, release, train, and mature as the actual software code does. It’s why most early-stage investors today spend as much time examining the competencies of an ISV’s marketing and sales leadership as they do in assessing the capabilities and potential of the software. Even the best software that users may operate will not find success in the market unless the ISV has also developed a run-time code or playbook for their sales and marketing teams to execute that is as effective and error-free as the software.
It is not uncommon that the best-planned market strategies, messaging language, competitive differentiation, lead generation, outbound scripts, customer presentations, sales collaterals, software demonstrations, and ROI value propositions are all revised when put to the test by a hungry sales force with quotas to meet. Sometimes, these elements don’t even exist until a sales force goes to work and has to create them on the fly to engage prospects and move opportunities through the funnel. Quite often, they are revised or scrapped all together when sales reports back that how the product is positioned and presented fails to resonate with customers who are overwhelmed with so many investment choices competing for their attention.
Only through managing a direct sales channel can all the insights, strategies, and assets be developed that a channel partner requires to be successful. Giving a new partner a new product from a new company the mission to go forth and sell without these elements also ready-to-go is a recipe for failure to launch. Partners are not going to invest in creating, testing, and perfecting these sales-enabling elements if the solution provider has not yet done so themselves. The initial experience of an ISV creating or winning new business with their own direct sales effort will ultimately make selling through a channel viable, repeatable, and scalable. It may not be easy, but not nearly as hard as without it.
A reasonable question to ask is if the effort to make an indirect reseller channel perform is as substantial as direct sales – and may even be more unpredictable or risky – why have one at all? We’ll review the many reasons for small or large software providers in PLM market segments to channel-up in our next Alliance Alchemy post on the most common Myth-Stakes of Partner Building.