The Changing Channel
In the Cloud and IP Era, Partners Rethink the Role of Salespeople
As the channel shifts further and further away from selling products, customers tell us more and more how they don't want to talk with salespeople anymore.
- By Howard M. Cohen
- March 16, 2015
A conversation I had recently was an echo of so many I've been drawn into, that I started to do some serious thinking about it.
The conversation was with the owner of a company that primarily sells cloud services. Like many others, it has had its ups and downs in the market as it learns a completely new science -- the science of selling cloud services. Very few have been immune, but this one seemed more tenacious and agile than others.
This owner mentioned, almost in passing, that the company had recently released the last of its salespeople, a team that once had more than a dozen members. Knowing this owner to value salespeople more highly than some others do, I expressed surprise. His response was even more surprising: "We're about to have the best revenue quarter in the history of the company."
The first thing that hit me was that he had said "the best revenue quarter." With all of those sales salaries, draws, benefits and commissions gone, it was a no-brainer that the profit picture for the quarter would be a meteoric rise above anything previous. So I asked that classic stupid question that journalists and psychiatrists seem unable to resist asking: "Why do you think that is?"
His immediate response was that he thought it was because everyone on his team, from the solution architects to the engineers and the software guys, worked together to close every deal. It was a truly collaborative group effort.
As the channel shifts further and further away from selling products, customers tell us more and more how they don't want to talk with salespeople anymore. They lament, "I want to talk with someone who knows what they're talking about!"
This can readily be attributed to the perceived lack of time by everyone. Everybody has to hurry. They can't waste time on a fast-talking, slick-haired dandy who just wants to make them feel good so they'll issue a purchase order.
Nowhere is the growing chasm between channel vendors and channel partners felt more than in the reaction to the role of salespeople. Channel vendor reps love, want, need and court channel partner salespeople, seeing them as the most direct route to customers who will purchase their products. Where everyone else sees a VAR company, a channel vendor rep sees a customer base.
But owners of channel partner companies have a different vision. More and more of them are telling me how badly they want to get out of the product business altogether. There's no margin in it, they say, and carrying credit to purchase products for sale eats any margin that may exist or consumes badly needed capital.
These same operators are realizing that their salespeople lack the ability to discuss relevant solutions with their customers and relevant solutions are what those customers want most. Then there's the math: Who can afford to give 25 percent or more of the gross profit from any sale away to anyone anymore?
With cloud services eroding the opportunity to sell infrastructure products and attached services, and companies like Microsoft flat-out telling partners they'll need to have their own intellectual property to sell if they're going to survive, the channel has to keep on changing, and changing faster.
Those who aren't creating custom solutions need to figure out from where their intellectual property is going to come. If you think you're exempt and don't have to worry about this, you're dangerously wrong.
Next, your motivation strategy and compensation systems need to be reshaped to more closely resemble those of a professional practice like a medical, accounting, architectural or legal firm. Knowledgeable associates who can find and develop opportunities for new projects need to be given targets to hit that will earn them bonuses and advancement to partnership. The owner needs to function more like a senior partner.
If you haven't asked yourself where you're going to take your channel business in the next few years, don't waste another minute. Start to think about it, talk about it with your stakeholders, begin to ask in which direction you could take your people. Ask customers what they see themselves needing from you. Gather all the information you can and begin to re-imagine, re-visualize and re-invent yourself. You may think you have a choice, but the business will surely show you otherwise.
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Howard M. Cohen is a consultant to IT vendors and channel partner companies and a board member of the U.S. chapter of the IAMCP. Reach him at firstname.lastname@example.org.