One of the most significant decisions an ISV/software developer faces is whether to sell direct or to develop an IT channel, comprising VARs, MSPs (managed services providers), MSSPs (managed security services providers), SIs (systems integrators), solution providers and value-added distributors. Selling direct may give an ISV more control over the sales process, but those looking for exponential growth should seriously consider the latter option. Here are four tips to keep in mind as you investigate this possibility in 2018.
1. Half-Hearted Channel Strategies Don’t Work.
The decision to sell through a channel should not be made in a half-baked manner. Channel partners are savvy and want to work with ISVs. However, they can spot a lousy channel program faster than snow melts in the Sahara. Take your time, invest in building your channel program first, then start recruiting channel partners. You may need to hire a dedicated resource, but it doesn’t necessarily have to be an expensive senior executive. You’ll need someone dedicated to the channel, and with whom channel companies can relate. If you don’t, you will get frustrated, you will hit significant roadblocks, you will ruin relationships, and you will throw in the towel. Also, remember going in, most partners don’t start selling day one. Partners are part of your sales team and take time to ramp up and grow. Invest in them the same time and energy you do in your sales force, and they will exponentially grow your business without the cost of a dedicated in-house sales team.
2. Finding the Right Channel Partners.
Anyone can pick up a directory, buy a phone number/email list and start dialing or sending emails. If you haven’t done this, you’ll soon understand the costs and challenges of recruiting a productive sales channel. With SaaS being so verticalized, ISVs have to know the DNA of the right partners to market to and recruit. Just because a company is an MSP, MSSP or SI doesn’t mean they are a good fit for your software. You need to understand what makes your best partners tick and, most importantly, what are your best candidates turnoffs? Once an ISV realizes this, it can cost-effectively recruit an effective sales channel.
3. Articulate Your Business Model.
How do you entice a sales partner to sell a $4 to $8 software license when they make only $.80 to $2 per license/seat/user? That’s a very tough sell with most sales partners if you don’t know the full business model. How does your channel make money from your product beyond commissions, margins or markups? Research from CompTIA found that “Partners report most of their SaaS-related revenue is coming from customization and integration services.”
Consider this: Anyone can sign up for your product. However, does every client have time/expertize to set it up/configure it correctly, integrate it and make it work to support their business goals and objectives? In many cases, no. Hence your attrition rate rises for no fault of the software but because the end client couldn’t get it to provide them with the expected value. The net-net is that you must understand and articulate to the partners how to build services around your SaaS offering.
4. Enable Your Channel Partners.
Be mindful of the fact that your channel partners will face the same objections you’ve experienced with your product. Make sure you’re sharing your marketing, sales, service packages and other resources to help them overcome objections and be successful. Providing these tools and services will go a long way in distinguishing your company from all the “me too” software developers who will be competing for their attention. Savvy channel companies (i.e., your ideal partner candidates) want to work with vendor partners not just software companies with cheap products that they can upsell. In fact, if they only want to focus on licensing costs and don’t care about support, enablement and other factors that are important for a partnership, they’re probably not worth your time.