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Changing the Channel From One-Off Deals to Long-Term Relationships

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By Carl Theobald

There are two clear trends in the software world that come to play in this equation: one is the shift to subscription-based revenue models. The second is the change in customer expectations and buying behavior, which, closely correlated with the first trend, means that the power has shifted away from the vendor and moved into the customer’s hands.

Companies are being pushed to transition into a multichannel engagement that turns all touch points into strategic interaction instead of operating in departmental silos. Upfront product revenues in the form of large license fees are shrinking. As software vendors increasingly shift their product portfolio towards subscriptions and SaaS, the role of the channel partner — as a key component of the demand chain — is also changing.

This implies that existing compensation models for channel partners also need to change.

Despite the “democratization" of software distribution and lower entry barriers to international markets, indirect channels continue to grow and flourish. Selling is about the customer, not about the product, and how better to scale the personal relationship and market knowledge than through the local partner, especially for small to midsize companies that want to go beyond just the direct online store but do not have the resource power to do it themselves.

Software vendors must redefine the role that their channel partners will play in this new world. Empowering the channel to own the relationship with the end customer and manage renewals, upgrades, cross-sales is the right way to go.

There are challenges related to this approach, however. In order to enable a recurring revenue model via the channel, there is an increasing need to have visibility into channel partners’ performance. Moreover, software vendors need to reduce complexity for partners to register new accounts, determine who owns the billing, clarify how to take ownership of the ongoing relationships with end customers, what are typical renewal rates and how can performance around these key areas be measured for partners.

These are just a few examples of challenges faced when changing the role of the channel into long-term relationship builders. How can that be tackled by software vendors? We’ll explore this topic in a future post. Stay tuned.

Carl Theobald is CEO of Avangate. A  seasoned technology executive with a proven track record of building high-performance organizations and bringing world-class products and services to market, he served as senior vice president at Serena Software prior to joining Avangate. He has also held multiple executive roles at Oracle.

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