Why sharing business risk is the real partnership model
- 06 June, 2016 04:30
David Henderson - Hall of Fame inductee
A few years ago, when I was head of a vendor channel organisation, I invited the leader of a large system integrator to visit our headquarter in Boston.
The objective of the trip was to share roadmaps for the next three years and have high level discussions with senior management and product development teams; All designed to respect the strategic commitment made by the partner to our solution set.
Everything was going well with what I thought was excellent content in the presentations and outstanding hospitality.
So towards the end of the week long visit, I asked the question – did the MD think he had good return on his investment of time?
Secretly, I was rather pleased with the demonstration of our commitment to the partner and the maturity of our partner program.
I sat back and waited for the the accolades and compliments. How wrong was I.
The MD took a deep breath and said “David, your technology and products are world class and you have a good channel program but, like the majority of vendors, you simply pay lip service to a genuine partnership.
A genuine partnership is where both parties share the business risk associated with delivering a solution to a customer.
“However, under the current model it’s the partner who is responsible for integrating the solutions, accepting the penalty clauses, carrying the cash flow and payments schedule, managing the product defects or specifications not living up to the brochure and managing the disruptive behaviour of end of quarter driven sales organisations.
“In other words, it’s the partner who is always left carrying the bag when things go wrong. When the vendor community embraces a shared business risk model then we will have a true partnership, until then we will always have a transactional relationship.”
So what was supposed to be a study tour for our partner, turned into the most valuable insight into how to forge a strategic and successful relationship with partners, way beyond the rules, regulations, obligations and small print of so many channel programs.
The ability to embrace this model does not mean that all parties have to sign back to back agreements on terms and conditions and penalty clauses. It does mean that all parties should look ways to minimise the risk and share the load of responsibilities.
Here are a few examples; IBM recently announced it was seconding IBM headcount into key partners to assist in the design and delivery of an integrated IBM solution. Excellent concept, saved cost for the partner and a well designed solution.
The whole philosophy behind the VCE joint venture was the coming together of three vendors to “guarantee the integrated solution”.
If it didn’t work, it was the vendors who were on the line to fix the issue.
The much maligned distribution partners, each and every one of them, embrace the partnership model by delivering working capital and payment schedules to allow the partners to roll out major deals.
The telcos reward their partners not only for closing a deal, but also delivering ongoing annuity stream to keep partners engaged and funded to grow their business.
So, if you are sitting there as a vendor and are genuine in wanting to build a partnership, ask yourself the questions: How can I assist in cash flow? Can I fund headcount? How can I assist in financing? Can I underwrite the performance of a solution? And so the list goes on.
Too much time is spent on managing the channel program and demanding compliance and working on next year’s changes.
Whereas greater results would be delivered if we come together and look to ways of sharing obligations and responsibilities. Only then will we have a true partnership.
My eternal gratitude to Steve Nola for his honesty and openness and, of course, the throbbing headache the day after.
Top four partner questions for vendors to answer:
- How can I assist in cash flow?
- Can I fund headcount?
- How can I assist in financing?
- Can I underwrite the performance of a solution?