Partner Go to Market Strategy for Enterprise Software / SaaS
Many startups make the mistake of partnering with as many companies as possible. Actually, too many companies in general make this mistake. You want to avoid the Barney partnerships problem. Here are 2 other problems that happen if you are not deliberate with your partnering strategy;
· Channel conflict. Too many partnerships without careful consideration about who to partner with. This will cause channel conflict problems. This is when many partners end up competing for the same deals. Or when your partners end up competing with your direct sales force. This will drive down pricing and it will hurt customer relationships. Customers don’t want to deal with 5 different partners responding to an RFP with the same product. That’s not adding value. It causes confusion and may drive customers to the competition. I once responded to an RFP with a direct response from a software vendor. One of my reseller partners decided to respond as well. The customer chose to ignore both responses. The customer told me that each proposals had different answers to some of the questions. They didn't know which to believe so they just dropped both and went with a competitor.
· Brand reputation. I had a reseller partner at Oracle who was terrible. They did not bother to get certified on the software they were reselling. They knew little about the product. Yet, the partner had the audacity to charge a significant premium when they resold the software to their customers. They could not handle any support requests on their own. So, everything escalated to Oracle. Eventually, a customer caught on to this and complained. Who did they blame? Who were they most upset with? You guessed it. Oracle. You need to make sure that the quality of your partnerships is high. Focusing on the quantity of partnerships is a mistake.
To design the best partner strategy, start with the customer in mind first. When planning who to partner with, most companies think of product or technology requirements. The better way to look at this is what is missing from the customer perspective. You can trace most partnership mistakes to the reason to partner had nothing to do with customers.
What would make it easier for the customer to buy the product? What functionality is missing that would make the product more appealing to customers?
Here are the main areas to think of to get your enterprise software / SaaS partner strategy right;
1. Partner has technology, functionality or data
Technology companies often make build vs. partner decisions.
When I was at Genesys, I managed some OEM relationships. For example, we partnered with InQuira. They were a market leader in Knowledge Management software. Our partnership gave us access to their product and we bundled it together with our product. This created a “whole product’ for our customers. This was a win-win. Genesys did not have to build a Knowledge Management solution. This wasn’t a core competency for us. InQuira got access to the Genesys install base.
2. Partner has access to customers or market
A. Geographic coverage is one of the easier and most obvious partner models. Using partners makes perfect sense if you want to expand into a particular geography. Especially if you are not ready to invest in a direct sales force for that geography. Just make sure there is customer demand. Don’t sign up partners ahead of customer demand.
This leads to rule # 1 - if you can't sell to customers direct, do not assume that partners can sell to customers.
Customers are willing to tolerate lots of inefficiency. If your product addresses their needs they will not care that you have no local presence. Local partners help you scale. They should not be landing your first customers.
B. Market coverage. If you have a goal to enter a new vertical market (eg. retail banking). But, you have no existing presence or brand recognition. Then partnering is a good strategy to penetrate this new market.
Some markets need specialized knowledge or expertise. Selling to the government is an example. You need contracts to sell to government. Some partners sole value add is to provide the ability to contract with government.
C. Sales leverage. A partner with a large sales force can provide leverage by reselling your solution. This is one of the hardest partnership types to manage. Especially if the partner is selling to the same market as your direct sales force. It’s important the you spend time doing proper market mapping. Do not become enamored by all those “feet on the street”. I have seen many of these types of partnerships falter. Large telcos, such as Verzon Business and AT&T, are prefect examples. They have lots of salespeople. But they sell lots of different products. Ask yourself - 1) why would customers want to buy from a large telco. 2) why will a sales rep at the large telco sell your product vs. all the other products they can sell.
rule # 2 - Ensure a compensation model is in place for the sales force at your partner to sell your products.
If they are not motivated, then they will not sell your products. It’s simple. Do not assume they will get compensation. I have seen situations where there was no monetary incentive in place for sales reps to sell a partner's software. Guess how successful those partnerships were?
There are two important tools that help put in place your partner strategy;
· Market Mapping and Account Mapping. Look at the markets you want to sell into. Look at geography, industry and the different buyer personas you sell to. Figure out where the gaps exist. Where you have no presence. Where you are weak. These are areas where partnering may make sense. Partner strategy should support the broader business strategy and sales goals.
You can get granular and map specific accounts as well. If you have a list of the top 100 target accounts, check it for gaps. Where gaps exist is an opportunity to look at partnerships that can help fill these gaps.
· Partner Enablement – NOT simply giving the partner access to your partner portal. Then, dumping all your sales tools, content and marketing collateral on your partners. This is a black hole when it comes to partnerships. For example, if you partner with Acme because they have a big presence in retail banking and you don’t. You need to enable them to be successful. That means they need sales tools, content and marketing collateral tailored for retail banking. You can’t expect Acme to create this on their own. You also can’t expect Acme to use your generic content or content that was created for the telecom industry. That will not resonate with customers in the retail banking industry. Acme also sells different than your direct sales force. They have a different sales method. They need sales tools that support their process. This isn’t going to take care of itself. If you want your partners to be successful, then you need to enable them.
BTW – I am pessimistic about referral partners. I have never seen this work. This is usually something that direct sales teams want. They love the idea of having leads funneled to them by referral partners. In theory, they provide a referral and then step aside to let the direct sales team run an opportunity. It just doesn’t scale. No business is going to invest in something that pays them a meagre 5 to 10% fee. You may need to have a referral partner program for consultants for example. The occasional blue sky deal may come in as a referral. I just wouldn’t spend lots of time and money on this type of partner program.
Enterprise software / SaaS partnerships are hard to execute. Signing a partnership agreement is about 1% of the work. The other 99% is were the magic happens. It all starts with understanding your customers. Your partnership strategy needs to support your go to market strategy. Signing up a bunch of random partners is a recipe for failure.
*I use the term “partners” for the sake of simplicity. There are many different types of partnership models in enterprise software / SaaS. Such as ISV, OEM, systems integrator and reseller.