Accenture white paper developing indirect channels
11 likes6,174 views
1) Indirect sales channels can help companies boost revenue and maintain profitability during challenging economic times when deal sizes tend to be smaller, by lowering costs compared to direct channels and helping expand market coverage. 2) To fully realize the benefits of indirect channels and build a channel that sustains high performance, companies must take a structured, analytical approach to selecting partners, bringing them onboard effectively, and closely managing performance. 3) Accenture's research identified a 5-step approach to developing indirect channels successfully, including analyzing cost structures and qualified partner selection. When done right, indirect channels can help companies navigate economic downturns and emerge stronger.
Accenture white paper developing indirect channels
- 1. Letter Flyer Title Customer Acquisition and Retention Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues
- 2. Overall, indirect sales channels entail lower total costs compared to direct channels. In challenging economic times, when deal size tends to get smaller, making effective use of indirect channels can become a prerequisite for high performance, by helping to boost revenue and maintain profitability. Whether a company is adopting indirect channels for the first time, or is trying to optimize the cost advantages of existing channels, realizing the maximum benefit from indirect channels requires a structured, analytically driven approach to strategy development, execution and management. 2 Customer Acquisition and Retention
- 3. Sustaining High Performance through Uncertain Times The Economic expanding market coverage. This has an indirect channel that boosts revenue been particularly true in the electronics, and ultimately enables high performance, Significance of Indirect communications and high tech sectors. a company must select the right channels Channels For example, the indirect channel now partners, bring them on board in the accounts for 66 percent of overall right way, and manage their performance The mix of direct vs. indirect channels technology sales1, up from 53 percent closely. used by many companies has changed in 1997. This change in the channel significantly over the past 10 years. Based on leading practices and our client mix—to include both direct and indirect Direct channels are critical routes experience, Accenture has structured a channels—has enabled companies to into the marketplace, but diminishing five-step approach to help companies better target customers and expand into economic returns often require a address these requirements and harness new markets (Figure 1). company to add indirect channels to their the power of indirect channels. go-to-market strategy at some point. However, while more companies have incorporated indirect channels into their The experience of many organizations sales approaches, the success of these over the past several years demonstrates programs can vary significantly. To build that indirect channels can be critical to Figure 1. Technology sales distribution by channel type. Technology sales through indirect channels increased 26 percent over the past 10 years Technology Sales Distribution by Channel 1997 2007 33% 47% 53% 67% Direct Indirect Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 3
- 4. Cost Savings and Channel-specific costs can differ were able to package their offerings so that their indirect channels could significantly by firm. Conducting a Strategic Growth thorough analysis of the overall cost enhance, sell and support products Analysis and anecdotal evidence highlight structure for direct channels vs. indirect and services independently, and drive a critical difference between the two channels helps determine the go-to- revenue growth. According to execu- channel types: in challenging economic market approach most effective for tives at these companies, more than times, deal size tends to get smaller each organization. In general, however, 80 percent of their sales are currently (Figure 2). In a weak economy, therefore, indirect channels can lower distribu- derived from indirect channels. it may become more important for tion costs, expand market coverage According to published reports, Hewlett companies to strengthen the strategy and enable improved performance by Packard (HP) also grew revenue us- behind their indirect channel programs supporting a rapidly growing product ing indirect channels during a slow and improve the execution of these portfolio targeted at new markets. economy. When Mark Hurd became CEO programs. In short, leading companies use a in March 2005, HP developed indirect A recent analysis of total average IT combination of direct, indirect and channels to expand its market coverage. distribution costs by channel type inside sales channels, taking advantage By 2006, the company identified more indicates the cost advantages that of the complementary capabilities of than $68 billion in untapped spending indirect channels offer.2 While indirect each channel type to serve specific by businesses that had never bought an channels add more cost categories than customer segments. HP product. Capturing these custom- do direct channels—for example, transfer ers through the indirect channel was For example, two major companies in HP’s 2006 priority for new growth in discount, market development funds, the software and high technology sector price protection—both 1-tier indirect the slowing economy.3 By 2007, the have both used indirect channel pro- company surpassed the $100 billion channels (for example, value-added grams from the early 1990s onwards to resellers, systems integrators) and mark in annual sales for the first time, navigate economic downturns success- largely driven by its strong emphasis on 2-tier distribution approaches tend to fully, and both emerged stronger when demonstrate lower total cost when the indirect channel.4 economic conditions improved. They compared to direct channels (Figure 3). Figure 2. Tradeoffs between deal size and volume for direct and Figure 3. Channel-specific IT distribution costs. indirect channels. Indirect channels save 11 percent in costs over direct channels Total Average Sales Cost by Channel Direct 63% 1-Tier indirect (Value Added Reseller) 61% Deal Size The Gap $ Mail order/retail 58% 2-Tier indirect 56% Web 50% Direct Indirect Channel Number of Deals Notes: IT distribution costs are shown as a percent of sales. Total average costs are determined based on business to business and solution sales. 4 Customer Acquisition and Retention
- 5. By studying practices employed by • Phase one identifies channel develop- several growth strategies at the same these and other successful companies, ment requirements and creates a time. This approach can be a drastic shift Accenture has developed a structured short list of qualified channel partners from a single-focus growth strategy that approach for developing and manag- who can address those requirements. served a company well in a more stable ing indirect channels to enable high business climate. • Phase two develops actionable steps performance. for bringing new partners on board. To meet revenue goals in more challeng- A Five-step Method Step 1: Review Go-to- ing times, business units often embark on competing and expensive channel Our approach to channel development (Figure 4) defines an effective market Approach development efforts. In contrast, high- performance businesses tightly align multichannel strategy for selling Accenture’s research into leading their growth strategies across various solutions and services, which helps industry practices shows that successful customer segments. Creating such companies quickly identify the gaps in companies segment their addressable alignment results in a more unified and their market coverage requirements, market and prioritize vertical targets.5 efficient go-to-market strategy. identify the right channel partners for Because customer needs vary, it can addressing these gaps and rapidly bring be difficult to establish new indirect Accenture’s approach to channel new partners on board to boost sales. development begins with the premise channels that concurrently address The approach consists of three distinct the needs of multiple vertical markets. that a well-defined go-to-market phases: Companies should first prioritize the strategy addresses specific customer vertical markets they plan to target, and segments within target verticals using • The prerequisite phase reviews the well-defined, differentiated offerings. outline known routes to these markets existing go-to-market strategy and before developing new channels. Absent a clear go-to-market strategy, its alignment to the overall corporate we recommend that companies complete strategy. Our research also shows that companies this prerequisite step before beginning under pressure to boost revenues in a phases one and two. challenging business environment pursue Figure 4. Our approach to channel development helps establish a successful indirect channel program to boost revenue and enable growth. Accenture Channel Development Method: A Five-Step, High-Level Approach Pre- Requisite Phase 1 Phase 2 1 Review Go-To- 2 3 Research and 4 5 Create Onboarding Analyze and Map Evaluate and Qualify Market (GTM) Develop Partnership and Implementation Approach (Optional) Channel Structure Candidates Select Partners Approach Assets • GTM framework • Industry specific channel • Relationship with 3rd • Partner evaluation • Partner on-boarding • Leading practices structure party channel framework best practices development agencies Activities • Review target customer • Determine key players in • Evaluate existing • Adapt Partner • Evaluate current segment profile value chain channels’ ability to evaluation framework on-boarding plan • Confirm segment • Define players roles, high provide market coverage to meet client needs (Optional) requirements level economics, operating (Optional) • Develop shortlist of • Identify caps • Align channel segments protocols • Identify market coverage partnership candidates (Optional) with target • Create specific product / gaps (Optional) • Conduct 1:1 interviews • Develop on-boarding market/customers service channel map • Uncover potential with prospects approach • Assess offering roadmap partnership candidates • Complete required due • Construct channel and value proposition • Supplement list, as diligence specific ‘Business Plan’ • Assess channel program needed, with additional • Finalize shortlist • Define “100 Day” value proposition research action plan • Confirm GTM approach Deliverables • GTM approach - • Channel map • Target partner list • Qualified shortlist of • On-board approach assessment partnership candidates • Business plan • “100 Day” action plan Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 5
- 6. Step 2: Analyze and Map sales model. Mapping the channel right customer segments. Similarly, structure bolsters the company’s ability distribution partners and resellers Channel Structure to support multiple partnering models. It help in transacting and delivering Researching new channel partners for is also important to recognize, measure the product to the customer. The HP a go-to-market strategy requires a and reward the specific contributions OpenCall platform facilitates a seamless thorough understanding of the industry made by partners to growing the flow of information among all the right channel structure and the relationships partner ecosystem, and it is equally entities in the partner ecosystem. between market participants. Accenture important to manage the channels in a Using a mapped channel structure, recommends creating a channel consistent manner. the HP partner program provides structure map to identify key players For example, HP has instituted a a customer-facing directory of its and how each influences solutions holistic partner ecosystem management complete ecosystem of partners available in the market place. Because a program to support its HP OpenCall and solutions. An accurate partner channel structure varies by market, such solution. This program engages an profile—available 24/7 through the a map can be invaluable for identifying appropriate customer segment with portal—plays a critical role in engaging worthwhile sales channels. the right channel partner, fostering the right entities on the channel map For example, in an evolving channel profitable business momentum and and linking them with the appropriate landscape high tech vendors use lowering development and testing costs. customer segments. multiple channel partners and tiers, Results include faster time to increased including systems integrators, resellers, sales and new revenue generation. independent software vendors, direct This partner program also adds market resellers and distributors. The momentum to development and go-to- complexity of this kind of multi-tiered market plans. Software providers and channel structure makes it essential to system integrators help influence deals understand the role each partner plays during the initial stages of deal making in the original equipment manufacturer’s by informing and interacting with the 6 Customer Acquisition and Retention
- 7. Mapping a channel structure is a three- The different colors show whether the step endeavor: supplier or third parties determine the 1. Identify the customer segments you operational direction of each channel participant. wish to serve. 2. Lay out the basic channel functions An external market study would result that route you to market. A typical in defining key channel partner groups, model might include the routes you leading channel partners and their use to: company profiles, the regions where • Inform they operate, the segments they target, • Interact the offerings they support and services they provide, and the strength of their • Transact customer base. The study would identify • Deliver emerging channel trends and additional • Service channel considerations for future 3. Define how channel partners perform expansion. basic channel functions exclusively or cooperatively (systems integrators, independent software vendors, resellers and distributors). The channel map offers a bird’s-eye view of existing channel participants and the topography of their existing relationships. Figure 5 shows a hypothetical channel map from the perspective of an original equipment manufacturer in the automotive industry. Figure 5. Illustrative original equipment manufacturer channel map for customer segments and channel participants. Customer Segments Inform Interact Transact Deliver Service Dealer Traditional Dealer Channel Dealer Marketing Traditional Direct OEM Direct Dealer Dealer Dealer Other Solution Providers Techno - New Media Ad Online Tech Online Dealer A, B or C Friendly Agencies Site Logistics Partner OEM Sales Force OEM Service Corporate OEM Direct Online OEM Buy Direct Organization Back Traditional Ad Agency Variety - Channel Ads. Dealer Service Channel Mass Merchandiser Facility Advertising Seeker Primary OEM Dealer Primarily Independent OEM/Dealer or Independent OEM: Original Equipment Manufacturer Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 7
- 8. Step 3: Research and Step 4: Evaluate and This step should also include developing an approach for education, as well Develop Partnership Qualify Select Partners creating materials to train new partners Candidates In this step, Accenture recommends rapidly. Activities here should include: evaluating the strategic fit of channel • Training content development and This step in the channel development process varies depending on a company’s partners against a desired partner management. channel maturity level. Established profile. That profile derives from a • Training administration, registration companies successfully improve channel comprehensive understanding of the and logistics. performance by using advanced analyti- industry channel structure and the • Training delivery and feedback. cal methods. role the partner plays within that channel. Another critical component is • Training competency management. These methods help companies iden- the assessment of a channel partner’s • Partner certification, tracking and tify poor performers in their channel ability to mobilize by evaluating the testing. strategy and improve the potential of partner’s business readiness, opera- • Events content development and certified partners to improve channel tional readiness and technical readiness. management. efficiencies. Lastly, determine a potential partner’s To improve partner productivity, compa- ability to achieve rapid sales impact by nies with established indirect channels evaluating the partner’s credentials, should also redefine their desired partner market visibility, depth of territory and profiles to align with their revamped opportunities in the pipeline. metrics for partner productivity. They reevaluate the current partner network Step 5: Create the to weed out non-performers and add partners who better fit the new profile. Onboarding and For example, shortly after the dotcom Implementation Approach bubble burst in 2001, a major network- Two key activities for bringing channel ing manufacturer realized it needed to partners on-board are enablement and transform its volume-based partner education. This step calls for a custom- program into a value-based one to ized 100-day onboarding plan that improve channel efficiency. Detailed addresses key requirements for imple- analysis of its partner program showed menting the indirect channel program, that about 1 percent of its partners and establishes the key capabilities generated more than 70 percent of its required for effective enablement and channel business. Only about 25 percent education prior to on-boarding partners: of the company’s channel partners were certified and had the potential to drive • Vendor intelligence (product, additional business.6 The others were market and customer) dissemination, registered partners. including product roadmaps, addressable market data and business planning input. • Business planning and accountability management. • Partner contract amendment and finalization. • Partner activation and ramp up. • Solution authorization. • Joint solution catalog update. 8 Customer Acquisition and Retention
- 9. How Leaders Build Indirect Channel Capabilities Growing Revenues Diversifying the Entering New Markets Sun Microsystems Channel Mix Juniper In July 2008, Sun announced plans to Dell Juniper Networks started in 1997 streamline its sales organization and use using a direct sales channel to target Michael Dell is another champion for its 600 or so channel partners to support telecommunication carriers. After customers below its top-300 accounts harnessing the power of indirect channels. improving its suite of offerings the worldwide. Sun’s senior executive When he returned as CEO in January company sharpened its market focus responsible for channels reported that 2007, he recognized the drawback of and targeted large enterprises a few two-thirds of business came through it over-reliance on the direct sales model years later. In 2004, Juniper launched its channel partners. By restructuring its he helped pioneer 20 years earlier. During indirect channel program and targeted the sales organization, Sun expects to raise the previous three years, Dell’s indirect broader business market. This measured channel revenue significantly, bringing channels had grown at a compounded approach helped Juniper make significant it in line with industry leaders and—as annual rate of 16 percent without a inroads into the networking technologies noted by industry experts—streamline its formal program structure and generated market and attain a more dominant operations and improve market coverage 15 percent of Dell’s total FY07 revenues.9 position in the overall market.14 in spite of workforce reductions made This success prompted the company to prior to launching the program.7 unveil a new indirect sales program in Telstra Incorporated December 2007 to increase sales. By July Service providers typically use direct sales Novell channels to sell and support complex 2007, the indirect channel was generating Novell, owner of SUSE Linux Enterprise, 20 percent of Dell’s total revenues.10 offerings. Increased focus on solution saw its 2008 first-quarter revenue selling has prompted providers to explore increase by 69 percent and its 2008 Avaya options for leveraging their suppliers’ second-quarter increase by 38 percent. Avaya, a leading provider of high tech indirect channel capabilities to offer Next year, corporate spokespeople communications products, is currently joint solutions. In August 2008, Telstra report, more than half of Novell's SUSE transforming itself to become a strong Incorporated launched an indirect channel Linux Enterprise revenue is expected to communications contender in the small- program to expand international sales. come from the indirect channel.8 The to-medium enterprise market. To acceler- Telstra Incorporates is the US-based challenge for companies with emerging ate this transformation, Avaya recently arm of Telstra International—a division indirect channels is to rationalize and appointed a new senior executive with of Australia’s leading and largest tier-1 scale their programs and then to identify successful indirect channel experience telecommunications and information and incorporate new partners in a at several companies to lead its global services company, Telstra Corporation structured way. indirect channel division. Currently the Limited. In the company’s indirect indirect channel accounts for 55 percent channel program, resellers maintain direct of Avaya’s total sales.11 The newly control over relationships with Telstra appointed channel lead set a corporate Incorporated clients and manage all target to achieve 85 percent of total sales aspects of Telstra Incorporated services through the indirect channel by 2011.12 as if they were their own. Conversely, the One of Avaya’s senior executives reported program relieves referral providers of the that a main challenge concerned auditing infrastructure requirements that come and analyzing the performance of its with reselling, supporting and billing for existing indirect channel and revamping an international telecom service. Referral it to meet its very aggressive corporate providers share in the revenue based on goals.13 prices that they can command; they have no responsibility for service delivery or troubleshooting.15 Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 9
- 10. To help clients achieve high performance by meeting the challenges of reaching new customers and growing revenues in uncertain times, Accenture offers insight, experience and a distinctive, structured approach—for developing indirect channels. We have developed leading practices for each activity in our approach, based on our extensive experience as a leading provider of management consulting and systems integration services, and as a channel partner for more than 200 partner companies. We also provide access to third-party resources to help identify and screen prospective partners using established evaluation criteria, which we customize to specific client needs. For more information about out how Accenture can help your organization on the journey to high performance, please contact one of the authors, or call us at +1 (312) 737-8290 or send e-mail to accenture.direct@accenture.com and reference this document. To read more about Accenture’s Sales and Channel Services, visit accenture.com/toplinegrowth For more Accenture insights on customer acquisition and retention in uncertain times, visit accenture.com/centricity 1 Dan Neel, “Positive Growth and New Market Perspective Paint Health Outlook for Pervasive Technology Channel,” http://www.ChannelWeb.com, May 2, 2007. Accenture analysis. 2 Global Technology Distribution Council, “Cost of IT Distribution,” September, 2008. 3 Lawrence Walsh, “HP Welcomes Proposals That Target Non-HP Customers,” http://www.Channel Insider.com, October 6, 2006. 4 Craig Zarley,”2008 Channel Champions,” http://www.ChannelWeb.com, April 25, 2008. 5 Accenture and the Economist Intelligence Unit, Innovation and Profitable Growth Survey, 2006. Accenture and CSO Insights, “Sales Performance Optimization,” 2006. CMO, “CMO RealityCheck,” June, 2005. 6 Rivka Little, “Cisco Worldwide Channel Chief: Partners Are about More than Fulfillment,” http://www.SearchITChannel.com, July 10, 2008. Accenture analysis. 7 James Niccolai, “Sun Moves to Indirect Sales for Most US Customers,” IDG News Service, July 23, 2008. 8 Colin Steele, “Enterprise Linux Growing but Still Far behind Windows and Mac,” http://www.searchitchannel.com, June 2008. 9 Tiffani Bova, Mark Stahlman and Mikako Kitagawa, “Dell Shifts Global Sales Strategy to Gain Back Market Share,” Dataquest Insight, January 30, 2008. 10 Chris Gonsalves, “Dell Getting Partner Raves for Evolving Channel Program,” http://www.channelinsider.com, July 2008. 11 Allan Sulkin, “Avaya CEO Giancarlo Talks to Industry Analysts at Avaya Conference,” http://www.nojitter.com, October 23, 2008. 12 Brian Riggs, “New Faces in Basking Ridge,” http://www.nojitter.com, October 22, 2008. 13 Andrew R Hickey, “Avaya Looks to Channel for SMB, Services,” http://www.ChannelWeb.com, July 2008. 14 Sean Michael Kerner, “Cisco Dominates in Routers as Juniper, Nortel Gain,” Datamation, November 21, 2007. Mikael Ricknäs, “Nortel files for Bankruptcy,” http://www.NetworkWorld. com, January 15, 2009. Company sources. 15 Telstra Incorporated. “Telstra Incorporated Launches Indirect Channel Program through Comprehensive Reseller & Referral Partner Programs,” http://www.reuters.com, August 19, 2008. 10 Customer Acquisition and Retention
- 11. About the Authors companies optimize their channel Ramesh Venkataraman is an partner relationships and in enabling experienced manager with Accenture’s Senior executive Kevin Bandy is the e-business strategies, business processes Strategy service line. He has a broad global lead for the Sales and Marketing and change efforts for channel sales range of experience helping several high Transformation practice of Accenture's and marketing initiatives. He is based in tech companies create and implement Communications & High Tech industry Phoenix. their go-to-market and operational group. He oversees the development of strategies. Prior to joining Accenture, strategies, assets and tools that help ron.ref@accenture.com he held senior-level positions at several companies in communications and high Adrian Sawczuk is a senior manager startups and Fortune 500 companies, tech industries improve sales capacities, with Accenture’s Strategy service line. which included developing, launching and pursue large-scale transformation He works with companies across a wide managing sales and marketing initiatives of sales organizations and enter new range of industries, helping them develop for three major technology product lines. markets and geographic regions. He is and implement strategies for growth, He is based in Reston. based in Atlanta. new business development, product kevin.f.bandy@accenture.com and channel development and new ramesh.venkataraman@accenture.com market entry. Prior to joining Accenture, Ron Ref is a senior executive with he cofounded a telecommunications the Accenture CRM service line, and infrastructure management company, leads the Electronics & High Tech Sales where he also served as vice president and Marketing service line in North of business development. He is based in America. He has extensive experience Atlanta. helping electronics and high tech adrian.sawczuk@accenture.com Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 11
- 12. Copyright © 2009 Accenture About Accenture All rights reserved. Accenture is a global management Accenture, its logo, and consulting, technology services and High Performance Delivered outsourcing company. Combining are trademarks of Accenture. unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. With more than 186,000 people serving clients in over 120 countries, the company generated net revenues of US$23.39 billion for the fiscal year ended Aug. 31, 2008. Its home page is www.accenture.com.