13 May 2019

Achieving scale-up lift off from your channel partnerships: what you need to know

Developing a strong channel network is the key for many technology companies wanting to achieve scale-up growth. Whether it is using partners to enter new geographies, vertical markets, or to take advantage of existing strong sales networks, using channel companies to help get your products and services to market can be a serious advantage.

However, our new research conducted in partnership with Investec found that while a majority of vendors have a channel programme in place, the results are far from stellar.

Many tech companies view the channel only as a method of distribution and measure the success of their relationships in cost versus sales. However, this mindset is more likely to lead to fewer sales and short-term business relationships caused by excessive churn of network partners. Vendors find willing partners but if profits are scarce, the answer is to chop the relationship and find someone who will be more successful. The level of portfolio churn is widespread – 52 per cent of vendors said that they need to significantly modify their existing partner roster to meet their needs.

Our research also uncovered a wide disparity between vendors and channel businesses when it came to success and confidence. While 37 per cent of vendors thought that their channel relationships were highly successful, only 14 per cent of channel companies thought the same thing. These figures suggest a lack of communication between vendor and channel and a fair amount of suppressed frustration in channel businesses.

Similarly, 46 per cent of vendors were highly confident of achieving their growth targets, but only 27 per cent of channel companies felt the same way. More can clearly be done to improve performance and to view the channel in broader terms than simply as distribution.

“Most people who run a technology company try to stay true to their vision. But they’ve got to find a balance, accept criticism and change.”

Roger Phillips, Technology Analyst at Investec

Significantly, the channel will often know more about how a product or service will resonate with end customers than vendors. They know more about the markets being entered and have a more experienced sales force with strong existing relationships. These things matter. They are after all the reasons why vendors choose to establish a partner network in the first place. To be successful, a channel programme needs to be a genuine network, a two-way street where vendors and channel partners work together. They need to share knowledge and experience to ensure success in the marketplace.

We know from working closely with the leaders of technology companies that they spend time and energy building a vision, developing intellectual property and getting viable products to market. That laser-like focus means it can be hard to shift mind-set and accept feedback from third parties. That doesn’t just hamper scale-up opportunities – it can hurt existing business relationships.

A big issue is that less than half of channel programmes have a dedicated research and development team. This is the hub for being able to take action on the information and advice vendors get from their channel. Listening is one thing but without an R&D team, who is going to be there to adjust a product or service to make it fit for the market?

Those who see the Channel as a two-way street understand partners can contextualise opportunities and suggest new products and services that will reveal scale-up opportunities. It might be extra functionality, new ways to support sales, roll-outs or systems integration. Or it could be investment opportunities to open new verticals or geographies. A genuine dialogue and the means to take action on the feedback received is one of the most vital markers for success when a tech vendor enters the scale-up phase. Tech leaders should make sure they listen to that message, loud and clear.

To learn more about these and other wide ranging insights from our latest research project with partner Investec, get in touch.