INSIGHT: Key challenges in the channel
- 15 January, 2015 08:11
Jan De Bondt is a partner at Devenyn & Partners, a European-based management consultancy firm.
During this Channel Expert Q&A session with Computer Market Research, De Bondt identifies certain challenges taking place in modern distribution channels.
What are some of the challenges that partners are facing when it comes to doing business with their vendors?
Today, the majority of channel partners struggle with vendor management. On average, a partner sells product from between 15 to 30 vendors [or more], which requires signifigant time and resources.
Another challenge for parters is the way in which vendors communicate with their channels. Partners receive a multitude of messages, mostly e-mails sent from corporate offices, regional offices, distributors and from local channel account managers.
Partners tend to get the same message 4-6 times. Add social media into the mix and the amount of messages explodes exponentially. You could argue that more is better, but this tends to have the exact opposite effect.
Channel partners also struggle to comply with partner program rules. The main reasons for this are that programs tend to frequently change, are too complex, or often demonstrate a lack of transparency.
Partner noncompliance almost always leads to less favorable conditions, thus less profitability. On the other hand, complex partner programs can make it difficult for vendors to recruit new partners, even if the technology is worth selling.
What is a challenge that vendors are currently facing?
The amount of Partner-Facing Time [PFT] that channel account managers have with their partners. PFT is the amount of time spent by a channel account manager in the field versus time spent in the office.
In reality, it’s time that can be spent on actual channel sales and development.
How much time should channel account managers be dedicating in the field?
A healthy PFT percentage is above 60 per cent. Administrative related tasks outside of the field should ideally be kept to 20-40 per cent of a channel account manager’s time.
As a general rule of thumb, if it doesn’t immediately relate to partner business, it should consume as little time as possible. After all, the action happens in the field, not in the office.
What kinds of administrative tasks consume a channel account manager’s time?
Most of the channel account managers I talk to mention 'quote chasing' as their number one time-consuming activity.
This is often the result of a complex quoting mechanism where partners tend to go back to their channel account manager in order to speed up the time to get an approved special pricing quote.
This process can take anywhere from a couple of days to a couple of weeks, depending on the level of the requested discount.
This directly impacts the channel account manager’s commission, so you can understand why it needs to be attended to promptly.
First, an official escalation is initiated and most of the time workarounds are applied, like calling the special quoting time to ‘prioritize’ their quote. This places a lot of pressure on processes and time constraint on account managers.
Could you see this issue worsening? How?
It’s possible. When a new vendor acquisition occurs, the majority of partners’ efforts are spent in the front office [partner portal/program]. The back office [systems/processes] takes the backseat and often does not get the appropriate attention, at times none at all.
It’s like adding a Ferrari engine to your Fiat Cinquecento. There’s nothing wrong with increasing your power, but it can get very ugly when you forget to adjust the gear ratio and power-assisted steering.
You have to sync all the components in order to win the race. If not, you lose traction and while driving through a curve, you’re out.
What actions are currently being taken to improve the amount of attention partners are getting?
A lot of vendors are improving their processes and systems, but there’s still a lot of work to be done. One of the problems is the lack of empathy vendors sometimes have.
They tend to think that channel partners are only having to manage a single vendor – themselves. Due to the increasingly complex business landscape, efficient systems and processes are key in enabling the channel.
How do you envision things being five years from now?
Every business I know is margin driven. As margins are under constant pressure, it should be in every vendor’s best interest to adopt and implement an 'ease of doing business’ mentality.
I consider ease of doing business to be more of a mentality than just a set of rules. I’m a big fan of the Kaizen method of continuous incremental improvements.
When applied correctly, it eliminates overly inefficient work, thus making it easier to do business. Overall, I’m convinced that vendors will have tough times ahead if they do no focus on their ease of doing business.