Partnering for Success

July 27, 2009

Why do upstart / small/ medium ISVs find it difficult to establish partnership in new regions ….

ISVs find it difficult to get mindshare of resellers or SI partners specially when they want to expand beyond their geographical region. When you think more deeply you would find few reasons.

When the ISV is entering into new region, a lot of work is needed to be done for the market development. Someone has to do this work – either ISV or the local partner. If partner decides to go ahead with the market development, question is how to get returns on the investments. The traditional partnership model in IT industry works on commission basis. If that is the only form of return the considerations for investment are driven by many factors :

  • Cost of the ISV solution and the % margin,
  • The absolute value of the margin
  • Volume of sales per month
  • Potential total gross profit in a given period.

Most of the time the Potential margin itself is not justifiable to make any significant investment. When it is a decent amount, the time frame may take much longer to get the returns.

Such scenario is not new to ISV vendors and hence ISV sticks to selling directly to the customers till the time it reaches certain threshold. When ISV is looking to grow beyond its geographical region (in new territories), setting up office or appointing a sales person is too costly a proposition. And given the above considerations it is difficult to excite the partner to work on purely commission basis and earn decent returns.

What is the alternative ?

Well, ISV can try some age old method of paying the retainer-ship fee to one of the partners in the new region for initial period. I am aware of the question as to how would it work for the ISVs. Well, by paying retainer-ship fee, ISV can insist on performing the tasks of :

  • Reaching out to key customers,
  • Creating awareness of its products and solution
  • Getting the feedback from the customers
  • Getting the market feedback (about competition, pricing, solution providers, influencers etc).
  • Participate in local relevant events (by paying the participation fees of the event)

It is possible to measure the efforts through weekly activity reports and reviews. The key here is to treat the partner as your extended sales team. You are hiring a sales person on time sharing basis.

The cost of this retainer-ship would vary from 20% to 50% of the cost of one local sales person / local small office. To begin with, this activity can be done only short period 3 to 6 months.

In this process, ISVs get crucial tasks done – market development activities, prospect database and also loyalty and interest of channel partner in the new market.

ISV can build from here. This phase helps it to take further decision about :

  • Continue or discontinue this arrangement,
  • Enter into the market with direct office
  • Put more trust in channel partner
  • Focus only on period

Tiger and The King…. New learning

July 13, 2009

The other day I was telling a story (as usual, making it on the fly) and when I ended the story, I was surprised at the way I ended it.

Tiger in the Singapore Zoo, photo taken by Sachin

Once upon a time, there was a King, one day he went for hunting in the jungle. There he saw a tiger. But the tiger was lying down and not moving, his eyes were open. King looked into Tiger’s eyes. King felt that the Tiger was asking for help. So he got down from his horse and went near the Tiger. He found one arrow pierced into Tiger’s body. He went near to him and took out the arrow and cleaned the wound. Tiger started feeling better. When Tiger tried to stand on his feet, King helped him a bit. Tiger stood up, stretched his legs and felt better. King was standing there, looking down upon the tiger, feeling proud that he helped a tiger and was happy with himself. Tiger roared and before King realised jumped upon him, putting him on the ground. King was surprised.
He said ” Hey, I saved your life and now you are going to kill me?”

” Thank you for saving and I appreciate your efforts.” The Tiger said, “saving other’s life is your Dharma (your nature, your duty), you felt good about it, you felt proud about it. You got your returns. My Dharma is to kill and eat. You did you Dharma and now I am doing my Dharma, If I don’t eat you, I would starve and I would die”.
And Tiger killed the King.

Moral this story for me is that before you decide to help someone you should know his “Dharma” or nature and be prepared to face it. Helping with just good heart is not good enough, you need to know that other person/ animal does not have the same heart as yours.

Contrast this with what my grandmother or mother or even I myself would have ended this story just 5 years back. I would have ended up telling that the Tiger and the King became friends forever etc – very similar to Lion and the Mouse story I have heard since childhood.

%d bloggers like this: