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Business partnerships, much like a marriage, require trust and compromise. In the case of channel companies, channel partnerships with peers offer an opportunity for growth and the ability to expand the breadth of their offerings -- and partners are increasingly forming strategic alliances.
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"There's an old saying: 'No man or woman is an island,'" noted David Streit, principal and owner of managed services provider (MSP) Stephill Associates, who works solo and has formal reciprocal agreements with two other firms to provide on-site support for his clients. "There's no way you can succeed on your own. No one knows everything. So I found I have to rely on others to handle projects that I simply can't handle myself as one person. It's as simple as that."
Having these relationships also allows Streit to be "on an even playing field with larger MSPs who have multiple technicians. I can say to a prospect that while I'm the sole employee, I have on retainer technicians from affiliated firms in the area so I can always cover an assignment."
Technology today, complex and involving so many moving parts, especially with cloud, internet of things and digital transformation, makes it hard for one company to deliver all the components alone, agreed Jacqui Rand, co-founder and director of Channeliser, which acts as a clearinghouse for IT partners to find one another.
Increasingly, she said, MSPs, value-added resellers and vendors "all need to form strategic partnerships and alliances to deliver the solution as a whole to the customer" while providing a single point of contact and engagement. "Partnering enables a combined solution to extend into new markets and opens up new opportunities."
Channeliser, which offers a software platform and a social business environment for companies to connect and engage, is seeing growing momentum for the partner-to-partner model. The company launched in July 2015 and today has about 2,000 member companies and individuals.
According to Diane Krakora, CEO of partnering consultancy PartnerPath, solution providers have been partnering for two primary reasons in the past five years: to find the technical skills they need to meet customers' needs and for geographic reach.
"With the growing adoption of on-demand or subscription-based solutions, we see solution providers needing to partner with other solution providers for the technical expertise to put a solution together to meet the customer's needs," she said. "The full solution takes several software, hardware and services components knitted together."
For example, a solution provider might have the overall relationship and trust of the customer -- but need technical expertise to deliver on the solution, she added.
In terms of geography, a solution provider based in Connecticut might need some on-site help for their customers in California. "With the emergence and adoption of cloud, this reason is less of a driver in the last five years than it has been in the past," she added. "However, there are still times when solution providers need a local resource to help out their customers."
Channel partnerships: Structuring the alliance
When partners decide they want to form an alliance, they need to figure out if the alliance will be a one-time arrangement or a longer-term strategic partnership, Rand said. "If the latter, the combined group needs to collaborate to define what the offering is; what the go-to-market strategy is; and who does what, when, how, by when and for what remuneration," she advised. "A joint business plan is a good idea to ensure that all are aligned, too."
It is also critical at the outset to make sure the partner you want to work with can deliver on a product, observed Stanley Louissaint, principal and founder of MSP firm Fluid Designs. "The way you vet them is by asking for references."
There also need to be agreements in place to protect both sides and an understanding from the firm you partner with that they are working for your client and they represent your company, Louissaint emphasized. It's also important to outline the terms of payment to that partner.
For Streit, face-to-face meetings are important. "In a sense we're all competitors, but we're also colleagues, so we have to have a relationship. I won't hire someone sight unseen. I have to get to know them or at least the owner of the business" to help determine if they are ethical.
Jacqui Randco-founder and director, Channeliser
Channeliser is building a set of resources that channel organizations can draw on. Resources will cover topics like customer satisfaction, customer approach, employee ratings, partnering approaches, ease of management, rules of engagement and sales-process methodologies, Rand said. "Our aim is to provide the channel with the tools they need to deliver better solutions and services."
PartnerPath believes there are seven steps to launching successful channel partnerships:
- Clearly define the joint value proposition (Why are you better together?)
- Discuss the big-picture vision and ensure cultural alignment (Can you work together?)
- Finalize a partnership agreement (What are the expectations on both sides? It helps to put this in writing.)
- Get the technical teams working together to develop a joint solution (Where does the expertise of each team come into play to support a customer's needs?)
- Communicate the value proposition to clients and prospects (People should understand why you are working together)
- Create co-marketing activities, such as cross-pollinating a prospect list and content for each other's campaigns
- Get your sales efforts working together
The potential pitfalls of channel partnerships
Of course, with any business deal, there are risks. Sometimes channel partnerships don't work out. But there are several considerations to keep deals from falling apart.
"If the 'I's are not dotted and the 't's not crossed, there will always be a situation for which you are not prepared," Rand said, "hence why trust has to be a key component. Communication is the key on all such projects and alliances, but also, don't promise what your partners can't deliver, don't point the finger and do work collaboratively."
She suggested using a third-party project assurance or project governance advisor, someone who typically sits with the collaborating partners and the customer and ensures expectations are aligned and projects continue to move forward as planned.
Some of risks that Streit sees are subcontractors missing appointments, doing an unsatisfactory job, displaying an unprofessional appearance or unprofessional behavior or attempting to steal the client. "Reciprocal agreements address the legal protections for preventing client and employee theft," he said. "However, as a rule, I source subs through my professional association and use them only after I've met them several times at events."
There are three issues Krakora constantly sees crop up: customer control; which partner is responsible for service quality/customer satisfaction; and margin impact. Regarding the latter, she said, "Any and every solution provider has a difficult time giving up revenues and margin to another firm. Everyone has to decide if sharing the revenue is worth creating a full solution for the customer or if they [should] try to 'do it all.'"
For Streit and Louissaint, it boils down to trust and ethics. "I find the breakdown in any relationship is when we don't properly manage expectations of other people, and you get around that by saying things upfront," Louissaint said. "Even when it comes to client relationships you have to be upfront, so everyone knows what they're getting into."
Streit outlines how to create a subcontractor agreement
Read Louissaint's tips for building channel partnerships