Definition

channel partner

A channel partner is a person or organization that provides services or sells products on behalf of a software, hardware, networking or cloud services vendor. Channel partners include value-added resellers (VARs), systems integrators, consultants, managed service providers (MSPs), original equipment manufacturers, distributors and independent software vendors. Many technology providers, including Amazon Web Services (AWS), Cisco, Dell EMC, IBM and Microsoft, have formed partnership programs to engage closely with channel partners.

Types of channel partners

Channel partner models have evolved over time. The VAR, or reseller, model has existed for decades. VARs emerged in the 1970s as minicomputer resellers but have since established themselves in networking and, more recently, cloud services. Companies within this class of channel partner may also describe themselves as solution providers.

The systems integrator model came of age in the 1980s as channel companies began to integrate disparate IT systems to help customers boost efficiency and meet business objectives. The IT consulting model, meanwhile, differs from partner models in that consultants may recommend particular IT products based on customer requirements but not actually resell them. Some IT consultants focus on advising customers on cloud adoption and migration.

Some VARs have evolved to embrace the MSP model. Companies in this category remotely monitor and manage customers' on-premises IT equipment. Channel companies often offer a portfolio of services representing multiple partner models. For example, a channel partner may provide a mix of managed services, consulting and product resale.

Partnering among partners

Channel partners often work together to access a broader range of technologies, expand geographic or vertical market coverage and extend the range of services they provide. The relationship between a VAR and a distributor is one example of a channel sale partnership. VARs often source IT products through broadline distributors or specialized distribution companies. VARs may also partner among themselves.

In a VAR-to-VAR relationship, the companies cooperate to obtain professional services and solutions that would not have been accessible to them otherwise. In such relationships, each VAR partner must offer something to the other, such as joint services or areas of expertise, or a presence in different geographical regions.

One-tier and two-tier channel distribution models
Channel partner relationships in two distribution models

How to maintain partner relationships

Channel partner-vendor relationships provide an opportunity for vendors to promote certain products or services. Vendors typically offer channel partners product and marketing training, discounts, technical support, lead-generation tools, deal registration and early access to a vendor's technology. Vendors may also provide opportunities for joint marketing and cobranding activities with partners as a business incentive.

In addition, vendors often launch channel partner programs to serve as the focal points for maintaining relationships with partners. Such programs may employ channel partner managers, sometimes called channel account managers, to recruit and cultivate relationships with partners. Vendors may also use a partner relationship management system and a web-based partner portal to facilitate communications between vendors and channel partners.

Why some enterprises have certification programs for channel partners

Some vendor enterprises offer partner certification programs in an effort to assure customers that channel partners are well-versed in their products and are qualified to sell and install their technology. Partners, for their part, use vendor certifications as a way to differentiate their services. Depending on their level of certification, channel partners may also qualify for additional partner program benefits from the vendor.

At Cisco, for example, higher levels of certification correspond to higher levels of support and business incentives. The AWS Partner Network Consulting Partners program provides market development funds and other benefits to partners who employ more workers with AWS certifications.

Channel partners vs. direct sales

Vendors that work with channel partners typically maintain an internal direct sales channel. Direct sales teams are in-house salespeople that engage and sell to end customers without the involvement of channel firms. Depending on the vendor, direct sales teams may focus on different market segments than its network of channel partners. For example, vendors may incentivize direct sales to pursue large customer accounts and channel partners to do smaller deals at a high volume. The relationship between a vendor's direct sales teams, channel partners and targeted end customers is determined by the vendor's channel strategy.

Generally speaking, vendors that use both direct and channel sales approaches must establish a clear set of expectations for how field sales behave when pursuing leads. Otherwise, vendors may face channel conflict situations, where direct and partner sales teams compete for the same customer. Typically, these expectations on sales behaviors are stated formally in a rules of engagement document.

Vendors differ in the percentage of overall revenue they look to derive from channel sales. Some vendors choose to have little or no direct sales staff in favor of selling exclusively through channel partners.

This was last updated in December 2018

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Where do you see channel partner models evolving in the next five years?
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the channel partnership could be involved much more as usual in future ebusiness
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