Manage Learn to apply best practices and optimize your operations.

Avoiding failed managed service provider (MSP) partnerships

Managed service provider (MSP) partnerships fail for a variety of common reasons, one of which is lack of communication. Learn how to avoid being part of a failed MSP partnership.

Paul Myerson, Enterprise Strategy Group (ESG)

 I have managed many partnerships in my day, and there are common themes on why channel partnerships fail -- most due to a lack of honest communication. Business goals that are not aligned on a regular basis can create a hostile environment with each side believing it is being short changed by the other. The reality is that the objectives of both parties are very simpatico most of the time, but the devil is in the details, and without effective communication these are the areas that tend to cause the most problems.


  • Vendor goal is incremental business and revenue while the channel partner goal is incremental profit. This is a subtle distinction but can cause problems depending on how the vendor sales and support arm is compensated. The VAR may be very happy making a lot of money in a single account where the vendor sales rep could find himself penalized as he is compensated on new accounts vs. growing existing accounts. It sounds foolish, but if the compensation goals are out of alignment (even if both are making a lot of $) and not dealt with, both parties will be dissatisfied.

  • Vendors typically believe a channel partner should be self sufficient once they get going, but most successful relationships have the channel and vendor linked at the hip. The partner is rarely ever 100% self-sufficient, but the best relationships require significantly less vendor help to get maximum value from the VAR. The vendor needs to recognize the objective is the highest return on investment in the VAR business, but no investment will eventually equal no return.

  • Vendors typically believe that it is the responsibility of the channel to generate leads while the channel believes the vendor should generate leads as part of the relationship.

  • Vendors sometimes discount the impact of being easy to do business with, especially if they believe they are doing the VAR a "favor" by allowing them to carry their product or service. This attitude is probably the top reason VARs look for competitive offerings. Being over-distributed leads to price erosion and accelerated negative feelings, which eventually leads to less competent VARs carrying a product line. This is fine if the product is a known entity and has been effectively commoditized, but if services and complexity are still part of the installation and support, vendors will find themselves with unhappy customers and an alienated channel. Channel partners can sell a multitude of vendor solutions, and being easy to do business with is a major factor.

One remaining challenge is channel conflict. There is nothing more damaging to a relationship than having a deal go direct when the channel created the opportunity. ESG believes if there is no channel conflict there is not enough market coverage which hurts both the vendor (sales) and the channel (brand). No relationship is perfect, but there is a science to managing conflict, which must be created through "rules of engagement". It again all comes down to the parties' ability to communicate honestly with each other. No one wins every fight, but as long as the rules are clear and both deal with the truth, usually the relationship can survive.

You don't always have to be in agreement, but you must be able to have honest communication in order to negotiate a middle ground and maximize productivity.




Becoming a managed service provider

 Home: Introduction
 1: Is your company a good match for the MSP model?
 2: What are the benefits of providing managed services?
 3: What questions should you ask a potential MSP vendor?
 4: How should you price MSP offerings?
 5: How can you avoid failed MSP partnerships?



About the author::   
Paul Myerson
Paul Myerson is a senior channel analyst for the Enterprise Strategy Group. Paul has core competency in direct and indirect sales model efficiency, channel program management and business strategy required for successful vendor/partner success. Myerson comes to ESG from EMC where he played a key role in developing the company's channel business. Prior to joining EMC's channel business, Myerson ran EMC's southeast region direct sales operations. Highlights of his 12-year career with EMC include signing and managing EMC's first resellers as well as the company's largest worldwide partners. In particular, he was recognized for his unique approach to channel management -- strength he now applies to the industry at large. Myerson's charter at ESG is to run the channel practice and to aid ESG clients with their channel initiatives.

Paul is also a featured speaker at the Storage Channel Reseller Seminar, just for VARs, resellers, systems integrators and consultants. This free one-day seminar is taking place in Chicago, Toronto, New York City and San Francisco. Take a minute today to apply for this free seminar admission by calling Delegate Recruitment representative John Smith at 508-621-5535 or applying online.

Copyright 2007 TechTarget

Dig Deeper on MSP business model transformation

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.