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What Do Channel Partners Really Want? (Part 3)

If you’ve been following this mini-series, of sorts, then you now have some new insights into a channel partner’s desire for marketing relevancy (how vendors and partners work together to make marketing programs relevant to a partner’s business) and sales relevancy (vendors aligning with partners around the partner’s capabilities, to drive and close sales

In this third, and final post of this series, we focus on another core element of success for any reseller’s business – OPERATIONS.

To a traditional reseller, operations means technical or professional services; the design, acquisition, implementation, and maintenance of products at a customer’s site. Because these operations are performed by highly trained technical engineers with typical hourly rates ranging from $100 to $300 or more, these services generally produce the highest margin for the reseller.

But it can be challenging for the reseller to both attract and retain top quality technical engineers who are expert in the products sold by the reseller. Their skill set is in demand by end users and vendors as well as resellers. Competition can be fierce.

On top of that, resellers are challenged to ensure these high value resources are billable. To be profitable, resellers need to keep their professional services engineers on customer projects and billable a reasonable percent of the time. This, of course, will vary by reseller, but consider a resource whose salary and benefits cost the reseller $200K annually. That resource would need to be billable 50 full weeks each year to have a 50% gross margin.  That’s nearly impossible. But, if the reseller charges a higher hourly rate in an attempt to make up for bench time, they may be less competitive. Resellers need to establish a reasonable billable percent to accommodate a fair amount of non-billable time.

We know that 50 fully billable weeks a year is out of the question, for many reasons but not the least of which is the training requirements vendors place on their resellers. Resellers represent from just a few vendors and product lines to others that resell hundreds of vendors and products.   And the more complex the product mix the more training that is required.

It’s no surprise, then, that resellers hesitate to take on a new technology practice with the commitment that means to training; ranging from keeping up on all the new product announcements, and attending webinars, lunch and learns, or other less from trainings to the tiered training, certifications and specifications larger vendors like HP and Cisco require.  It’s a huge time commitment which means lost income because the engineer isn’t out providing billable services. To make matters even more difficult, vendors charge the resellers for their training.  Instructor led training costs the reseller $2,000 – $4,000 per week plus travel expenses.  That means a two week training for one engineer costs a reseller around $25,000.  And, for resellers that are outside of the US, there’s the additional struggle to find training in other than English.

The only way resellers can afford to commit to the training investment required to get into a new technology practice is if they have a significant sales pipeline. They certainly can’t afford to take the Field of Dreams approach of “if you build it, they will come” (said in a spacey James Earl Jones voice for dramatic effect).

So, what can be done to better align vendors with the operational needs of their resellers?

Some vendors are making strides. They are working to reduce training costs and improve access through on line virtualized training that can be taken in off hours.  And, while the larger resellers have an advantage because they have more technical resources and can spread the training requirements without as great an impact on their profitability, vendors are working with all levels of their reseller partners to find new and better mechanisms to enable all areas of their technology training.

What suggestions do you have that would help vendors and esellers better align for operational relevancy?  I’d love to hear your thoughts and experiences.

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