Category Archives: Software Channel

What can we learn from SolidWorks Channel Program–Conclusions

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This is the final blog about the case SolidWorks and the channel program and success that that David Skok describes well in his series of blog entries. SolidWorks grew their revenue from $135M to $400M in 5 years and one of the key elements was the channel. In my first blog entry, I described SolidWorks VAR development program, in my second blog I discussed the means how to grow your sales with the channel and in my third blog, I discussed about scoring your channel partners.

When I reflect back on the SolidWorks growth with the situation today with a strong cloud drive, I will draw some conclusions of things that are still valid when building your channel. Lets look at what David Skok concludes in his summary of SolidWorks channel program.

The fallacy of thinking that Channel gets too much money

ISVs tend to forget, that the ISV do not finance the building of the channel partner from a cash flow perspective. If the channel partner hires a couple of sales reps and technical people, the sales of the solution better to work. According to Skok, ISVs fall very easy to the trap thinking that channel partners take too much money from the transaction and that it really should be the ISV that owns the customer relationship. But is it really this way? I hear this more and more from ISVs moving to the cloud where the ISV wants to move the customer relationship to itself and let the channel partner to become more or less the lead generator. I think this is a dangerous proposition from the ISV side specifically in the enterprise side as most end user organizations still expect to have support from the organizations that know the locals and these locals also kind of “own the relationship”. What was interesting that some of the competition had the direct sales force compete with the channel and this is never a good way to grow the business.

SolidWorks took the channel as the route to market, believing and investing in the channel. This investment meant that the SolidWorks had to believe that the channel would bring the needed growth and that SolidWorks had to gain trust in the channel. Without trust, there is no channel. Some organizations have even thought that the channel is loyal to the vendor, but that is just a dream. The channel is loyal as long as they make money. End of discussion.

Building a channel requires hard work – there are no shortcuts to success

The management team picked the strongest and most experienced senior managers with strong operational experience to build and develop a channel. This team had not only seniority, but were also experienced operationally. If the channel person has never sold anything, how do you expect the channel to believe in this person? I would not. I mentioned this in in my previous blog posts that I got reminded this in my younger days when becoming CEO in young age. The SolidWorks VAR channel managers became coaches to the channel, helping to build the business.

It was not easy for the VAR team and the pace was challenging to keep up with\ and some of these people still had other things to do besides being coaches. According to Skok, one of the learning’s was to understaff the VAR team and reward the success and this also led to a behavior where the VAR managers invested their time to relevant tasks.

The management needs to make a commitment to lead by example. If the management “walk the walk”, how can you expect the line management to do it? Lead by example is the key and this has applied at least in my career. The collaboration between the top management and the VAR team was ongoing with immediate access for discussions and reviews. That is a powerful concept and unfortunately many organizations forget this. Management stare purely on the amount of calls and not asking the right questions why something does not work. If you have a broken model, how can you expect to work in the future?

Building a channel is a road that requires ongoing reviews, changes in direction and deep understanding of the target markets. If the ISV does not have this touch, how can one expect them to lead the channel partners to success? I do not think it will ever work.

The question that we have to ask is whether you need to be a large ISV to afford this type of channel program that SolidWorks created. The answer according to Skok is that the team does not have to be big as long as they are dedicated and know what they are doing. You also have to pick the measurements that you want to track, metrics that apply regardless of geography and culture and this helps everybody to get aligned and speak the same language.

You have to have a long-term view on your channel partners

You should take a long-term view on the channel partner. Do not create “incentive of the month” kind of initiatives. This drives the wrong behavior in your channel partner. Your channel partners should be strategic and this will always require a long-term view.

Would the SolidWorks VAR Channel model work with cloud business?

In the beginning of this blog entry, I said I would reflect if the VAR channel management will change anything when building a channel for cloud VAR channel partners. The answer is no. The same basics will apply, but what needs to change is to get alignment between the ISV and the channel partner and this should be done by comparing the business models side-by-side, looking at the drivers for both sides. In the cloud business, there are multiple new factors that will change and one of the biggest factor is revenue model and this could be a prohibiting factor for the channel partner. Building an organization from recurring revenue streams in the beginning could be challenging and it is also challenging for the ISV.

This concludes the series of blog entries of SolidWorks, a successful ISV that was able to create  strong channel.

Is a Solid Channel Program the foundation for increasing your sales?

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This is the fourth blog posting about VAR Channel programs.In my first blog entry I claimed that the ISV needs to realize that it works for the channel, not the other way around. In the second blog entry, I initiated the discussion of why it is important for an ISV to really pay attention for its channel program and educate the channel specifically in the cloud transformation as that is what the channel is saying is needed.  In the third blog entry I explained the channel program developed by SolidWorks and what type of findings that this ISV found out as reason for its successful channel development and results.

In this blog entry I wanted to portray the VAR Development Program modules that SolidWorks developed with some comments around these. The program “Channel Capabilities Assessment” is divided into four separate areas in following way:

VAR Channel Program-003

When you review the areas above, there isn’t really big surprises as such, but what is interesting is that most ISVs neglect many of these areas and this will hurt the ISV in the long run. If the ISV does not know its channel and its partners well, how can the CAM estimate anything in respect to forecasting or even the skillsets that the channel partner has in the sales process itself.

What David Skok explains in this blog entry is that to really understand the channel, SolidWorks had to put a “social scientists” hat one to really study the behavior of the partner and to understand their capabilities and what was really needed from the ISV. It is so easy for us to ignore to reach out to our customer/partners/prospects to ask: “how can I help you guys to become successful”. If you are working with a channel, ask yourself how much you really know about your channel partner business? I would bet that not much. To be transparent, I have had the same issue myself, still have but have tried to really dig into my customer case and understand what is needed. It is an ongoing battle and challenge.

In the SolidWorks case, a survey of 65-questions was created with six categories: Business Planning, Finance, HR, Sales, Marketing and Technical Support. Two person teams where trained to do face-to-face interviews and each interview took an entire day.  What I find fascinating is the way these VARs where ranked. Two dimension was created, one that portrays “Vision and Execution” and the second was based on “Willing and Able”.

The process was not only good for the ISV to achieve better understanding of the VAR channel, but it was also interesting for the VAR channel partner to understand its needs and also to get a better understanding how the ISV can help the channel to become better. SolidWorks used a modified or variant of GE Market Management model to categorize the VAR channel partners and I will present this in my next blog entry of this topic.

The conclusion that we can make of this blog entry is that an ISV needs to put time and effort to understand its channel and this will take time and money. Besides this, it is imperative to rank and categorize the business partners so the ISV can allocate its resources to the partners that are “Willing and Able” to perform and invest in the joint future.

Stay tuned for more….

A Case Study – Creating a VAR Development Program

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This blog entry continues on my first blog entry where I concluded that the channel does not work for the ISV, it is the ISV that has to ensure that the channel has the tools to become successful with the solution itself.

In my second blog entry I highlighted a case study of a successful ISV that was able to grow its business by doing the channel development by identifying an impactful approach where the VAR channel felt that it was a win-win situation for both sides.

In this blog entry I am high lightening the VAR development program (Phase 1) that SolidWorks created for its channel and as I stated in my previous blog, this program was almost like a mini-MBA where the ISV wanted to facilitate and help its VAR channel to run its business more effectively. The program that David Skok highlights in his blog entry as phase 1 of the development program is divided into two main areas: Business Management and Sales Management.

VAR Channel Program-001

From the picture above, the channel assessment was reviewed from these two perspectives and each of these perspectives are divided into smaller components that have relevance specifically when running a VAR business.

Cash is king as they say and I have also experienced this as an entrepreneur. What ISVs tend to forget is that somebody has to fund the activity to build the funnel of the solution that the ISV wants to sell. So lets review the typical steps that we expect to happen when an ISV signs up new channel partner:

  • The ISV wants to ramp up the activities immediately once the deal is signed, which means that VAR technical and sales team needs to be trained and educated of the intransiences of the product and learn how to take objections from the target prospect market segment.
  • The ISV expect the VAR channel marketing team to dedicate resources to start building the funnel and sometimes forgetting that there are other products that they might have in their portfolio.
  • The ISV Channel Account Manager puts effort in getting things going as he/she is the one that will have the pressure of getting first deals going and to ensure that he/she meets the budget.

With all of the effort that has been put into the joint effort, the VAR finally signs its first deal and now everybody can be happy. On top of this, the deal is very sizable and this makes the VAR a bit nervous as there are some financial risks that it now has to carry as it carries the paper with the end user organization.

The project starts, everybody is working hard on getting the client happy but sudden and unexpected issues comes up in the implementation. The customer tells the VAR that it is unacceptable and they will not pay until the software has been fixed. The VAR tells the customer that they do not have the means to fix it as it is the ISV that carries that responsibility. The customer tells the VAR that that is not their problem, the responsibility is with the VAR as that is whom they bought the solution from.

As the invoicing relationship of the solution delivery is between the VAR and the end user organization, the VAR runs into issues as an invoice has already been issued from the ISV and they want to get paid.  This puts the VAR management to sweat and now they really understand the consequences of this and need to do something about it.  The ISV wants to get paid, but the channel partner has not got paid yet. Worse than this, the software included bugs that the VAR can’t do anything about and has to wait for a fix. The ISV still wants to get paid, no matter what as its view is that this issue has nothing to do with them. I am sure you get the scoop of the vicious circle.

If the ISV is reasonable, they will work with the VAR and the end user customer to get it right, but unfortunately I have seen cases where the VAR has really run into a wall. I can’t imagine how that feels as I run my own business every day and have to consider risks and rewards when conducting the business. In large organizations with huge cash piles, this might not be a problem, but for the majority of ISVs, SIs and MSPs, this could be a huge issue.

The scenario above describes some of the areas where the VAR has to pay special attention when running its business. The number one in business management side is cash flow and how to manage it when dealing with ISVs and purchase management overall. I have run companies with high growth and one of the most pressing issue seems always be cash flow. People want growth, but with growth you need cash flow. Sales in your books does not mean that you have money in your bank account. Having lots of receivables might feel good, but you can’t feed your family with receivables.

The second area is “Sales Capacity” where typically small VARs become the victims of their own success. Skok concludes that a typical successful VAR is where the business owner is number one in sales, but one person does not scale up to grow the company. There needs to be more than one to scale the business. If the owner becomes the gatekeeper, then that becomes the bottleneck for the growth for both the VAR and the ISV.  What a VAR needs is a strong sales manager that can scale the sales, follow and create processes and the owners should keep away from that (my observation).

Also, what is typically undervalued among VARs and ISVs is market research and what sales people tend to use as an excuse for poor sales is that the “market segment is saturated’. Good research includes information about market size, market share, historic customer growth rates and sales coverage etc..

According to Skok, one of the most difficult task that VARs are struggling with is the requitement. I can really believe this. The key for success is to build an interview process to identify the right candidates and even if you become good at this, you will still fail. I have.

What an ISV might see with its channel is that VARs are hiring new employees, but there are more leaving the company that coming in. So what will happen is that the VAR has new people that are learning “the ropes” and then the ones that have learned are leaving for different reasons. The VAR ends up having a situation where the skills don’t meet the demand of the market.

One key thing that is often ignored is to ensure that the employees have a good view of their professional development,  like sales people having strong  product training, presentation training, and  sales management training.

And finally, and probably one of the most difficult tasks: how to manage and review the pipeline that everybody presents to the management. How should the VAR and ISV ensure consistency in the pipeline? One of the key things for both ISV and VAR is to create a standardized view on the pipeline, not based on each and every sales persons personal definition which is typically biased to his/her own preferences.

The question is what kind of deliverables can an ISV and VAR expect from both Business and Sales Management exercise? The way Skok defines them is in following way:

VAR Channel Program-002

It is obvious that each one of these need to be worked on and each ISV will have to estimate how much to put effort into this exercise. Also, what something might work for one organization, could be very different for another.

The next phase of this case study I will discuss about the way that the case study ISV segmented and categorized its VARs and their ability to grow. Stay tuned for more.

How to become successful with your Channel–a case study to learn from?

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In my yesterday’s blog entry, I gave a few hints of channel development and what kind of things the software vendors should avoid.

Today, I thought to share some perspectives on a case study that David Skok gives in his excellent blog entry.  Like in my previous blog entry, I will give my perspective on the findings of this case study.

The case study software company is SolidWorks and this company is specifically known within modeling for mechanical design. This company grew rapidly and one of the key reasons was an effective and well-managed VAR channel. According to the blog, the success of the channel was based on three distinctive phases:

  1. Hiring an executive that had been part of the channel in the past, so this person really understood the channel and how a VAR business works.
  2. Understanding that the success of SolidWorks
  3. Realizing that the VAR channel as an un-optimized  resource and how decide that it was worthwhile for SolidWorks to educate its channel on business skills. This meant every aspect of the business, almost like a mini-MBA

During the spring/summer 2012 I did some research in the VAR/MSP channel and one of the findings was that a key obstacle for many VARs and MSPs specifically in moving the cloud business is lack of expertise and the business model was seen to be unclear like can be seen in following picture (Source: CTTA 2012):

Obstacles in moving to cloud-2012

The latter is specifically relevant to the discussion of SolidWorks and what they did to make the channel successful. What happened in the case of SolidWorks was that the channel account teams became business mentors for the VARs and educating them to run a better business. In retrospect, I think this is exactly what ConnectWise CEO Arnie Bellini is trying to do with its resellers in its annual User Group Meeting IT Nation in the beautiful Orlando, Florida in November 2012.

He even brought in my favorite author Jim Collins that has written many bestselling business books and the latest book “Great by Choice: Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them All” was given to all conference attendees.

I had the opportunity to hear Jim Collins keynote and I think it was one of the best speeches I have heard in my life. He brought up things in an interesting way and without every loosing the audience in the session.

In the next few blog entries, I will review what a good VAR channel program should look like and what kind of VAR development program did SolidWorks have to run its VAR business. I will also give my own add to this by looking it from a Business Model Canvas perspective which we use every day for everything we analyze in respect to Business Models. Stay tuned for more!

The Channel does not work for you, you work for the Channel

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pentagons and negative stars - CPBuilding a channel is not an easy task and there are many things what one has to think about when building one. I have had the pleasure to building channels for more than 20 years in enterprise software space, specifically in business intelligence,  collaboration, document management and integration software.

Today, when doing some preparation work for a channel related gig, I found an amazing link of a case that describes a successful channel development initiative and also some of the common mistakes that software vendors do.  The author of this article (David Skok from Matrix Partners) is definitely an authority in many areas (specifically SaaS related things). He lists a few very important points for software vendors to remember and I am now listing them here with some additional comments based on my own experience:

  • You (ISV) have to figure out the sales model first and then using this to teach your channel. I have heard many naïve comments from ISVs where the management explain that “we don’t have to do anything, the channel will take care of that…” Well.. I have not experienced this in my 20 years…..
  • Building a channel takes long time and ISVs forget that the channel has different priorities to what the ISVs have. The channel is focusing on products that are paying the bills and if you have not been able to demonstrate your capabilities to sell, why would they want to take the risk with you? I will never forget when a good friend of mine in California asked me once when I had become a CEO for a software company in the US and recently emigrated from Europe (from from a technology role). He asked me: “ How many have you Petri sold yet…. Call me when you have some stories to tell…”. I closed a few deals, called him and he was a man of his word. We closed large deals together during our collaboration. I had to show my friend that I could sell myself and show by example how enterprises would buy my BI solution.
  • Resellers need ongoing education on your solution, how to handle objections and how to differentiate your solution from the fifty-nine others on the market. You will have to provide marketing material, PowerPoint decks, PDF White Papers etc. And please do not say that there is no competition for your product. Give me 2 minutes and I will list 20 for you….
  • Do not expect your resellers to do lots of marketing, because they expect you to participate and expect you to pass some leads as well. You are expected to help in the channel demand generation efforts by working together with your channel partners.
  • Try to identify a pre-existing channel that supports your solution or your solution can be sold as an add-on. Business Intelligence is a good example where you can sell a collaboration solution as part of the value-added delivery. When you do this, you have to customize your messaging in a way where the channel partner realizes that that your solution together with the other solution is more than 1+1, it is in fact 1+1=3.
  • When ISVs build a channel and have an existing direct sales model as well, there will always be conflicts between the channel and the direct sales force. This can’t be avoided and if the ISV is committed to the channel, the channel will always come first. It is not easy and there are some rules that the software vendor has to apply. These rules will have to be emphasized from the top management of the company. Skok also states that one should expect the direct sales execs have an issue in moving to the channel sales model. Channel people know that with good channel management and right type of partners, the channel will give much higher leverage than trying to grow with direct sales.

These are some of the statements flavored by my own experience and I could not agree more with Skok on these. The good news according to Skok is that with the “right channel, the right people, good product/market fit and with lots of patience, the channel sales model can be one of the most profitable business models.” I echo with this!

Stay tuned for more in this topic and love to talk about it as I happen to have million different scenarios that I have been exposed to.

photo by: origami joel

An Independent Software Vendor (ISV) moving to the cloud – what are the financial implications of this?

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I have to say that I am living in a nirvana from a researcher perspective (even if I am an entrepreneur on daily basis working with practical execution). Nobody of us will have the chance to experience too many profound transformations in our lifetime. I was asked to write a report on ISV transformation from traditional software business to cloud business from financial perspective and I loved the nights and weekends that I spent on the Internet doing research. Coffee, music in the background, two large screens side-by-side and the feel of really learning and assembling pieces of information together is a feel that is hard to explain. No wonder I like to write books, dissertations, and reports…

My personal background is that I came from school when minicomputers such as HP3000, VAX/VMS and later UNIX computers where the ones that software was built to. The next era was the move towards client/server architectures where I really made my personal career in product development. Then we all remember the short period of web-enabling solutions and the huge investments in hosting facilities which many have now disappeared. This new cloud/SaaS era is much more than just making your solution web-enabled. It will change not only the way you build software, but it will change the way you run your business. Let me explain how by reviewing the picture:

The Cloud ImpactI will start with the business model in this blog entry and continue with the others in later blog entries. The change from perpetual software license model to subscription-based model will change the way the ISV sells its solution and it will change the way the ISV structures its partner channel. It will also change the way the ISV markets its solution. The main driver for this is that the ISV will not be able to sustain its cash flow with a traditional sales model as the sales team needs to keep much higher pace in sales when moving to the cloud environment. The sales model for an ISV has to be either fully automated with customer self-service or it can be highly transactional where you can have some human elements but the amount of transactions will cover the cost of maintaining people to close the deal. The ISV has to be able to control the Customer Acquisition Costs (CAC) as that is one of the key drivers to be able to achieve break-even point and start generating pure profit. This does not typically happen in less than a year, whereby the ISV has to maintain a happy client so they sign up for a new contract period assuming that the contract period is 12 months. I will analyze the metrics in my later blog entries. This just gave you an example of the operational changes that an ISV will experience.

How does an ISV manage to plan appropriate scenarios that it can take when moving to the cloud? Obviously, the assumption is that the Board of Directors have made a decision that the ISV has to make the move to survive in the new global competition where anybody from anywhere in the world can enter the competitive field. There are no geographical borders that will keep the ISV from competition. If you are an ISV from Italy, you can expect to get somebody to enter your territory from France, Germany, Brazil or Bolivia. Once the strategy has been set, you will have to use a model to operationalize your strategy and I am used and thrilled about Dr. Osterwalder’s Business Model Canvas that provides all of the needed elements to analyze and “paint the picture” on a high level. I have witnessed several experienced senior management team members to become enlightened of the power of the canvas and it really has become our number one tool when working with ISVs. The Business Model Canvas consists of nine building blocks: Value Proposition, Customer Segmentation, Revenue Streams, Cost Structure Key Resources, Key Activities, Channels, Customer Relationships and Key Partnerships.

Business Model CanvasThe power of a business model framework such as Business Model Canvas is that the management is compelled to take a position on each of the nine building blocks on a Business Model Canvas. Each building block can also have its own key metrics and these can become the foundation for a dashboard that the management team tracks on the monthly basis.

Besides the question whether the ISV has the right core competence to move towards a cloud business, the key question that any ISV has is how this change is going to impact the financial model and the canvas above shows how the Revenue Stream building block has to be in balance with the Cost Structure block. In the perpetual software business model the metrics on the cost structure and Revenue Streams are completely different.

To summarize, the ISV and its management has many different questions to answer in its journey to the cloud. The first is to make sure that the owners, the management team and the Board of Directors have a common understanding where to go with the strategy. The role of the Business Model Canvas is to help the ISV to lay out a few possible operational scenarios that it can take in its cloud transformation. In my next blog entries I will explain in more detail the financial impact on an ISV when moving from traditional perpetual software license business to subscription-based business model. Stay tuned for more.

 

 

 

 

 

Nokia and Microsoft from a partner-to-partner (p-2-p) perspective to achieve a vibrant ecosystem: recommendations for Microsoft and Nokia partners

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Disclosure: I am a former global Chairman for International Association of Microsoft Channel Partners (http://www.iamcp.org) that according to IDC 2009 study had $10,1 billion in partner-to-partner business. My views might be biased due to two factors: I am a Finn living in the US and earn 100% of my revenue from the Microsoft ecosystem. This blog entry is about the possibilities for Microsoft and Nokia, and not about the past mistakes that might have been made.

The much speculated announcement from Nokia and Microsoft is now reality. Nokia and Microsoft have announced a new strategic partnership to build a new global mobile ecosystem. This news item has been dwelled in the cyberspace such as PCMag.com, blogs such as Mary-Jo Foley All about Microsoft and some newspapers such as Financial Times questioning whether Elop is the right person to lead Nokia. The rumbling of Nokia’s strategy accelerated to full force after Stephen Elop’s internal memo was leaked to the public. This memo included strong words about Symbian and how it was burning and it was time to jump ship. I have commented on Nokia in some of my previous blog entries but today and going forward, I am going to focus on future possibilities and not dwell on the past as this does not bring anybody any good.

This announcement from Microsoft and Nokia is not just a major and dramatic shift for Nokia, but also for the entire Finnish business ecosystem. Based on the Finnish news sources, this is the biggest change that Finland has seen in the technology landscape since the changes that took place in traditional industry such as forest, metal and shipbuilding. I feel sorry for the thousands of Nokia employees and hundreds or even thousands of companies that have earned their living from Nokia and its ecosystem. I have in fact been Chairman of the Board for one company and Nokia was a very important source of living for the company. However, each and every one of us has to admit that this did not happen overnight, the writing was on the wall and Stephen Elop just happened to be the one that had to make this change.

I have been tracking the discussions in the cyberspace and this announcement has caused emotions, both negative as well as positive. I believe that Nokia to Finland is like Volvo for Swedes and  it has to do with national identify and when that gets threatened, people react in different ways, some probably without really thinking about the consequences of what they say, and some more realistic and with the future in mind.

I have had a chance to track the evolution of Nokia story from a US perspective during the past 13 years and I have to say it has been depressing to see Nokia and the Nokia brand sink among US consumers and businesses. Already a few years ago it was almost impossible to find a nice Nokia phone in local AT&T store and this should have been a sign already then that something was wrong. One could argue that the current Chairman of the Board Jorma Ollila should have seen the signs on the wall when he was the CEO or at the very latest during Olli-Pekka Kallasvuo’s tenure. He did not, or if he did, the board and the management team did not take the risk of changing the course.

The current Nokia CEO Stephen Elop was the one that was forced to stop the bleeding of Nokia’s market share in the smartphone space and he is now the one that is taking the heat from the press and industry analysts. I do not think it is fair to put this on his shoulders as Nokia has had ample chances to change the course during the past few years or at the very latest when the first iPhone was released in in 2007.

When I saw the Meego leader Ari Jaaksi leave Nokia a few months ago to lead HP Palm software to become senior vice president of WebOS, I smelled problems in the future of Meego. This is obviously bad news for the companies that have invested in Meego development and future, but that is unfortunately nothing new in the technology field. During my career, my company had to invest in APPC communication protocol development that nobody remembers today. Nobody asked me how I felt when APPC was replaced with TCP/IP.

Once the companies and Nokia employees that have put their lives into Symbian and application development around Symbian have spent some time to reflect what they want to do going forward, I would like to encourage them to view Microsoft as an opportunity for them to change direction and get really to become a part of Microsoft huge 600k plus partner ecosystem. That is what we entrepreneurs do all the time. We have to review our business model, its robustness and change it when needed. We will never let outside forces let to drive our future; we need to be in charge of it. If your current revenue model is 100% from Symbian, you are the one responsible for it and you can’t blame Nokia or Microsoft for it. Running a business on one horse is both stupid and risky and not good for shareholders. In some cases it can reward you, but in some other cases it can also take you down. You have to be on watch what happens around you and the day when you start ignoring the outside world, things start falling apart and this is exactly what happened to Nokia.

I have seen some misrepresentation in some blog entries that Microsoft would not be partner friendly which is a misrepresentation of huge measures. Microsoft partner network generates more than 90% of Microsoft annual revenue. Bring me another company that would do that with its partners. Microsoft has of course individuals that might in some cases have hurt some partners, but overall Microsoft has a strategy to work with its partners, not against its partners.

When I look at the Microsoft ecosystem and what is happening today from a technological perspective the cloud and the mobility are the two current topics that everybody seems to be talking about. Look at what is happening with our youth. They assume to be able to consume services from the cloud and they are born with smartphones and know how to utilize them effectively by using messenger and SMS. What does this mean for Microsoft and Nokia? Microsoft has more than 30.000 Windows Azure clients and an ecosystem building cloud solutions. These cloud solutions need mobility applications and this is where I see the thousands of current Symbian developers to have a huge opportunity if they so want to see it. It is going to be a change that they have to take and any change will hurt and be difficult but without change and pain, there is no gain. There are thousands of Microsoft partners that are more than willing to partner with mobility professionals and once the mourning is over, it is time to jump on the bandwagon of cloud and mobility and start building new innovative solutions.

I would encourage all current Symbian developers and vendors focusing on Symbian to look at what Microsoft brings to the table and the opportunities that it brings to these companies. We know that Symbian is not the nicest development environment to work with and based on developer experiences, Microsoft development tools and environment will be better and more productive. Yet again, there are many different opinions on this as well, but I am basing my opinion on the tens and hundreds of developers and people that I have talked and worked with.

I would also encourage both existing Microsoft partners and Nokia development partners to get together and IAMCP.org is an example of an organization that can facilitate partner-to-partner collaboration. IAMCP has chapters and chapter meetings every day in some part of the world and this gives a tremendous opportunity to get a view of what it is to be partnered with Microsoft. I would also encourage to ignore the ones that are resistant to the change as the change has already happened and the ones that will prevail are the ones that takes this moment as an opportunity to grow and build a new sustainable business.

I rest my case and welcome all Nokia developers to learn what it is to be part of the Microsoft ecosystem.

Do you know how to work and build a software sales channel?

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If you are a software business, sooner or later you have to consider a sales channel for your growth. It does not matter whether you are in traditional software business or considering a cloud business, you will probably end up having a channel in some shape or form. Some cloud solutions might be simple enough to be able to deploy without a local consulting practice getting involved in the delivery, but most enterprise level software solutions will still require a middle-man that knows the end user client and is able to do onsite consulting. There is no substitute for local support and partners that have access to an ecosystem that the software vendor would never have access to.

Is your current organization capable of supporting a channel?

Building a sales channel will have to fit into your strategy and my recommendation is to use some type of strategy framework (like Dr. Osterwalder Business Model Canvas) to identify how each functional area in your company plays in a possible channel scenario. Do you have the right people supporting the channel? Is your product strong enough for a channel and do you have the right skills to penetrate new geographical areas that could possibly include other language versions of your product? Do you know how to manage 24/7 support if you sell cross different continents?  Does your current management and operations understand international business? How does your current software/solution delivery model aligned with a channel sales model? Does your product support the correct compliance rules of the geographies that you are going to address?

The questions above are just the beginning of the questions that the software ISV has to respond to when entering new markets. Each of these markets could potentially lead into additional complexities that the software vendor did not know at the time of decision making of the new market. However, the potential resellers in these markets will eventually ask the questions and you’d’ better be prepared to have the right answers.

Do you have a robust channel program for your prospective resellers?

Do you have a good and profitable program for your channel partners? We are seeing a transition from traditional software business model to cloud model, but the foundations of channel rewarding will still stay the same. If the channel does not see enough of an opportunity to invest in your software solution and in its sales, you are out of luck in trying to convince the reseller or distributor prospect to take on the product into their solution portfolio.

There is no success without showing success yourself. As an ISV (Independent Software Vendor), you have to show how to make money to convince the channel that it is worthwhile to put effort into the sales of your software solution. This was something I learned very early in my sales career as a young CEO of a US-based software company. One very experienced reseller on US West Coast asked me bluntly how many deals I had personally closed when I approached him to resell my software solution.  Had I said none… the discussion would have been very short.

My recommendation to all ISVs, regardless of the software domain, is to demonstrate your own sales success before trying to solicit channel partners to replicate your success. It is naïve to think that a pure channel sales model would bring you success. It has to be a combination of direct sales and channel sales that bring either success or failure in your efforts. If somebody claims otherwise, ask them to provide evidence of a model with only channel sales as revenue source.

Having a channel sales strategy could become very effective specifically in cases where an ISV wants to broaden its sales to new markets/geographies. Typically, the ISV has already some experiences in its own native country of the sales and the sales processes and what it takes to become successful. This is also a basic requirement in trying to get others to sell your solution. The success in local ecosystem should be easier and also become the “beta site” for any other markets. If you can’t demonstrate success in our own backyard, why would you be able to do it in a remote geography?

Do not underestimate the resources a reseller has to invest in selling your product

In many of the cases, software vendors forget that setting a reseller or distribution business will require the very same resources as the ISV would have to have in its own sales operations. If you have pre-sales resources in your organization, it is to expect to have the same requirements for your reseller. If you have a need for inside sales force, the same requirement will apply to your reseller partner. In cases, where the solution requires solution delivery, the reseller has to provide resources in solution delivery or create a partnership with a local partner organization that enables a successful delivery of a solution.

Do you know how to reward your channel?

How much should you pay your sales channel when closing deals? How much commitment do you expect your resellers to put on your product? It still amazes me to find software vendors (ISVs) that assume the distribution channel to be OK with commissions such as 10% with the assumption that the distribution channel will invest in the sales of the product. How many companies do you know that can live with 10% and create an organization to support the ISV’s product for 10%? I do not know any. Many reseller partners expect commission ranging from 30 to 50 percent to be able to create an organization that delivers a solution and promotes the product. If the commission is 10%, we are typically talking about referrals, where an opportunity name is given to the software vendor and the vendor is running with the sales effort without any interaction from the organization that gave the referral. What the ISV tends to forget is that there are tens of other solutions that the very same reseller community gets solicited on and therefore your value proposition and attractiveness has to appeal from get-go.

The cloud will change the channel models sooner or later

There will be new rules in software channel sales when working in the cloud era and I will be addressing these in later blog entries. Jeffrey M. Kaplan from THINKstrategies makes some predictions of what is going to happen in 2011 in the cloud era and one of the key elements will be the implementation of new channel programs with new channel partners that will compete of the same space as the more classic resellers that we have seen in the more traditional software sales business models.

I would like to emphasize that it is unrealistic to expect the channel to disappear, but what every software vendor in the cloud arena needs to figure out is to create enough value proposition to channel partners (like resellers and distributors) to be able to build a solid and profitable business. The componentization of the software and new models of software consumption will have ever lasting impact on software ecosystems.

I have to say that this new cloud era excites me tremendously as we get to see new exciting innovation and new business models from new players.  Some players are trying to eat into more established vendors such as BranchOut trying to take on Linkedin as a new way of business networking. BranchOut uses the huge database of Facebook to build a new view to business connections. I expect this type of new innovation to continue and Facebook to also become a greater platform for other social functions besides “connecting” with friends.