When vendors talk to us about channels, they typically mean resellers, MSPs, distributors, integrators, consultants, and occasionally agents. But every once in a while, a vendor asks us about building an Alliance channel, or making their existing Alliances work.
What makes Alliance partners more difficult than a traditional channel, is that they typically don’t make money out of selling your product. The other complexity is that different vendors have different definitions for what constitutes an Alliance relationship, making it harder to understand their role. So let’s begin by defining what we mean by an Alliance Channel.
What are Alliance Partners
The definition of an Alliance Partner is a company that doesn’t sell your product, and you don’t sell theirs, but the alliance provides both organisations a competitive edge that makes it easier to position and sell your products. It really is the 1+1=3 scenario.
For example, a storage vendor may not sell servers, and a server vendor may not sell networks, but an alliance between a storage vendor, a server vendor and a networking vendor can create a working/validated solution that a partner can sell, which enables the three vendors to compete against a hyperconverged infrastructure vendor.
By our definition, for it to be a true Alliance partnership,
- Both parties must operate on the same tier of the channel (i.e. vendor-vendor or integrator-integrator) and
- Neither party sells the other party’s products individually
When is an Alliance not an Alliance
Now here is where it gets muddy. In our ever more complex industry, we find the term Alliances being used to describe partnerships that we would not consider Alliances.
In some cases, some vendors refer to non-transacting partners as Alliances. For example, a Salesforce.com partner doesn’t sell the Salesforce product, but they provide additional products and/or services around Salesforce that enable the sale. We would define this as a Consulting partner or perhaps an ISV partner, rather than an Alliance Partner.
Similarly, some vendors refer to their big global partners (Deloitte, KPMG, PWC, Wipro, IBM, HP) as Alliance partners, usually to differentiate them from their smaller partners. We would argue that if they don’t sell the product, they are still Consulting partners, and if they do, they are better defined as GSIs (Global Systems integrators).
Another type of arrangement is where a vendor bundles their product with another vendor, so that the customer buys them together. This may be overt (eg. an Anti-virus solution being pre-installed on a notebook with the branding clearly visible) or covert (eg. a microchip component in a phone with no mention of which vendor produced it, such as Snapdragon chipsets by Qualcomm). In both cases we would define that as an OEM agreement
Please note: we are not by any means implying that these other types of relationships are not valuable; they’re just different. If you’re interested in how to make those partnerships work, please contact us and we can make this a topic for a future article.
How do you make Alliances Work
Having now defined an Alliance relationship, let’s look at what makes an Alliance partnership work (or not work).
Here are some “must haves” in any Alliance partnership:
- It must make the other party’s product more competitive, or easier to sell, or solve an issue that they have for specific customers (ideally those they would both target individually). This is the 1+1=3 test.
- There must be some sort of financial gain for both parties. If the alliance relationship does not influence the compensation of the people influencing the sale, then sales reps and sales managers will quickly ignore it.
- Typically, there are joint head office or board level agreements in place of how the Alliance partners will work together. This includes sharing of confidential or proprietary information encompassing relevant business plans and common technologies.
- Alliance managers are first and foremost “business managers”, with strong business planning and financial skills able to work and engage at senior management or even CxO level.
- Alliance managers need to have deep multi-dimensional relationships within both businesses, not just a great relationship with the other Alliance Manager.
- Alliance managers are typically not measured against shorter term quarterly sales numbers, but a set of metrics more relevant to the long-term growth of the combined businesses.
In summary Alliances are strategic in nature and have long term time horizons, not the short-term promotional bundling of a group of compatible products.
Best Laid Plans….
Sometimes great head office plans don’t translate well into great real-world field implementation. It is useful to “war game” potential outcomes of significant decisions before execution, to make sure there aren’t any unintended consequences. Here is an example relating to Alliances.
We recently worked with a major US software vendor that forged a global alliance with a major US hardware vendor. The hardware vendor updated their local Australian price list and included the software vendors licenses in pre-defined “customer solutions”. The problem was that the two vendors had different distributors locally. So each distributor really only had knowledge around one half of the “solution”.
The other issue was each vendor had their own channel program with their own benefits and requirements. What this meant in practice, was that a Bronze partner (for the software vendor) could now purchase the software at the Gold price, if they had Gold partner status with the hardware vendor.
There are many examples of vendors that have successful and valuable Alliances. An extreme example is VCE “Virtual Computing Environment” which started as an Alliance between Cisco, EMC & VMware, but turned into a standalone joint venture company because of its success.
When looking at how you manage your alliances, begin by making sure everyone in your channel organisation understands what Alliance partner is (and what they’re not) and then follow the principles to make sure that the alliance adds value to the customer, as well as all of the alliance parties involved.