Ideally, every partnership made in the channel would be of the “strategic” vein. But unfortunately, that is not always the case.
Every organization has a different level of dependency on vendors due to factors like size, and internal support. Starting out, a channel partner may test out a vendor to see how the relationship develops. A good partnership will flourish when there is sufficient support for operations and processes, creating greater efficiencies and inevitably providing each partner a competitive advantage that deems the relationship “strategic.” However, this relationship is a continuum which develops and contracts at various speeds depending on the market, timing, and other outside factors.
While most businesses put a centric focus on customer relationship management, vendor relationship management is also vital to the success of a business. The size of your profit margins largely depends on having healthy vendor relationships. And the best relationships are strategic partnerships where both parties are making money. How these relationships are handled have a direct impact on a company’s bottom line, whether it is IT or procurement executives managing the relationships.
A true strategic partnership is a mature relationship that is tried, tested and solid because it is meeting a need for the market at a time that is benefiting both partners. A business can justify greater spend and dependency on a vendor if that partner is providing them with a competitive advantage, and the partner providing the good or service can depend on this client as a regular source of revenue.
But partnerships don’t always continue to mature. In some instances, partnerships scale back due to a lessened need or a failure on one side to benefit the other.
There are several ways to escalate or retract the level of “maturity” of a channel partner relationship, such as was provided by Mihail Papovsky via CIO.com. According to the Papovsky, the partnership scale ranges from ad-hoc (vendor called upon as-needed), to strategic (both parties growing and receiving mutual benefits together). There are ways to manage these partnerships to be closer to ad hoc or strategic, depending on where your relationship currently lies. The following factors can be adjusted to influence the relationship in either direction:
- Time allocation: Either increase or decrease the time spent on communication i.e. goal setting, status reporting, etc.
- Cost: If scaling back, look for and ask for opportunities to lower the cost and/or extend payment terms. If maturing, use an outcome-based compensation model where the partners with both either win or lose.
- Paperwork: Similarly escalate by used outcome-based agreements, or deescalate by using your own standardized agreements as opposed to the vendors.
- Relationship: When forming a strategic relationship, learn about the vendor’s goals in order to find ways where you can help them achieve their objectives. Otherwise, keep them at arm’s length.
This last point is expanded upon further by SearchITChannel, you have a greater change of growing the depth of the relationship when you can understand everything from the go-to-market strategy, to the structure of their channel program and how your organization plays a role in it. Then, look into how the company is making money as a whole and on an individual level – from corporate executive, to regional manager, to the sales rep. Understanding their individual goals, quotas, margins and priorities will help further cultivate your relationship by finding a way to better serve their needs, while also getting a benefit yourself. This is particularly important for smaller firms in order to compete with larger competitors who may not put as much effort into managing partnerships, often times because they don’t have as great of a need to do so.
Because partnerships are fluid depending on the various factors of your business and market, it is important to try to keep the relationship positive regardless of its status. For as it is possible your need for a particular partner is diminishing now, you may require their services in the future and it is always good to have more friends on your side.