uk building channel

Channel Approach

adam davison

By Adam Davison, Director of Sales at Cloud Distribution Ltd.

For those vendors that have decided to launch in the UK with a channel approach, establishing a network at the earliest opportunity can drastically cut down on time-to-market. The partners can start the process and begin to build up momentum during the three or four months it takes for the vendor to establish their in-house team. This can even mean that the sales team has a set of opportunities already waiting for them when they are ready to begin.

A good distributor is really the lynchpin to a successful channel, and the decision on the appointment of the right partner needs to be considered carefully. As a distributor, we also do as much due diligence as possible before signing up with a new vendor. This includes our own in-house investigation into the company to establish important elements such as their backers and how much investment they have behind them. We also speak to friendly end users and partners to get an independent, honest opinion on the technology the vendor will be bringing to the market.

I would recommend all vendors ensure they look for a distributor who has a similar approach and takes their vendor signings seriously. This kind of due diligence shows that a vendor’s business is an important investment for them too, rather than simply another signing.

Likewise, the vendor should be doing their own homework about a potential distributor. If possible, you want to ensure that a distributor has a good track record with launching companies similar to your own size and background. Ideally, however, I would always avoid signing on with a partner who currently works with a direct competitor, as this can cause some awkward loyalty issues if two similar solutions are competing for a single prospect.

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Finding the right distributor

There are many different kinds of distributor, and it’s important that a vendor partners with one who is a good fit for them – especially if they are a start-up with less resources.

Larger, mainstream distributors bring value to well-established vendors. In these cases, the partners and end users all know the product well and are well aware of what they are buying and at what price. This means the distributor won’t need to undertake a lot of value-add activity because the product is essentially taking care of itself. Instead, the distributor’s value comes from their ability to handle the logistics for a huge amount of stock, getting everything configured and shipped to the customer on a reliable, next-day basis.

However, these distributors are less likely to be able to evangelise and explain why each customer is buying each product. While this is fine for an already established brand with a big customer base, it won’t be a good fit for a smaller company or a brand-new entrant into the UK market.

Other distributors specialise in the market evangelism aspect and operate almost entirely by finding exciting and disruptive new technology to bring to the market. They understand the value add of the technology, what problems it solves, and what verticals they should go to in order to create opportunities with their partners. That said, these specialists are becoming somewhat hard to find as most have been bought up and incorporated into the larger distributors.

Distributors who are start-ups themselves can potentially be a good fit for a start-up vendor, as they will likely share a similar passion and entrepreneurial mindset. It’s worth noting though that they often don’t have much spare bandwidth and may not have the resources needed to really push new technology.

Ideally, disruptive vendors with innovative but untested technology should look to find a distributor that has the right balance of size. They should be established enough to have the connections and resources for a demanding campaign, but small enough to be nimble and assign the vendor as a priority.

It can also be beneficial to partner with a distributor who specialises in a particular field of technology. Specialists are guaranteed to have a high level of knowledge and experience with your type of solution, and a head start on getting to grips with newer, cutting edge products. Distributors with a more general approach to technology can also work well however, especially as different fields tend to intersect. For example, we specialise in all things cloud, which includes cloud-based enterprise security solutions.

Once the decision is made to sign on with a vendor, we immediately set to work to deliver them with an accelerated go-to-market. Onboarding a new vendor’s solution can be very work intensive for a channel partner, particularly if it’s a more niche or disruptive technology. This means the partners will be itching to secure sales and generate revenue to recoup this investment as soon as they can. Generally, if they haven’t established a revenue pipeline within three or four months of taking on a new solution, they are likely to start looking for something else.

As already discussed, vendors are usually even more impatient to see sales coming their way after launching in the UK, so it’s really important that we are able to deliver an accelerated go-to-market.

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Establishing the partner network

Once the distributor has been brought fully up to speed on the vendor, they will go on to establish their own network of resellers to get out there and start selling. However, a distributor won’t want to be knocking on a reseller’s door and saying “hey, I have this one cool widget you can sell”. Instead, the solution needs to be integrated into the reseller’s stack.

To establish this, the distributor and vendor need sit down together and create a proper plan. This needs to establish their niche, the verticals they are strong in, and the pain points and key messages for each one. Likewise, it should break down the size of an ideal customer deployment and how this is measured – for example number of locations, employee count, number of endpoint devices, and so on.

This should hopefully draw on the go-to-market plan the vendor has already established, but the distributor can also help to solidify these plans if the vendor is less sure of its approach.

A good distributor will have a large stable of reseller contacts specialising in different types of technology and target company. The next step will be to establish a selection of partners that have the best mix of experience and contacts for the vendor’s objectives. This could, for example, see an initial list of 15-20 partners, with five coming on board in the first six months, followed by another five as the channel continues to develop.

The distributor will then move on to do account mapping with the partners to establish the needs of the vendor and what verticals and enterprise compositions will be covered.

It’s usually beneficial to have a smaller core of well-chosen, proactive channel partners rather than a larger, sprawling network. A smaller number of partners means that the opportunities the vendor identifies are passed through the same five or eight people every time, which enables them to build momentum.

Working with a smaller network means a vendor is more important for each of their partners. Closing £50m worth of deals across 100 different partners means that a vendor’s solution won’t be a particularly important part of any one reseller’s stack. On the other hand, closing £50m through just five core resellers will establish the vendor as an important partner.

I’ve found some distributors will approach this from the opposite direction and will instead ask a new prospect who their preferred channel contact is, and pass the deal on accordingly. This can mean that each deal will end up going through a separate reseller, which again means the vendor will be a very low priority for each one.

The vendor’s sales team really needs to push and insist to prospects that they have specific channel partners they work with. It’s important to point out this will benefit the customer too, as they will be dealing with resellers that are experienced and trained with the vendor’s solution.

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Margins of error

Sales margins can be one of the of the most sensitive elements of a channel agreement, but it’s very important these are agreed to the satisfaction of both sides.

Margins need to match the level of investment, effort, and risk on the part of the partners. If the product is part of a relatively well understood field and has a clear market, partners will be happy with smaller margins as it will be a relatively easy job for them to add the solution to their stack and start securing opportunities.

However, more disruptive, leading edge products, or those that are simply more niche, will require a much greater investment from the channel, with more training for sales teams and a greater amount of evangelism and education. Accordingly, these types of products need to be given higher margins if the channel is to be interested and involved, especially in the early days.

Resellers won’t be motivated to get out there and knock on doors for niche technology for a five per cent margin when they could be making the same level from a much easier sale for more established brands and technology. Higher margins will also enable both distributors and resellers to put more resources into the launch and speed things up.

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When is a distributor not a distributor?

The UK and US approach to the tech channel can be radically different in several ways, and this can lead to some major misconceptions from uninitiated vendors entering the UK market for the first time.

One major distinction is the vast difference in size and structure between the US and UK – something that seems obvious but can be easily overlooked on both sides of the Atlantic thanks to our strong connections in language and culture.

The size of the US means that channel partners often demonstrate their value through their local contacts and knowledge in different states. So, for example, a partner will know all the large pharma firms in Texas and will have 10 contacts that he can go to immediately and start progressing deals.

By comparison, the US is roughly 40 times the size of the UK, and there are 11 different States that can fit the entirety of the UK within their borders. This means that rather than region, partners tend to specialise in vertical markets or solution types. There will be partners focusing on retail or finance, or else security, storage, and so on.

Easily the biggest issue between the US and UK is the perception of what exactly a distributor does. In the US, it’s common to think of a distributor as purely concerned with logistics. A vendor with a physical hardware product will usually sell single tier, only taking on a distributor if they have a sufficient volume of orders that they can start achieving better economies of scale on with a new logistics approach. Start-ups and more niche technology vendors won’t be shipping their product every day in big numbers and so won’t be looking for economies of scale.

Likewise, vendors with entirely cloud-based solutions will of course not be shipping out anything at all, so the idea of a distribution partner won’t even be on the table. This mindset means that many vendors who do seek to take on UK distributors will assume they only need a small margin.

While UK distribution does include logistics when necessary, this is just one element of the benefits a distributor provides. Rather, a distributor is about connecting dots – getting the right people in contact with the right products at the right time to accelerate the go-to-market process.

Ignoring the value of distributors in the UK is a major shortcoming as they won’t be leveraging the increased time to market that a solid channel partner can deliver. Particularly when it comes to selling disruptive technology, the right distributor can hugely decrease the time to market through their channel and end user contacts. But as this kind of activity is rarely seen in the US, many vendors won’t understand that this is an option.

As a result, I often find that US vendors are conflicted about their UK channel strategy. They want to operate a channel here because they don’t want to invest the time and money required to recruit a full in-house office. On the other hand, they also won’t want to give the channel partners high margins because they don’t truly grasp the value the channel can deliver.

A good approach is to have a single in-house salesperson acting as a virtual channel manager. They will be able to leverage the distributor’s resources and contacts to achieve many things that would otherwise take a much larger in-house team, such as marketing planning, sourcing PR contacts and handling events.

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Accelerate your launch

A good example of how a distributor can drastically accelerate things is our prebuilt mailer campaigns, which can be customised for each vendor, with their branding and messaging. This includes landing pages, calls to action, contact details, and everything else necessary to start funnelling some prospects towards the sales team.

Configuring one of these mailers will take all of 30 seconds, and our partners can start mailing it out to their contacts. We supplement this with some of our own 22,000-strong end user database to reach an even wider audience. Having all this prebuilt saves a lot of time and meetings going back and forth on designing landing pages and other factors.

While all the time-consuming set-up is going on in-house, we can go out and start doing end-user marketing directly on behalf of the vendor. A particularly rewarding approach is to operate end-user workshops, where relevant prospects will have the opportunity to come along and learn about the vendor’s technology and try it out. These leads can then be passed back on to the partners for development.

This can reduce the sales cycle by up to half, leading to some opportunities already in the pipeline as soon as the partners and in-house sales team are on board.

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Managing a new channel

Openness and communication are very important for a successful channel relationship. I find it works best to set up and share timelines for responsibilities on both sides of the relationship right from the initial kick off. This includes basic items like sending the contracts, building sales cards, and so on. The more visible the process is, the better.

The business plan should be designed with this in mind, including regular milestones that the distributor wants to hit. Objectives and progress can be tracked in a shared document to provide real time visibility and remove the guesswork.

A regularly scheduled weekly call can be invaluable in getting things done on both sides, allowing both the vendor and the distributor to keep each other updated, and giving them the chance to chase up on anything that might be slipping.

On the other hand, I have found vendors can get somewhat carried away, demanding daily updates and chasing leads constantly. It’s important to find a balance between keeping a regular dialogue and pushing too much. However, this tends to be more of a personality-based thing rather than any particular regional experience, so there should not be any major cultural clashes here.

Defining a timeline at the start of the relationship and breaking it down into separate objectives can also help prevent the vendor getting too impatient. As discussed in the previous chapter, it will generally take at least 12-18 months to get a new UK launch fully operational and producing a regular revenue stream

While a good distributor will help to speed things up significantly, many elements still take time – for example, it will usually take a couple of months to book in sales and technical training for channel partners, and a similar amount of time to create and launch a marketing campaign. Having the progress of all these elements in an accessible tracker will help to quell the vendor’s urge to constantly chase and chivvy things along.

With the combination of a solid in-house sales team on the ground and a well-chosen distributor, vendors should be able to trust their UK operations to start flourishing and establishing a place for them in the new market at an accelerated rate that will quickly catch up with the competition.

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