People and Pay-for-Performance are Vendors’ Top Spending Priorities

April 21, 2010 at 10:54 pm 1 comment

Beth Vanni – Director, Market Intelligence
Amazon Consulting

What channel spending is viewed as having the highest ROI for vendors?  And what investments are vendors planning to reevaluate or reduce this year?  Data from the Amazon Consulting 2010 State of Partnering Study indicates that the pendulum has swung back in favor of people as the vendor channel investment with highest ROI. Yes, good old partner-facing staff.

2010 was a tenuous year for many channel sales mangers.  A number of companies made significant changes to their field and phone-based coverage model and reevaluate both the number and type of partners a field channel sales manager would support.  And, those vendors that didn’t make changes were reevaluating compensation plans and core performance criteria for 2010.  Ironically enough, data from other Amazon Consulting research indicates that the top five vehicles solution providers want to use for two-way communication and collaboration with their leading vendors are all face-to-face:  local regional events, user groups, partner advisory councils, annual partner conferences and discussions with vendor’s staff were all highly ranked vehicles.  We’re glad to see solution providers raise their hand in support of face-to-face collaboration and the value of properly structured channel sales manager and channel sales engineering roles.

Pay-for-performance incentives and variable cost programs rank a strong second behind people as having the highest value. These include tiered reselling discounts, deal registration program incentives and performance incentives or rebates.  We saw a lot of these programs get enhanced or changed this year.  Cisco announced a total retooling of its services discounting and rebate structure.  VMware leveled its discounts and aligned them to their channel program tiers. HP announced the movement of various incentives on their ProCurve networking products from back-end rebates to front end-discounting on registered deals in order to increase the margin incentives for their partners to sell again Cisco. The list goes on and on.   Now that deal registration programs and performance incentives are mainstay in most vendors programs, the issue for solution providers is not so much the availability of funds, but the complexity of registering the same deal in 2-3 different vendor’s system and the overall administration involved in receiving these performance incentives.

Perhaps not surprisingly, MDF and funded headcount were ranked as having the lowest value and ROI in 2009.  The practice of vendors paying for dedicated headcount within solution providers is an age-old debate around value and investment.  It seems to be a polarizing issue for vendors — some love the mindshare and dedicated accountability it offers;  others resent the need to invest for mindshare where they think the partner should be reinvesting its margins to grow their line.  Either way, we saw a lot of reevaluate of these roles last year and new levels of accountability where these roles remainder. The large 100+ person investment HP made at CDW around a dedicated SMB partner support team notwithstanding, many vendors are making go/no go decisions about which partners (if any) to place bets on for funded heads.

MDF has been a hot topic for debate as it relates to channel value for nearly a decade. Access to funds has been challenging and rules around utilization have certainly gotten more stringent.  As budgets got squeezed in the last 12-18 months, channel MDF was one of the first operating expense lines to be reevaluated.  Sun partners, for example, complained of channel marketing budgets that were less than half of what they were in recent years. Guidelines for usage are often run by other functional teams within the vendor such as corporate or field marketing whom impose standards for brand usage or adherence to existing templates and materials that don’t necessarily work for all markets or all solution providers. By contrast, some vendors are pressing the accelerator on MDF investments and flexibility with their channel. IBM, for example, cites a significant increase this past year in marketing budgets for their General Business initiative, the majority of which are directed and used by their business partners. For organizations that are truly channel-centric and offer a lot of flexibility in fund utilization, the money is still there for the right proposals.

So, what’s the word to the wise solution providers regarding vendor’s channel spending this year?  First, make sure you know how your partner facing reps (field and phone) are being paid and how that aligns to your business plan and support needs.  Don’t assume just having top-line growth and keeping your certifications current will make you golden.  Second, make sure you have a business plan clearly documented with your leading vendors defining your unique services and market differentiation.  Petition hard for your unfair share of available marketing funds and make sure you keep visible within the vendors’ local sales management and program teams.  Remember the saying, “only the paranoid survive?”

2010 State of Partnering Executive Brief

2009 Study Reports


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Entry filed under: Industry Perspective. Tags: , , , , , , , , , , .

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1 Comment Add your own

  • 1. Pay for Performance »  |  June 8, 2010 at 5:13 pm

    […] “Pay-for-performance incentives and variable cost programs rank a strong second behind people as h…   […]

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