Engagement Models Pose Biggest Challenge in the Services Market

July 9, 2010 at 11:34 pm Leave a comment

Lack of clarity and alignment between vendor and solution provider pose roadblocks

Beth Vanni – Director, Market Intelligence

Because “services” is such a broad category, successful solution providers most effective in delivering professional, managed and support services have distinct and separate business models. At the same time, a good segmentation model with clearly defined partner profiles and performance metrics is critical for vendors. But, in our recent research focused on vendor/partner engagement models around services, we discovered a lack of clarity by the solution providers about the very core of their execution around services – namely, vendor field engagement models. We think this is still contributing to relatively widespread conflict and confusion in vendor channel relationships.

Field engagement has always been the critical “last mile” of harmonious vendor/channel engagement around services. As the saying goes, “all politics are local.” However, our research results are alarming about how ineffectively this field engagement is currently working. Over half (57%) of vendors indicated that they don’t think their own channel partners understand their own rules of engagement, and another other 50% say their partners have reported a poor experience in engaging with their direct services teams in the past. From the partner side, (leave as-is) of the respondents themselves indicate they are unclear on the vendor’s rules of engagement and have experienced channel conflict (39%) around services delivery

Despite the fact that vendor’s sales policies don’t always make solution providers happy, this type of widespread lack of clarity is very counterproductive to channel growth and delays solution providers’ investments in vendor’s channel services programs. Solution providers need the clarity and consistency of vendor field execution, even more so than many other more specialized channel incentive and support programs.  Predictable behavior around roles, rates and customer teaming processes is the glue that allows solution providers to build a meaningful and financially viable services practice. It can also be the factor which either instills confidence or deteriorates trust and satisfaction in end-user relationships.

The most common process deployed in the field to manage direct/indirect channel relationships is deferring services to the incumbent partner in an account, which got a 39% response rate from partners and a 43% response from vendors. Of course, solution providers prefer this method and expect vendors to leverage their insights and existing customer relationships when trying to further penetrate an account. Also, more than one-third of both vendors and solution providers felt they clearly segment which customers would receive vendor direct vs. partner-led services (41% and 38% response, respectively).

These “hard decks” are becoming increasingly common. However, as it relates to services delivery they seem to be less absolute and harder for vendors to consistently execute due to the need to keep services teams at maximum utilization and drive higher-margin services revenue during softer financial periods.

Lastly, the solution providers indicate they are using a co-sell and co-delivery model in key accounts based on vendor/partner complementary skills less frequently (39%) than the vendors felt that model was being used (57%). This co-selling model can be a very effective one for mentoring and helping solution providers apply technical skills, but is an expensive one for many vendors and doesn’t scale very well. Solution providers usually welcome the support, but are eager to get the vendor disconnected from the account so they can continue to promote overall multi-vendor solution and ultimate find their own unique and differentiated services delivery models.

For the full study, visit the Amazon Consulting Resource Center.

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