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Raising money for business development and operations is no easy task in a weak economy, so Channelinsight must be doing something special to collect $10 million in fresh investments and a total of $21 million funding for its partner relationship management (PRM) platform. One of its chief promises to subscribing vendors: Uncovering regulatory exposure amongst partners.

Solution providers are increasingly under pressure by vendors to tighten their management governance, keep tighter records, and carry higher levels of general and professional liability insurance to cover the risk exposure of their vendors. Many solution providers are grappling with higher vendor requirements for risk mitigation, and vendors are looking for even greater levels of risk coverage from their partners to insulate their exposure even when there is no clear connect between a partner activity and the vendor.

Despite the recession and the weak economic climate, vendors are banking huge sums of cash reserves. Corporate America has more than $2 trillion in cash sitting in the bank, and many of them fear real or frivolous lawsuits aimed at tapping those treasures. As one vendor executive told Channelnomics, “We’re all trying to protect our bank.”

Channelinsight was founded in 2003 as InfoNow, but is going through the process of rebranding itself “Channelinsight – a Business Unit of InfoNow” to reflect its core competency of collecting data and managing the intelligence of partner business activities, specifically in the IT channel. It’s already working with large, channel oriented vendors such as Lexmark, AMD and Siemens.

Partner activity intelligence is particularly problematic for vendors since they rely on data for forecasting and measuring partner value. Synching and collecting partner data isn’t easy, since every vendor uses different CRM systems, and their partner portals will have different interfaces. The average solution provider has relationships with 12 vendors, so the problem is compounded by the multiple relationships and systems. Even if a solution provider happens to partner with vendors all on the same CRM platform, the chances that all share the same data values are nil.

Many vendors will compel their solution providers to use their systems, routinely updating their PRM or CRMs with fresh sales and pipeline data. Solution providers in this situation often must dedicate an admin exclusively to recordkeeping – a heavy burden for a non-revenue producing position. This is often applicable to top-tier vendors.

As a result of CRM/PRM shortcomings, vendors are often left with spotty intelligence on the financial and performance health of their channels.

Channelinsight, though, is touting a different problem that it solves: regulatory compliance.

Vendors are subject to myriad domestic and international government regulations. The familiar SOX, HIPAA, GLBA and various data disclosure laws rise to the top of the list. But vendors are subject to countless more regulations dealing with fair labor practices, import/export standards, anticorruption, material integrity and antitrust. Compliance costs reaches into the billions of dollars annual, and the ramifications for noncompliance is often enormous – if not embarrassing.

Channel relationships are tricky when it comes to regulatory compliance. Vendors often call solution providers “partners,” but that’s not necessarily the case. A vendor and solution provider are very much independent entities, each responsible for their own operations. A vendor can no more dictate to a partner how to operate their business than a partner can demand product specifications and branding. Alignment between the two entities is one of mutual interest.

And that’s the catch that Channelinsight is looking to uncover in its PRM reporting, vendor exposure to regulatory noncompliance through “mutual interest” that’s manifested in partners taking the initiative to win business through illegal or unscrupulous activities.

In an interview with All Things D, Channelinsight recounted cases where solution providers bribed officials to win contracts, a clear violation of laws and regulations. In the end, though, their vendors ended up having to pay settlements – guilt by association.

“This is a big issue for any company that works with partners,” Channelinsight’s Mark Geene told All Things D. “We screen every transaction that gets processed on our system, looking for red flags.”

In Mafia movies and on TV’s Law & Order, the violation being described here is akin to RICO, a legal standard in which one party is equally culpable for the actions of another if they are part of the same chain. That chain is the channel.

Some solution providers may claim that they only have loose relationships with vendors. Perhaps, but even representing a vendor product through referrals and team selling places the solution provider brand on equal footing with the vendor in the eyes of the customer (and perhaps the law). And no vendor wants to be associated with another company that’s accused of or engaged in illicit activities.

Vendors are looking at this problem, thinking they can pass their risk exposure off to insurance carriers. Insurance carriers are happy to write policies, but they’re having a hard time understanding the risk exposure. And insurance companies charge more for things they don’t understand. It’s the nature of risk.

Good recordkeeping is a benefit to solution providers as much as vendors. There is a distinct lack of business intelligence and analytics among solution providers. But what Channelinsight is talking about is giving vendors a direct – and perhaps undue influence – over solution provider operates and decision-making.

For solution providers, staying clear of illegal activities is just plain smart. Short-term gains are nearly always erased and up costing more in the long-run. But if solution providers feel as though vendor partnership and recordkeeping requirements are odious, here’s part of the reason.

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Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships. He’s also the executive director of the Channel Vanguard Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at lmwalsh@the2112group.com.

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Larry Walsh:@lmwalsh2112| Channelnomics: @channelnomics