We Don’t Have Partnerships; We Have Relationships

Vendors need to recognize that they don’t have channel partnerships, but relationships that need cultivation and support to generate returns on investment.

By Larry Walsh

Since my early days in the channel, the notion of “partnership” between vendors and the companies that take product to market never sat well with me. A partnership is a formal relationship between two or more parties in which they share risk, liabilities, and – if successful – the profits of their enterprise. By that definition, few arrangements in the channel are partnerships.

What we have, rather, are business relationships that need purpose, cultivation, and support so that everyone in the route to market has a reasonable chance of success.

Those thoughts resurfaced recently at the biannual retreat of the Baptie Club 50, an exclusive organization of channel executives hosted and facilitated by Baptie & Company, in Austin, Texas, where I facilitated an eye-opening discussion. The room was clearly divided over the issue of partner profitability.

I proposed the topic in the first place to see how a room full of channel chiefs would react. At The 2112 Group, we believe vendors aren’t responsible for partner profitability. The vendor’s job in the go-to-market relationship is to provide resellers, integrators, service providers, and other intermediaries with opportunities – partly through discounts, incentives, and support – to make money in support of the end user. Ultimately, though, partners are responsible for defining their own profit models.

On the other side, we have the channel chiefs who believe that vendors are responsible for partner profitability; they see the world as one of co-dependence. In their view, if vendors don’t provide partners with clear profitability in the form of margins, incentives, and non-monetary benefits, the partners will either disappear or migrate to vendors that do.

Finding common ground between us proved to be more difficult than one would think. Channel chiefs on the latter side of the dispute couldn’t separate a vendor’s responsibility from a partner’s responsibility to chart its own destiny. And they couldn’t answer one key question: Who’s responsible for your – the vendor’s – profitability?

Every vendor going to market through indirect channels faces the same problem: You can create market conditions ripe with opportunity; you can provide rich margins and incentives that give partners immediate return on their investment; you can provide all the technical, sales, and marketing support needed to take products to market. But you can’t compel a partner to be successful.

By law, vendors can’t tell channel partners what to do; they can only motivate through incentives. If partners choose to engage, vendors win. If partners choose to coast by on the kinetic market currents, they can get by – as so many do. And if partners choose to fail through inaction and lack of investment, that’s their choice as well. There is one constant, however: Vendors are responsible for neither partner success nor partner failure.

If channel chiefs bear any profitability responsibility, it’s to their own companies. A channel chief’s first customer is his or her own organization and, specifically, management. The crafting of channel programs may provide partners with opportunity, but it’s not a guarantee of their success. Channel programs are, though, an investment in go-to-market resources and capacity that, when executed well, contribute to a vendor’s success and profitability.

Following that logic, vendors and channel companies – whatever they’re called – aren’t partners because they never have shared investment, risk, or reward.

Vendors and channel chiefs are responsible for their own profitability, which is why they need to foster their relationships with channel companies – these so-called “partners” – to ensure they have a reasonable chance of covering the total addressable market and generating a profit. Partner profitability is a byproduct of that mission. Vendors shouldn’t lose sight of that fact and get lost in the fog of phantom responsibilities.

Larry Walsh, The 2112 GroupLarry Walsh is the CEO of The 2112 Group, a business strategy and research firm servicing the IT channel community. He’s also the publisher of Channelnomics, the leading source of channel news and trend analysis. Follow Larry on Twitter at @lmwalsh2112 and subscribe to his podcast, Pod2112, on iTunes, Google Play, Spotify, and other leading podcast sources. You can always e-mail Larry directly at lmwalsh@the2112group.com.