How to develop a winning channel partnership strategy

Channel partnerships have gained greater importance this year. B2B companies looking to forge crucial relationships and strike deals in order to grow and scale up are currently denied the traditional avenues of conferences and events. Channel partnerships, whereby systems integrators resell or partner services to an end-client, can therefore be a valuable tool for all parties. A recent Lakestar workshop conducted by Jawad Bhatti sought to share knowledge with our portfolio companies of how to enter into a successful channel partnership and get the best out of it.
B2B Channel Partnerships

Start-ups seeking traction with a client typically establish a direct sales route but those looking to grow and scale up need to consider a more powerful set-up. Entering into a partnership embeds the start-up into an ecosystem that can enable growth but, for all parties to prosper, it has to be the right partnership, and on the right terms.

There are several elements to a value-creating ecosystem and all are interconnected. The B2B start-up will require technology companies to provide either a larger platform for it to plug into or interactions with suppliers. Also in the ecosystem are the channel partners and the clients. Channel partners can be typical System Integrators (SIs) that operate as value-added resellers or they can be distributors that resell but also create value.  Successful ecosystems are those in which all parties can quantify the value proposition of working with their particular partners. They also need to make integration and flow-through easy to create the value. 

Avanade example

One example of a successful partnership is Avanade, the joint venture created by Accenture and Microsoft. Avanade now has almost 36,000 employees and is one of the strongest service providers for Microsoft Solutions. The value proposition for all parties is clear, with Accenture able to sell the services of its consultants, Microsoft gaining a reliable partner with a large number of people to deliver its products and the client having the reassurance of a partnership that can deliver results. 

The structure also allows the partners to protect each other with Avanade’s underpinning by Microsoft technology offering a compelling proposition. Moreover, the structure provides Accenture with the margins, Microsoft with the predictability of the pipeline and the client with peace of mind that the partnership will deliver on time and on budget. 

UiPath example

The relationship that a B2B partner forges with an SI is also influenced by its growth stage, with that stage very much defined by the SI. For example, when UiPath, already an established company, and Accenture started to co-operate in the UK UiPath was categorised as a start-up because Accenture had only a few people trained to deliver its software. When a company is “emerging” the SI might 20-30 resources trained on its technology. “Rapid growth” is when the SI has 500-3,000+ resources ringfenced and dedicated to the service. The “platform” phase is reserved for the likes of SAP, Oracle or Salesforce where SIs have thousands of people ringfenced on their technologies.

What to bear in mind when designing your ecosystem 

  • Build your strategy across a regionalised approach, starting from the client and going bottom-up. 
  • Channel partnership requires a long-term view. This route of go-to-market is always mid to long term. 
  • Before moving into a channel strategy you have to overhaul your sales strategy and change your mindset. If the sales people are not compensated to sell through a channel they will always go direct. 
  • Many start-ups think the SI should be bringing deals to them. It may happen but it’s not the normal practice. The best thing is to bring deals to your SI. This will create momentum and skills within the SI so that they will feel confident that they can deliver your product. Remember, the big thing for a SI is reputation. 
  • Last but not least, the entire sales team should be aligned with your channel sales.

The successful partnership ecosystem is built on several key pillars; alignment and understanding on which KPIs are important to each partner will strengthen the ecosystem. 

Also important is the choice of channel model: it could be one where the channel partner resells software; operates a managed service; a joint venture; or it could be a rebate system that compensates the SI if it recommends the company’s software. Many SIs have opportunity targets whereby they want to create the openings for their team to sell services. 

The structure of the partnership deal impacts on margin profitability. The most expensive deal structure for the client is managed services, when the SI buys all the tools and manages them on behalf of the client. A more profitable model is resell because the cost comes under expenses. 

One challenge that start-ups face when seeking a channel partnership is the matter of trust. An unknown or unfamiliar company is viewed as risky by the SIs, although a mention by Gartner can be enough to attract attention. One solution to help build trust is working on the RFPs with the SIs to help them offer more capabilities and the ability for them to sell more people on the back of the deal.

3 steps for growing a channel partnership:

  • Become famous with the SI
  • Codevelop your solutions with the SI 
  • Create demand within your SI clients

About the expert
Our guest host for this workshop was Jawad Bhatti, a frequent advisor and mentor with nearly two decades of experience in designing technology architecture, building commercial strategies and navigating complex ecosystems to accelerate commercial growth. He is currently the Global Managing Director at the international consultant firm Star.