09 May Picking a Technology Partner as an IT Services Firm
All relationships require investment and care in order to have them be fruitful and successful and no technology partner vendor is an exception. There are so many win-win scenarios when it comes to working with an OEM.
In the tech-enabled services market, service providers need to partner with leading providers of cloud, software, and hardware solutions to meet the needs of their customers.
In this podcast we will dig into what things an IT service provider should consider when establishing key partners with technology providers. For the sake of this podcast, we will call these providers original equipment manufactures – OEMs.
Here’s what we highlight in this episode:
- products and services are huge when aligning
- Providing technical support
- Don’t necessarily depend on leads but if you’re aligned, things can come together
- If you’re looking for commission dollars there is more money to be made on implementing
- Understanding that all channels have conflict but working with partners that understand conflict and can navigate together is important when having a relationship
- Invest in your relationship to get the most out of it
Mike Harvath 00:04
Hello and welcome to this week’s Shoot the Moon podcast broadcasting live and direct from Revenue Rocket world headquarters in Bloomington, Minnesota. Revenue Rocket is the world’s premier growth strategy and M&A advisor to tech enabled services companies. Today, I have my partners Ryan Barnett and Matt Lockhart with me. Welcome, guys. What are we talking about today?
Ryan Barnett 00:29
Good morning, Mike. And Matt, thanks for joining us. We do a lot of work in our client base, is it service providers and tech enabled services companies. And oftentimes, these companies when they go to market, they choose a technology partner to help provide them with solutions to go to market. So what there is, it could be a cloud or a cloud partner or software partner, or even hardware solutions to meet the demand of the partners? What we want to talk about today, podcast is what are some big consideration items when you’re looking to choose a technology partner? And, and what what should you look for and in in choosing the right the right path and picking the right horse to ride. So with that, Mike, I’d love if you can kick us off because you spent decades in the partner ecosystem. I’d love to hear just your overall thoughts on you know, what is a technology partner? And how did those relationships work? We can go from there!
Mike Harvath 01:39
Yeah, for sure. So, you know, most of the work that our clients do, is aligned with some sort of technology partner, it’s either built in an ecosystem, for example, or around an ecosystem like a cloud or using custom development tools, or even implementing apps, with vendors like Microsoft and Oracle, and, you know, could be Salesforce could be a variety of different vendors and those partner ecosystems are robust. And partners have sort of different flavors and different stripes. But there are some universals that do come to play in these partner ecosystems and sort of, are you thinking what technology partners do you align with to build your services business around? That are important? In certainly, some of the areas, you know, to think about are, you know, the quality and reputation of the company and the products and the services?
You know, what kind of support are you going to get as a partner from those vendors? And sort of, you know, if you do resell, although I would tell you there’s still some of our clients do some of our clients don’t? You know, what is the sort of the profitability sort of relationship with that vendor? And then how well does it align to your own ability to create your own offerings, so that you can build around that. So that’s just a sample of some of that. There’s certainly plenty of great technology partners that are quote, unquote, channel friendly, talk about the ability to work with a channel and a channel is not just one that resolves products, it could be a robust services channel that can build upon the technologies that that vendor built, and really allow customers to win with it. You know, just a few thoughts, Matt. Oh, what’s your, what’s your thoughts on this one?
Matt Lockhart 03:39
Yeah we’ve all seen and, and had experience and success, where aligning to the right technology partner provider is, is a really important aspect of, you know, one’s growth strategy. I think, first and foremost, you have to believe what said technology provider does and how they go to market and what their tools are, and, and, and aligning your target market to their target market. Well, and most importantly, that you’ve got a specialization.
You know, your capabilities are specialized and align to those technology providers, you know, in a way, it’s the opportunity to accelerate your growth because you’re recognized, you know, with that specialization and you’re able to, you know, broaden the awareness to that, to that align target market because of your specialization and credentialisation. But there’s obviously a lot of work that needs to get done, and ensuring that you’re making the most out of it, you know, we’ve seen a ton of examples where, you know, firms just do the bare minimum, with their, you know, technology partner. And, they don’t really learn how to work, you know, within the ecosystem. And so, and they don’t get much out of it, right. On the flip side, I, personally have had this experience where you, you rise up in the awareness within that ecosystem, you are celebrated, you know, as a partner of the year or an advanced partner relationship, and, you know, new business opportunities, are abandoned. And so, so it’s, it’s a very important for many services firms, it’s really a very important key foundational key to them being able to grow over time.
Ryan Barnett 06:31
Yeah, I’d love to emphasize that, Matt, I think what you said is very true in that, when you start with your your customer focus in mind, and you’re looking at the solving the problems that your customers have, looking for a partner that has the technical ability to go and execute with, with their software, or with our hardware is, is the first and foremost most critical thing that you have to have, if you’re trying to sell a piece of software that doesn’t mix with your client base, that relationship is going to be pretty sour to start fairly obvious. But I think it’s important that you understand that that look.
So when you consider things like, do they solve your solutions, a good consideration might be the market share that they have, or the the specificity to the target market that you’re going after that the software provider has. So if they if they’re able to solve niche problems, and you’re able to solve, and you’re able to wrap around your business expertise for that target market, I think has one of the critical components to selecting some of those technology vendors, your teams will partner much better, if you understand that you can both go and dominate a market together.
Mike Harvath 07:59
I just think, you know, too, I’ll add that, you know, Another consideration is, particularly if you build IP, on top of some, you know, maybe a build an extension or some software on top of a baseline set of technologies, that, you know, they’re marketplaces have become very important lead generation tools for some of our clients. And, you know, I can think of very specific solutions that are built on some of the industry leading CRM offerings that either align to a vertical market or become, you know, an enabler for a company to you know, further, get involved with implementation, and lead in or lean in to, you know, best practices for a particular sub market segment. You know, we seek vendor marketplaces that Microsoft and Google and Apple and others, but you know, more and more vendors are developing vendor marketplaces. In many ways. Now, it’ll become a way for you if you develop IP, to sell it in a in a pretty efficient manner, but also to be a great lead generation source for your services business when someone is looking at that technology.
Ryan Barnett 09:15
Let’s take that portion you mentioned about leads, how much should a partner be depending? When I say partner in this say, how much are should a partner here, depend on the technology provider for leads? Better said how much of the channel partner depend on Microsoft or Google? Clearly, there’s not any any of those in that ecosystem?
Matt Lockhart 09:40
You know, I think it goes back to how much have you invested early on and any channel partner in relationship, I think that you’re dependent upon leads. In particular, sort of new customer leads, should be actually quite low. I mean, so you got to, put yourselves in the shoes of a Microsoft or a Salesforce or an Oracle, or an AWS, and you know, it, the fact of the matter is, is paying a check and saying, Hey, we’re a partner isn’t going to get it done, you have to build trust, you have to build trust with them, that you how you’re going to take care of their shared customers is, you know, really strong, you have to build trust with them in terms of your competency, you have to build some relationship relationship with the field relationship with the channel team.
When a firm shows that those pieces are in place, that they know how to work within the ecosystem, then I think that you can rely upon the partner for, you know, lead generation opportunities. But until you see it starting to happen, and until you see that commitment coming forward. Yeah, I know, you shouldn’t really depend upon it, I always really advocated for this mentality of, of, you know, you give without early on in these relationships, you give without an expectation of return. And if you do that, and you do that, well, then all of a sudden, the return starts to come. And again, think of the the opportunity to align appropriately with some of these, you know, really valued firms. The same can be true for, you know, smaller technology, partner relationships, these guys have deep relationships within those target market customers. The opportunity is, is definitely and clearly there, Mike, you’ve seen it too. What do you think?
Mike Harvath 12:25
Yeah, I think you summed it up? Well, Matt, I mean, I think, you know, oftentimes, technology, you know, channel partners, tech services companies, you know, guys that build IP, around an ecosystem have a high degree of expectation, so if they’re gonna get a pile of leads from their vendor. And, and there’s a couple of reasons for that, I think they believe that, you know, hey, you guys are, you know, Microsoft, Google, AWS, Apple, or might be, you know, a lot of market velocity.
So you should be able to send a little business our way. As much as that probably true, it’s such a quid pro quo type relationship, and that you need to be able to show your competency and skill, particularly in the area that stands out from the rest of the partner ecosystem, in order to get those leads. And oftentimes, that means that you’re verticalized, that you’re an expert in your space, not only in the technology, aspects of the space, but in the market aspects of the space. So that, you know, it’s easy for a sales, field sales organization, or members of a vendor community to think of you as the go to guys for, you know, discrete manufacturing, with their technology or, you know, maybe professional services companies, whatever the market is you may choose to participate in. That’s a, that’s a big equalizer.
Most channel partner companies don’t do a very good job of marketing number one or two, they don’t certainly align vertically. And so for those that do those things, well, typically they need to rely less on the vendor lead component. And that’s exactly the time when they’ll get more vendor leads, it’s part of a very unique situation. Because it becomes much more frictionless for a vendor to send you leads when, you know, they know that you’re the leader in that portion of their ecosystem, or have the potential to be there’s a little bit of a shiny Penny syndrome as well, that comes with new vendor partnerships where you know, the vendor wants to send that channel partner leads when they’re new on there, just signed up with them. That becomes an expectation that that’s gonna last forever and it certainly does not. It’s just a way to jumpstart the partnership. So you have to be a little bit careful there in those early days to not expect that that stream of support and leaves will happen forever. It’s more of an onboarding period in your relationship with a particular vendor.
The way to keep those those leads coming, though is to, as I said, get, you know, really specialized verticalized, and ultimately productize, meaning you’re making your services and related technology offerings, easy for the client to buy. When you do that, then the vendor understands where you can add value to the overall ecosystem. And frankly, I’ll send you more opportunities.
Ryan Barnett 15:43
If I was to transition this a little bit, but I think it’s a very similar same vein, how what weighting factor would you put on the commission structure from, from the technology partner? And it goes hand in hand with I think the leads here. But if you think about making Commission’s or rebates or any kind of dollar amounts is strictly created with the the the resale of a service? How does that factor into decision with a with a technology partner?
Matt Lockhart 16:23
So just to clarify, Ryan, you mean the for the technology providers, you know, field team? How are they compensated? And or are they rewarded by using the channel?
Ryan Barnett 16:42
Also a great question, Matt, not necessarily what I’m asking, but I’d love to, I’d love to get to that. Next, I’m actually wondering it a little bit more about if you look at the model of a provider, and they add a commission or a spiff or any kind of dollar amount that’s associated with the resale of their service. Do Is that Is that something that should be high in a consideration factor? And if someone simply pays more? Or is that something that maybe he will go away? Do you have to be the services provider?
Mike Harvath 17:18
No. Yeah, I’ll weigh in on this one, I think, you know, for those of you that are in the audience that know me know that I’ve, for a long time, and I believe that most of the, at least the industry, leading technology, vendors will go to a net zero payment to or their channel. At some point, you know, the value added in it has to do with sort of when they get a particular offering to a tipping point in the market where they don’t feel that, quote, unquote, a reseller, that reselling support needs to exist, or they, you know, sort of pivoted to a sell direct model very similar to what Salesforce has done.
In those situations. You know, I think what’s important to note is, you know, the couple things that I think are interesting, you know, when our industry started, there was a huge, and it was relatively nascent. And I remember these days explicitly, because I worked in distribution, and I worked for a vendor and I worked for distribution, prior to kind of spending most of my career and IT services. At that time, all of the companies that participated in the ecosystem were small, including the vendors, relatively small, I mean, into the kind of hovering around 100 million in revenue and maybe do a billion but they weren’t larger than that. As vendors, and there was a need for kind of feet on the street, right. And in the old days, we used to have computer stores that were an oftentimes franchises and then they evolved in more b2b resellers. Then that evolved more into value added resellers, and then that evolved more into pure play services companies that were building, you know, real material, business solutions on top of these technology platforms.
Fast forward 30 plus years and we have still some of those types of businesses around. We still have some resellers around, we still have value added, you know, resellers and distributors that build solutions on top of hardware and software. But the vast majority of the market is now services oriented, and they’ve moved towards services or have become completely reinvented services. And I think ultimately on that continuum, we don’t know when that will be, most of all of these vendors will most likely not pay commission spiffs or discounts or rebates to partners for enabling the sale of their solution. They will, as you know, AI gets implemented further and it becomes more frictionless to acquire those baseline technologies, those vendors will solve that stuff direct. And it’s very important for you then as a services provider to have a very material solution or approach or market, or if you will, offering that’s built around the merits of that baseline technology. And you have to have your own marketing, your own sales organization, you know, your own services capability to really implement that solution, and in earnest, and I think, you know, that’s ultimately where a big part of the quote unquote channels have gone.
Certainly there’s some leaders in our space, so we could hold up and say they’re doing it in a way that probably portends what the future will be for most, if not all these vendors, you know, and that Salesforce, Salesforce tends to sell all their solutions direct, subscription revenue draft, but they’re very focused on making sure that the work around the services side and the implementation occurs with their channel. In the best channel partners have strong relationships with Salesforce. And they do, you know, get a lot of, frankly, a lot of leads, because it’s not as easy as just selling a subscription to a solution that needs to be implemented. It ultimately needs to be implemented, customize, integrated, extended, and that work comes from talented and train, you know, technology consultants that know this solution.
So to answer the question, again, Ryan much more directly, I think anybody who works around Intel companies should plan, particularly if they rely heavily on either, you know, discounts to resell a solution or a payment, if they are involved somehow in the commerce transaction about acquiring a fast solution to expect that that will probably go away someday. That day may be coming sooner than later. And that they need to make sure they fortify their own business around their offerings. So they can continue to be closely aligned with that vendor and ultimately be a partner moving forward, even if they’re not getting paid by the vendor.
Matt Lockhart 22:54
Point counterpoint, I love this, this is great. Ah, I think there’s an exception to that rule, Mike, and that is in the cloud consumption arena. And so, you know, the AWS, the Google’s the Microsoft’s the world, the big three, right and in cloud, have a have a pretty attractive program, where as you if you demonstrate that you are driving consumption to their clouds, that there’s a, you know, to quite honestly, kind of think about it as an ongoing annuity stream, related to your ability to continue to demonstrate that you’re driving consumption to those clouds.
So while I agree with you completely in that sort of more traditional relationship where you’re quote, unquote, reselling, that that’s, you shouldn’t necessarily count on that revenue as a ongoing annuity. But that cloud consumption model, pretty attractive. And that applies, you know, to our our clients in the Managed Services arena, our clients in the app development, you know, modernization arena, our clients in the, in the cloud, right, cloud modernization, cloud migration arena. And so I think that that’s, you know, keep that in mind as a potentially differentiated play. But super important in that, that you again, understand how to work within the ecosystem. These firms are really advancing a market place channel marketplace mentality that you need to get, you know, really smart with.
Mike Harvath 25:01
You know, what’s interesting about that mat is that, you know, there is some movement to reduce those those concerns and overrides. We certainly have seen it in Microsoft in recent years, or at least consolidating that higher consumption, renumeration, Congress relationship to the largest firm or the, you know, biggest firms and implement the biggest amount of consumption. I, you know, it’s my opinion, as long as there’s level of competitiveness, that there is in cloud consumption, that you’ll probably are right. I’m sort of thinking out of, you know, three to five year period where, you know, maybe a true leader comes to the surface, and they have so much market share that, that isn’t, they don’t feel that that’s going to negatively impact them, by continuing to reduce the reliance on the cloud consumption overrides, because they own you know, 80 or 90% of the market.
Now, whether that’ll ever occur with, you know, competitive landscape? I’m not sure. But, you know, if history is any indication, I think, certainly, we certainly can probably predict that this, these numbers aren’t going to go up, they’re probably going to continue to go down. And I think to rely on those annuity payments, as part of your long standing business model, it’s certainly what I advocate is to not do that. And as long as they’re, they’re great and take advantage of that. But you don’t want your business disrupted or offended because a vendor with a swipe of a pen decides to cut your annuity payments in half or something. So I think it’s important to, to understand that and, and know that, you know, Independence rules here. And to be able to focus on whatever sort of influence or payments you get from vendors to just simply be on top of your are already operating business model.
Matt Lockhart 27:15
Oh I agree with you completely. Mike, it’s in any ongoing channel strategy, it’s additive to your own capability around going to market to your target market, right? It is it is it being dependent upon that revenue. But being completely dependent upon any technology provider for the majority of your lead development, that is a bad idea. I think that the proverbial you gotta eat your own, you got it, you gotta kill your own, you know, food, right is absolutely critical. These are enhancers, they are part of your overall go to market strategy. But it isn’t, it isn’t your go to market strategy, or it isn’t your you know, profit and loss capability.
Ryan Barnett 28:27
I think great, great discussion here. I think one of the things that I’m hearing in is that if you’re specializing in your market, and you’re not going to depend on this, those commissions, if you may, but you’re gonna get a majority of your revenue and profit, mostly your profit, you may get a huge revenue boost in cloud consumption, but you’re gonna get your profit margins and actually pushing services of making sure that they’re driving consumption. So you’re doing a big mix there. I’d love to go back to your question, Matt. I think this is a good one.
The other thing is I think this gets a little bit into channel conflict and a little bit of the ecosystem working with channel partners and how how their sales reps are compensated on your activity. I’m sure both of you have seen a lot of this in your careers and and and I’d love to hear just general thoughts on what you should look for in an alignment to their sales reps and in compensating for the for the for their channel. Matter my guy either one of you can go here.
Matt Lockhart 29:39
Well, I’ll jump in you know, I think that you know, simply said you there’s a real negative if if a field you know it’s compensated in conflict with using with using the channel there’s a medium where You know, they’re not compensated in conflict, but they’re, they’re also not compensated to the positive by using the channel. And then, you know, the best case scenario and the best, you know, what I’ve seen in terms of the best collaborative relationships where are such that a technology providers field is, is actually part of their compensation is aligned to, you know, furthering the channel, in their customers. You know, most of the, you know, most of the well established technology providers do just that, now, it changes, right. And that can be a frustration, ya know, that can be a frustration in working with technology partnerships, is those incentives tend to change, oftentimes on a yearly basis. So continuing to figure that out is can be a challenge. But there are other scenarios where a field is in conflict, right, in terms of their incentives, against, you know, further in the channel, in, in their customers.
Mike Harvath 31:24
I would all weigh in on the conflict component of it, you know, bad I think, you know, all channels have some degree of conflict, particularly if a channel partner is able to sell and a vendor correct hire is able to sell to an overlapping customer set. These, these opportunities can get sticky, I think, knowing the team that’s in your patch, vertically or geographically. And having a relationship goes a long way to minimizing conflict. And so, it’s challenging, though, because a lot of these companies, vendor companies tend to not have people in these roles for more than 18. You know, what, sometimes 24 months, so, you know, it’s it takes work, right? To maintain those relationships, build those relationships, and stay close to those people, but understanding who they are, and organizationally, how they might align, in how you can collaborate, makes it a lot easier to have a discussion and in some ways minimize to eliminate conflict.
If a vendor sales guy who knows who calls you and says, Hey, we got this problem, how do we solve it, versus just does something unilaterally that negatively impacts your pursuit of that customers work or your business. So in some cases, depending on how it arrives, I think the best vendors are figuring out how to navigate conflict by segregating the market into direct and indirect, and or, you know, being able to understand where the lines are drawn into not competing with her channel, particularly on the services side of the work. And so understanding how that entire ecosystem works with the marketplace is important. And then being able to stand out amongst fewer competitors in that channel with the vendor is also critically important that comes back to the merits of, you know, really being known for something with that vendor.
That starts with not only your technology prowess, but that’s a given that sort of table stakes, but also your market experience in particular series of maybe one or a series of verticals, as well as your reputation as a partner, all those things will help you to want to eliminate channel conflict because there’s fewer channel partners that look like you if you’re very narrowly aligned to a particular set of technology and verticals or, and or, you know, have also developed a meaningful relationship with a field sales organization. The combination of those two things we find can become much more additive to the your own business versus those of you don’t those stories we’ve all heard about how vendors you know, when you find a large opportunity, want to take that direct and leave the channel partners on the side
Ryan Barnett 34:51
yeah, I think this is really been a great discussion here today. Just to kind of summarize a few things that I’ve heard When picking a technology partner, really get to lean on your target market specialty and in the technology partners ability to execute within the market you’re going after. So the quality of product and services is huge. When it comes to aligning your markets figured out, you should look for some level of technical technical support and how they’ll be able to provide support if there are issues for customers and addressing the needs of those customers, if there are issues heard that don’t necessarily depend on leads from a partner. But understand that if you’re aligned together, those leads will come and there’s a partnership that that that can come together. I heard also, if you’re looking for commission dollars, there’s a lot more money to be made on the implementation of the services compared to the resale of a product. But understand there’s some there’s some healthy business to be done within Cloud consumption models. And also the understanding that all channels have a bit of conflict, but working with a partner that understands that conflict and can help navigate directly.
So you’re both wind heavy and Win Win scenarios is important to any partner relationship. That’s what I heard, Matt will turn it over to you for any closing thoughts and kick it over to Mike from there?
Matt Lockhart 36:25
Well I thought it was a great summary, you know, these, these relationships, you know, like any relationship, you need to invest in it. Right to, to get the most out of it. You know, I’ve just seen time and time again, where there’s, you know, really low investment, that you you don’t consider it to be a value. And yeah, you’re just kind of wasting time and money. So but on the flip side, you invest appropriately, based on the understanding that this isn’t your, this isn’t your primary go to market, but it’s really an enhanced, and it’s an additive go to market. And, you know, those firms do do really well, you know, with these relationships, so we’d be, we’d be thrilled, you know, to talk to you know, talk more about it individually, if any people have any questions. We’ve all had a lot of experience in in these areas, and, and they’re a lot of fun. So, over to you.
Mike Harvath 37:39
Yeah, thanks, Matt. I mean, I think you’ve probably highlighted at one of the most important components of maybe this whole podcast, which is, you know, all relationships are an investment, and you know, some care and feeding in order to have them be fruitful and successful. And, you know, certainly technology vendor relationships are no exception to that. And there’s a lot of great vendors out there that have worked really hard to cultivate channel programs that I think are are beneficial, you know, when when sort of scenarios for not only their channel partners, but also themselves. And, you know, there’s always some discussion internally to those vendors, as to the best way to do that. For both their channel partner ecosystem, but also their own business, which they’re trying to just like you grow and grow profit and revenue and ultimately reach into the marketplace.
So that will tie a ribbon on it. For this week’s Shoot the Moon podcast. I encourage you all to tune in next week. So we unpack and discuss further relevant topics about growth, strategy and M&A within the tech enabled services space, thanks and make it a great week.