Managing a Reseller Channel in the

Software Industry

Whitepaper from TBK Consult

Author
Hans Peter Bech, M.Sc. (econ)

 Hans Peter Bech 2014

First edition
Unless otherwise indicated, Hans Peter Bech copyrights all materials on these pages. All rights
reserved. No part of these pages, either text or image may be used for any purpose other than
personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission,
in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal
use, is strictly prohibited without prior written permission.
Published by TBK Publishing (a division of TBK Consult Holding ApS)
Strandvejen 724
2930 Klampenborg
Denmark
CVR: DK31935741
www.tbkpublishing.com
ISBN: 978-87-93116-06-1

Managing a Reseller Channel in the Software Industry

Table of contents:
Targeted audience
Abstract

Author

Acknowledgements

Introduction

The Channel

Reseller Idiosyncrasies

A, B and C Partners

The Partner Portal

The Partner Account Manager

Managing the Stars

Managing the Growth Potential

Managing The Rest

The Partner Relationship Management System

10

10

Tools for Improved Channel Partner Management

11

ValuePartner
Business Model Management

11
12

The Partner Communities

www.tbkconsult.com

Final Remarks

12

About the author

13

Managing a Reseller Channel in the Software Industry

Targeted audience

The target audience for this whitepaper is the board of directors,

the CEO and the sales and marketing executives of software
driven companies1 with ambitions for achieving global market
leadership.
The whitepaper primarily addresses the challenges of software
companies with long value chains.

Abstract

With only very few exceptions the software industry is a grow

or die type industry. This whitepaper therefore assumes that
a channel partner management framework must support a
business strategy aimed at becoming the market leader.
The whitepaper discusses how to design and execute effective
frameworks for managing independent resellers in the software
industry.
The whitepaper explains how the business models of the
software vendor differ completely from the business models of
his resellers and how this affects the way channel partners must
be managed.
The whitepaper address the challenge that 85% of channel
partners have no growth potential.
Finally the whitepaper makes specific recommendations for
strategy frameworks for supporting channels partners with
growth potential.

Author

Hans Peter Bech

Acknowledgements

Design and lay-out: Flier Disainistuudio, Tallinn, Estonia,

www.flier.ee

www.tbkconsult.com

Proof reading: Emma Crabtree, ecr@tbkconsult.com

Independent Software Vendors (ISVs)

Managing a Reseller Channel in the Software Industry

Introduction

Software companies have historically had a very strong

preference for selling their software indirectly through a channel
of resellers2.
The word channel is used in the software industry to
describe independent companies that assume various roles and
obligations in bringing a software product to the customers. The
definition is rather broad, since the roles and obligations can
vary substantially from simple reselling to system integration,
solution development on top of the software, implementation in
terms of consulting, project management, customization, training
and support.
The common denominator is the fundamental condition that
the individual channel Partner is an independent contractor
operating in his own name3, at his own expense and at his own
risk.

The Channel

The business models of software companies have some

substantial differences to those of most other industries.

www.tbkconsult.com

The software industry is blessed with the lack of a need for

manufacturing and logistics infrastructures. Getting a software
product from Finland to Australia in principle only takes a few
seconds or minutes.

The term reseller is here used for any type of 3rd party company
engaged in selling a software brand to his customers irrespective of the
degree of value add.
3
In channels designed as franchises however, this is not the case.
2

Managing a Reseller Channel in the Software Industry

The software industry is cursed with a few other characteristics.

Software is invisible. The value of software is heavily dependent
on how the customer perceives the risk of implementing and
the benefits of using it. The actual value is then also heavily
dependent on how the customer actually uses it. Thus the value
may be tightly associated with the services provided alongside
the software and the customers own ability to take advantage of
the functionality.
Leaving the sales of your products to 3rd party companies
operating in such an environment is a risky endeavour.

Reseller
Idiosyncrasies

When software vendors choose to sell their products through a

channel of independent resellers they actually put their lives in
the hands of people over whom they exercise very little control.
What many software companies fail to realize is the vast
differences between themselves and their resellers. The value
propositions of software companies and those of their resellers
are completely different. Thus their business models and the
way they think and act are also completely different.
I suggest you also read these whitepapers to fully comprehend
these fundamental differences: Growth Through Partners The
path to market dominance through a channel of partners in the
software industry, The Software Partner Channel in a Business
Model Context, The Software Partner Channel and the
Customer Value Propositions, Channel Partner Recruitment
in the Software Industry and Designing Effective Channel
Partner Programs in the Software Industry4.
Most software companies consider their resellers as their channel
to the market. A few changes to the previous sentence will
provide a much more operational foundation for the relationship
with resellers:

www.tbkconsult.com

Resellers are independent businesses.

The word independent makes a huge difference. Your resellers
do not consider themselves as your sales channel.
All available for free at www.tbkpublishing.com

Managing a Reseller Channel in the Software Industry

Resellers run their own businesses with their own ambitions,

their own P&L, their own target market segments, their own
value propositions etc.
Resellers consider their software vendors as their Key Partners
not as their superiors.
Resellers may associate very closely with a specific software
brand, but as soon as that brand starts to fade they will look
elsewhere to protect their own business interests.

A, B and C
Partners
5%
10%

85%

Figure 1: The Performance in a

Reseller Channel

www.tbkconsult.com

The Partner
Portal

All software reseller channels will gravitate towards the

structure illustrated in fig. 1 below.
Stars: Approximately 5% of your resellers will possess the ability
to grow their businesses without your support. Their leadership
is ambitious and they have the management skills to execute
their strategies.
Growth Potential: Approximately 10% of your resellers are
genuinely ambitious, but they lack the management skills
required to execute. With your assistance they may be able to
grow and become stars.
The remaining 85% are either without ambitions or their
management skill sets are so weak that no external support will
have any impact on their growth capabilities.
Designing your channel management programs must be based
on these facts5.

All information and logistic services provided by the software

vendor to his channel partners should be available through
a web based portal. The administrative overhead associated
with providing standard documentation and answering trivial
questions can by reduced substantially by providing a user I give that these numbers based on my personal experience from 30
years in the software industry. You can choose to ignore them if you
want, but please then tell me what you experience.
5

Managing a Reseller Channel in the Software Industry

friendly self-service Partner Portal. At the same time partner

satisfaction will increase with the degree of self-service
opportunities.
With chat functionality, social media type applications, videos
and search functionality it is possible to satisfy most information
requirements instantly and with very little human interference.
As channel partners hire new or additional staff to support
the activities around your product the partner portal should
accommodate most of the initial educational requirements.

The Partner
Account
Manager

Software companies must assign Partner Account Managers6 to

support the growth of their Stars and their Growth Potential.
The Partner Account Managers are business people with a strong
commercial background. They are not product specialists!
The main objective of the Partner Account Managers is to
understand the business model7 of his individual channel
partners and help them grow their business with his own product
as the core component. Thus the Partner Account Manager is
a coach and a management consultant when working on the
channel partners executive level and a senior sales person when
working with the channel partners sales staff in the field.

Managing the
Stars

The Stars set their own agenda and drive their own growth.
The management team of a Star type channel partner need and
appreciate executive attendance from the software vendor. They
do not want to waste time on people who do not have decisionmaking power.

www.tbkconsult.com

The Partner Account Manager must be well connected with the

top executive team of the Stars and use his liaison opportunities
to build and strengthen the ties between his own executive
management and the management of the Stars.
Partner Recruitment Managers and Partner Account Managers are
not the same. Please see the whitepaper Channel Partner Recruitment
in the Software Industry.
7
Including the strategy, the value proposition(s), the key market
segments etc.
6

Managing a Reseller Channel in the Software Industry

The Partner Account Manager must explore all opportunities for

strategic cooperation and alliances between his own company
and the Stars making sure that all the energy and potential of
the Stars fuel the growth of his own company.
There will be daily communication and activities between the
Partner Account Manager and his Stars. There will be at least
an annual strategy review and planning workshop and monthly
or quarterly follow up meetings.

The Growth Potential needs organisational support to release

Managing the
the growth.
Growth Potential The software vendor must have a framework for supporting the

Growth Potential, which all Partner Account Managers should

use. Only this way can the software company continuously
improve, fine-tune and scale the effort.
The Partner Account Manager will have to take the initiative
to and also facilitate the strategy review and planning sessions,
which provides the basis for the growth.
The Partner Account Manager should apply the strategy
framework and help drive the effort until the channel partner
becomes self-sufficient.
The Partner Account Manager will have weekly communication
and activities with channel partners in this category. There will
be at least an annual strategy review and planning session plus
monthly or quarterly follow up meetings.

www.tbkconsult.com

Managing The
Rest

Dont waste Partner Account Manager resources managing

channel partners with no growth potential! The cost/benefit ratio
will not justify the effort.
Although the majority of channel partners do not have any
growth potential, they still represent an important source of
revenue and a market coverage resource. They should primarily

Managing a Reseller Channel in the Software Industry

be managed through the partner portal with opportunities for

chat, call centre and email communication.

The Partner
Relationship
Management
System

Making it to market leadership through a channel of resellers

requires a Partner Relationship Management system (PRM).
Just as most companies have CRM processes and systems to
manage their customer relationships, an equivalent approach is
required for managing channel partner relationships.
The PRM supports the partner relationship management
processes, thus you must define these first and then implement
the system afterwards.
There is no way a software company can enforce best-practice
approaches and share crucial information on their partners,
their performance and their issues if all the data is in the head
of individual people who come and go.

The Partner
Communities

If you are building and maintaining a true eco-system8 then you

must provide the members of your ecosystem with opportunities
for meeting and getting acquainted. However, software vendors
with mere sales channel partners can also benefit from bringing
their partners together.
Partner conferences are opportunities for announcements,
training session, business development workshops and other
activities, which help improve the productivity of an indirect
channel.

www.tbkconsult.com

The biggest impact from the partner conferences may be the

impact on morale. Having the personal experience of being a
member of a huge global family is extremely reassuring for
most people.
All your channel partners should be invited to participate.
Attendees will pay their own travel and accommodation
In the eco-system your partners are enhancing and enriching your
product and providing services around you product enlarging your
market reach way over what you could ever achieve by your own
means.
8

10

Managing a Reseller Channel in the Software Industry

expenses and you can charge a fee for attending the conference
and associated events (e.g. special training sessions).
Partner Conferences are excellent opportunities for meeting and
recognizing your entire top performing partners.

Tools for Improved Channel

Partner Management

TBK Consult recommends using the following tools for effective

strategy review and planning sessions with your top channel
partners.

www.tbkconsult.com

ValuePartner

ValuePartner9 is already in use by many software vendors

helping their top performing partners grow faster and more
profitable.

Ideal curve

Importance average

ValuePartner is owned by ValueMaker: www.valuemaker.eu

11

Managing a Reseller Channel in the Software Industry

ValuePartner is a strategy review and planning tool based

on a questionnaire, a day workshop and a 1-day workshop.
The entire exercise can be completed in less than a week.
ValuePartner is an excellent tool for starting any strategy review
process aiming at improving growth and profitability.

Business Model
Management

Alexander Osterwalder with his Business Model Generation

book from 2010 operationalized the business model framework.
TBK Consult has developed a 3-day workshop helping channel
partners review and optimize their businesses based on
Osterwalders framework.
The 3-day business model exercise includes a review of the
customer segmentation, the ideal customer profile(s), customer
value proposition(s), sales and marketing approaches, customer
relationships, key activities, key resources, key partnerships
and the P&L10. The workshop also reviews the business model
environment, which includes all the external factors which have
an impact on the business including the competitive situation.

Final Remarks

Contradictory to the perception of many software company

executives channel partner management has very little product
content. Successful channel partner management is business
management and thus requires solid commercial understanding,
business acumen and salesmanship.
It doesnt mean that your product doesnt play a role. It certainly
does and all your tools and programs must support the product
you are offering.
However, successful reseller channels are not built with excellent
products alone.

www.tbkconsult.com

Combining an excellent product with a professional channel

partner program is the best insurance you can take out to protect
all the investments you have made in R&D and help you make it
to market leadership.

10

12

Profit & Loss: Review and analysis of revenue and expenses.

Managing a Reseller Channel in the Software Industry

About the author

Hans Peter Bech has been developing and managing global
partner channels in the software industry for more than 30
years.
Hans Peter built the partner channels for companies such as
Dataco (now Intel), Mercante, Dansk Data Elektronik (now
CSC), RE Technology (now Barco), and Damgaard/Navision (now
Microsoft).
As a management consultant Hans Peter has been providing
consulting on channel development and management issues
to companies such as Microsoft, Danfoss, Proekspert, Jeeves
Information Systems, eMailSignature, SoftScan (now Symatec),
Netop, EG A/S, CSC Scandihealth and Secunia.
Hans Peter is the author of several whitepapers on channel
development and management and he frequently writes articles
on the subject.
He started his career as a management consultant in 2003
and founded TBK Consult in 2007. Since then he has built the
company to its present position with 24 senior consultants in 16
countries.
Hans Peter oversees the development of TBK Consult as well
as performs management consulting assignments for selected
clients.
Hans Peter holds a M.Sc. in macroeconomics and political science
from the University of Copenhagen. He speaks Danish, English
and German and is a certified ValuePerform, ValuePartner and
Business Model Generation consultant.

www.tbkconsult.com

More about Hans Peter Bech

13

TBK-WIPA-015