Is your vendor becoming a fine young cannibal?

  • 23-Jan-2009

"Channel partners" are consulting or integration firms that implement or provide supplementary services to a software vendor's technology. They are ubiquitous across all the technologies we cover, and in fact tend to generate substantially more revenues than the vendors themselves. This makes vendors envious, and sometimes their baser instincts take over.

Consider the case of Web CMS Vendors Ektron and Sitecore, fierce competitors in the mid-market who both issued formal praise of their channel partners earlier this month.

Ektron announced a partner engineering group and touted one-hundred consultancies as certified in its latest platform. Sitecore praised its "growing network" and then cited some channel "MVPs."

The timing of those announcements was kind of ironic, since we had just heard from partners of both companies complaining about the vendors muscling in on some of their business. Ektron's lovey-dovey announcements followed on the heels of a release promoting the vendor's own consulting services -- so perhaps they were issued to mollify a restive channel?

There's a cycle in vendor-partner relationships, and I've seen it run full-circle many times in the last twelve years of analyzing content technologies. The cycle goes something like this:

  1. Vendor builds partner channel to increase sales -- while recognizing its incompetence at key collateral services (like graphic design and SEO in the Web CMS space, for example)
  2. Partner and vendor salespeople engage in an intricate dance with prospective customers -- choreography that typically involves copious beer and horse-trading
  3. During a sales downturn or feared sluggishness (e.g.., now), vendor increasingly "cannibalizes" channel by promoting its own consulting
  4. Vendor re-discovers to its delight that basic services can be highly profitable, while deluding themselves that they can scale it horizontally
  5. License sales from the jilted channel predictably start to drop
  6. Vendor loses some deals and reputation by overcommitting to consulting services where they don't excel
  7. Vendor realizes belatedly that margins diminish once they get beyond boutique architectural services
  8. Vendor hires new channel marketing rep with "fresh commitment" to building partner channel
  9. Initial resistance arises within vendor consulting team, but the rest of company finally comes along after multi-month delay
  10. Some jilted partners get back in the game with idealistic new salespeople
  11. Vendor dips into bottomless well of consulting and integration firms to recruit new partners
  12. Everyone returns to Step #2

 

In the case of Ektron and Sitecore, the story will vary from country to country. It's the same with a lot of other WCM and ECM vendors: their channel posture may differ in North America than say, EMEA or Asia-Pac.

As a customer this all might seem like insider talk, but you need to be aware of the dynamics when starting or renewing a vendor relationship. As we've counseled repeatedly in these pages, "partnerships" can take many forms. Ultimately, managing your suppliers to best effect remains your responsibility.