What’s Your Channel Strategy; Channel-Only, Channel-Led, or Channel-Dead?

Why it’s time for a 100% Channel Strategy

When I got my start in channel sales 20 years ago in a fast-growing software company, our channel partners were several notches lower on the totem pole than our sales reps.  And even they were viewed as a necessary evil in the eyes of our technical founder and president.    Today, many IT vendors still operate in that mode; treating their channel partners as second class citizens and creating channel conflict through sales and marketing strategies that favor direct sales.   Rather than a “channel-led” strategy, these vendors are following a “channel-dead” strategy that leaves way too many burned partners in its wake.

Over the past decade, however, innovative startups like Veeam and Kaspersky have taken a very different approach.  These companies launched their businesses right out of the gate with a 100% channel-only strategy.  By being 100% committed to the channel and not taking deals direct, they have enjoyed tremendous success in business growth.    Their channel success didn’t go unnoticed.  Other companies started moving from a “direct + indirect” channel model to channel-only.  Sophos, for example, shifted to 100% channel in 2007, and Patch Link Security (now part of HEAT Software) followed suit a month later.

Recently I’ve noticed that the 100% channel strategy is accelerating, driven by a number of market forces.   The digital transformation of technology is driving a transformation in the channel with partners either migrating to cloud or being “born in the cloud”.    It’s also a major driver of the new way that customers buy technology, and in turn, how vendors view the channel.

A whole new breed of startups are launching their businesses with a 100% channel-only strategy.   One example is security startup VijiLan, where Gary Mullen, VP of Sales & Marketing, implemented a 100% channel strategy after seeing the success he had while at Kaspersky.  Security startup illusive Networks just raised a second round of funding and has quickly switched to a 100% channel only model to “scale quickly and accelerate its upward trajectory”.

This channel model isn’t limited to security vendors.  Business Continuity vendor, Zerto, and analytics vendor, CloudPhysics, are also following the 100% channel playbook.   Zerto, founded in 2010, has raised $110 Million in funding and achieved 4 consecutive years of 100%+ revenue growth with their channel-only strategy.

Why Sell 100% through the channel?

That’s a question I asked a number of vendors and here’s what I heard:

  • It’s less costly than setting up a direct sales force
  • As a startup, we can scale faster and bigger through the channel
  • Without direct sales, our partners don’t have to worry about that channel conflict
  • Our target customers don’t know us – but they already have a relationship with our partners
  • Our customers want to buy from their trusted partner who can sell them a complete solution comprising multiple vendors’ products

The key driver in this transformation is the customer.   As Shlomo Touboul, CEO, of illusive networks said In their recent press release, “We are focusing on the channel this early in our company’s history because we believe partners play a critical role as trusted advisors in helping customers to define and implement their security strategies.”

But how can the channel sell your product if you don’t have traction?

There’s a common belief that if you haven’t already sold enough of your product directly to gain traction, your partners won’t be interested in, or able to sell your product.   There’s some truth to that statement, but it can be countered with the right sales strategy – one that involves a much higher level of sales support as you start ramping up sales.  The startups that are successful with a 100% channel model have an inside and/or field sales team that work, and often help close, deals with their partners. In addition, they have Channel Account Managers who are responsible for understanding their partners’ business models, determining how the partner can profitably sell the vendor’s product, and enabling the partner through education, co-marketing, and support.

As a start-up, you typically don’t have brand recognition or a huge marketing budget to develop your brand and generate demand for your product.    One way to solve that problem, for example, is to allow your partners to white label your solution.  This is the approach Mullen at VijiLan has taken; leveraging the brand recognition those partners already have with their customers.   This frees up more funds for areas like product development and partner support.

Are you ready to go 100% Channel?

The digital transformation is having a massive impact on how and where customers want to purchase solutions to run their business.   If you’re a startup or early stage growth company, adopting a channel-only strategy could be the smartest choice you make to accelerate the revenue growth of your business.   How can you get started?   Here are a few suggestions:

  • Research companies, like the ones I’ve mentioned above, to learn how they’ve been successful
  • Engage a channel consulting company like ROCA Partners to help you create and begin executing your Go-to-Market strategy
  • Hire a channel expert, someone who has deep channel experience, to avoid costly mistakes that can bite you later

If you’re a well-established company with a direct sales culture, customer buying trends are going to work against you.   Adopting a hybrid channel strategy that ensures your company is channel-led, and not channel-dead, will be the topic of my next post.

I’d love to hear your thoughts.  Have you gone, or considered going, 100% channel?