Youd think with the economy tanking, Infortes Tim Foley would be singing the blues, along with thousands of other solutions providers who have seen their revenue streams dry up.
But Foley remains upbeat, thanks in large part to partner relationship management (PRM), the new solutions and tools set that extends the capabilities of CRM to an organizations alliance and channel partners.
Compared with the $6.4 billion thats being spent annually on CRM, the PRM market is small, but its growing faster than just about any other technology sector. For instance, Siebel Systems PRM sales are growing at an 80 percent annual clip, making it the companys hottest product area. The Yankee Group forecasts that the overall PRM market will grow at an 80 percent-plus rate over the next few years.
Meanwhile, the Meta Group projects expenditures for PRM software and services will exceed $1 billion by next year, as companies look to increase the usage and effectiveness of their partner channels. And IDC claims that revenue number will double by 2003.
“Those guys can be a little optimistic,” observes Foley, the director of the Demand Chain Management Group at Inforte, the Chicago-based strategic technology consultancy. “But, in this instance, I dont think thats the case.”
Whats driving this growth? For one thing, the benefits that PRM can generate have a strong appeal to organizations that have fallen on hard times.
“PRM increases in importance with the slowdown in the economy because when budgets are smaller and times are tighter, companies recognize they should make more business alliances with people who can provide other services or products related to theirs,” Foley explains. “If anything, the slowdown is accelerating the adoption of PRM.”
With PRM, organizations can leverage their distributors, resellers, agents and brokers, without having to add a lot of overhead. “PRM brings down the walls, allowing companies to include partners as virtual employees,” says Robb Eklund, VP of CRM marketing for Peoplesoft, which is beginning to offer PRM functionality as part of its CRM product portfolio.
For organizations that count heavily on indirect sales, the benefits are self-evident. “Weve recognized that PRM is going to be a key technology going forward if we want to expand our channels,” says Mike Munzer, senior director of distribution sales and business development at Symbol Technologies, a mobile data transaction systems provider that relies heavily on resellers, partners and OEMs. Symbol is looking to enhance its existing opportunity and lead management capabilities with a comprehensive PRM program. “You can achieve tremendous benefits in the marketplace by ramping up a partner very quickly with a tool like this,” adds Munzer.
To a large extent, PRM is an extension of CRM. “Theres a lot of cross-functionality between the two,” notes Ryan Olsen, co-founder of VisionSource Consulting in Salt Lake City, Utah. PRM extends CRM functionality in such areas as forecasting, product catalogues and lead routing to external channel partners, notes Tim Foley. But it also adds channel-specific functionality, such as the ability to close deals interactively—a feature of Siebels eChannel—partner profiling and performance measurement; partner recruitment; and the mounting and managing of joint marketing campaigns.
For IT consultants and integrators, PRM represents a potentially lucrative business opportunity. Not only is PRM one of the few items in the technology bazaar thats attracting customers, but as vendors jockey for position, theyre eagerly signing on service providers to implement their offerings — in the process throwing business their way.
At the same time, potential customers often need help in making sense of what is a fragmented, immature market that encompasses a bewildering variety of offerings and approaches. For example, PRM vendors have adopted divergent delivery models — ASPs, portals and packages – sometimes abandoning one approach for another almost overnight. As a result, notes Infortes Foley, solutions providers that have experience with both PRM strategy and technology best practices are in great demand.
And the payoffs can be substantial. In partnering with Siebel, for instance, Inforte has landed several big PRM customers such as Rockwell Automation and Sun Microsystems—contracts that helped the consultancy register a profitable Q3 and positive cash flow. Part- nering with several PRM vendors, including Allegis, has likewise helped VisionSource Consulting establish a solid presence in the insurance and banking industries.
“We initially targeted high tech, but with the slowdown in that sector we moved to insurance and banking on a regional basis,” says Craig Condie, a VisionSource co-founder. “Now this is becoming more of a national market for us.”
Whos the Customer?
Initially, PRM vendors targeted the high tech sector as their primary market, with significant success. HP, Cisco Systems. AT&T, BMC Software, Sprint, Compaq and Avaya were among the early PRM adopters. Now, however, major companies in other industries, including Maytag, Minolta, Bank of America, Allstate (with its agent network), American Express and Hartford Insurance, are buying and implementing PRM packages. In many cases, these customers are replacing their now-outdated extranets in the process.
Still, the momentum is just beginning. “Id say among the U.S. Fortune 1000, the penetration is still very low, perhaps 5 to 10 percent,” notes PRM consultant Bob Thompson, president of Front Line Solutions. Thompson expects the percentage to increase sharply, as more and more companies grasp the business value of PRM.
Within target customers, vendors that sell direct, as well as third-party service providers, are typically pitching their wares to those managers running corporate sales and distribution channels.
“By title, were selling to the vice president of alliances or channels,” says Foley. The IS chief also signs off on the acquisition, while in some industries such as insurance, sales and marketing managers are key to the buy, adds Foley.
With a collaborative technology like PRM, it is also important to get “buy-in” from the channel partners that will be utilizing the network. “We usually try to make existing partners —especially key partners – part of the interview process for designing the system,” Foley explains. “That way they feel its something theyve asked for.”
The top selling point for PRM, meanwhile, couldnt be timelier. PRM is one technology that can produce substantial business value very quickly—a return on investment on the order of 300 percent to 500 percent, by some estimates. “Some of the ROIs are stunning,” suggests Thompson. “You see paybacks in as little as three months.”
The reason: For starters, many indirect sales and distribution channels have been neglected. “Frankly, a lot of the existing channels are screwed up [and] theres also a lot of waste,” says Thompson. With an effective PRM initiative, he adds, an organization can better target sales, match the right partner with the right customer and, in turn, generate significantly higher sales and savings.
“We can show customers how to take campaigns and promotions that have been run by 10 people, each putting in several dozen hours a month, and with PRM have one person accomplish the same results in a half hour,” says Ryan Olsen of VisionSource.
Make no mistake, however. Succeeding in the PRM market can be tough. Selling the software — typically a suite of packages — is the easy part. “The technology is only 25 percent of the solution,” argues Thompson. Much of a PRM initiative centers around designing, planning and developing a strategy for collaborating with partners and developing a customer-centric business; overseeing change management; and integrating a PRM system with the back office.
In every implementation, aligning the PRM software with business processes is key. “We take a look at the existing business to optimize the effectiveness of solutions,” says Olsen. “If a business process is broken, digitizing and automating it isnt going to fix it. The process has to be reengineered before PRM can be effective.”
“The ability to do process analysis and understand the clients real business issues is critical,” Thompson adds. Inforte, for its part, usually breaks a PRM installation into two phases—design and implementation. With Sun Microsystems, as an example, it spent eight weeks assessing Suns PRM strategy. “We have a strategies team that has extensive process knowledge and industry experience that worked with Sun in developing a PRM strategy,” Foley explains.
On the implementation side, Inforte staffers typically work side by side with the client team. “With our delivery approach, we want the clients to co-own the project and specify upfront how much of their time they are willing to [devote to the engagement] and what their role will be in terms of joint staffing,” Foley says. “We try to approximate a 50/50 split, but ultimately, of course, thats up to the client.”
As a result of this collaborative implementation, the clients come away with first-hand knowledge of what PRM can do for them and how to manage the installations effectively. Its also a big plus if the solutions provider has CRM experience, but the two technologies arent directly analogous.
“Direct sales reps have different pain points than customers on a CRM channel,” says Thompson. “The PRM solutions provider has to understand that.”
Other requisites for success: Solutions providers must know e-business and be able to integrate disparate elements in the clients sales and marketing systems (i.e tying a sales force automation system into a PRM offering). Symbol Technologies has well-established lead management and opportunity management systems. “We need someone who can take what were doing with all the various hooks and leverage and integrate everything into one comprehensive PRM system,” Symbols Munzer says. “That way we can achieve maximum ROI.”
That, of course, is ITs top goal these days.
Seven Deadly Sins
Seven Deadly Sins
Managing partnerships is a tricky task. Here are seven of the biggest challenges facing alliance managers and channel managers.
1. Cost to recruit partners
Executives often expect channel programs to reduce their internal sales costs. As a result, they often underestimate how much it costs to recruit partners.
2. Gaining partner mind share
If youre not on the map yet, few partners are willing to go the distance with you.
3. Delivering sales tools to partners
The Web has eased this process, but do you really want to share your best sales tactics with outside companies?
4. Risk of partners selling competitive products
Coopetition is the norm. One day you cooperate, the next day you compete.
5. Reduced control over the sales process
Why trust an outsider with a big deal when your own VP of sales is up to the task?
6. Coordinating partner and vendor sales efforts
Are there clear rules of engagement for each market/geography?
7. Complex forecasting process
If your top partners dont have sales visibility, how can you possibly predict quarterly performance?