Can Value and Velocity Channels Co-Exist?

Consider Microsoft. Anyone even remotely familiar with the software behemoth's channel strategy has to be awestruck at how delicately Microsoft leverages high volume players, like the catalogers, along with value partners, such as solution providers, both of which are selling high-turn products such as Windows and Office.

But observers could also easily have anticipated that chain saw crashing to the floor as Microsoft's channel mavens began pondering the strategy for Microsoft CRM, a complex solution that involves three separate server products. Microsoft Business Solutions partners are miffed, to put it mildly, at the vendor's decision to put the CRM offerings through the velocity channels and volume licensing. This was the channel dowry brought to Microsoft in the Great Plains and Navision acquisitions. These inherited partners suggest that Microsoft's scheme is proof positive that the vendor doesn't grasp the intricacies of the value-added sales and support model.

On Microsoft's behalf, executives reply that breaking the transaction apart from the post-sale service and support will ultimately benefit partners. But with current margins on sales and service of upward of 50 percent, that's a tough sell. Especially when one considers the upfront consultative selling involved since part of the job of the value players, especially on a new product like Microsoft CRM, is to set customer expectations. And since CRM solutions were positioned as silver bullets solving a myriad of customer problems a couple of years ago, expectations that went unfulfilled and resulted in large CRM deployments falling out of favor, this is a critical point

This is by no sense of anyone's imagination a problem inherent only to Microsoft. Chains saws and feathers don't really mix. But there's an emerging model that could alleviate the problem.

The Institute for Partner Education & Development (IPED), VARBusiness' sister training business designed to help vendors better engage with channels, is pushing a concept that marries the best of both the velocity and value models.

Under IPED's approach, value channels evangelize complex technologies and solutions and, once the customer is sold, designate a volume player as the source of purchase. The vendor sells to the volume partner who, in turn, pays a predetermined fee to the evangelist, which is funded as a deduction from the invoice. That creates an auditable paper trail to avoid any monkey business on the part of the volume player.

The vendor's role is to define the value proposition. For example, the value partner should receive something for registering the deal. He should receive something more for running a pilot program and another incentive for deploying the technology, etc.

And what makes this program practical is that, ultimately, market mechanisms keep everybody on the up and up. That is, if the volume player decides to hold back a few bucks, the value partner can direct purchases to a different volume guy in the future.

Of course, for this model to work lots of market dynamics have to fall into place. Not the least of which is value partners speeding up the migration to an influencer/specifier model. And while that is emerging, it certainly isn't sweeping across the channel like a tsunami. But value partners have to understand that vendors can't ignore volume opportunities,either economically or legally. And if they fail to get out of the velocity player's way, let the inanimate objects fall where they may.

Charles Humphrey (chumphre@cmp.com) is vice president of strategy and new product development at CMP Media, parent company of VARBusiness.