The channel strategy dilemma
A persistent challenge for enterprises buying technology in Asia is ensuring that whatever IT project they buy into gets used for its intended purpose
. In some cases, part of the disappointment in the solution lies with the failure to properly deploy the solution based on the original understanding and expectation of the user organization.
Years ago as country manager for a storage vendor, customers would often question the commitment of my company to the customer given the fact that we did not have a physical presence in the country. We signed up some channel partners with strong roots in the community but for some of our larger customers, they still wanted the presence of the vendor as a guarantee that we would be there to offer first level support should the occasion warrant it.
I believe this is a common problem for many IT vendors coming into Asia. They see an opportunity but at the same time are unwilling to invest given the geographically dispersed nature of Asia it is neither a country nor a continent, but several countries with some separated by large bodies of water. This is particularly difficult to grasp for many US companies whose executives have very little understanding of Asian demographics.
It doesn't help that historically most of the channel engagements were focused on pushing point products solutions that solve a very specific problem. Many of today's enterprises are no longer interested in buying point solutions but are looking for integrated systems. They also want to reduce the interaction with vendors and channel partners to, preferably, one organization so agrees to take accountability for the different products being deployed at the company.
I spoke to Neil McMurchy, research director at Gartner covering IT Marketing and Channel Strategies, and asked him to describe the challenges faced by vendors, their reseller partners, and the end-users in navigating the increasingly complex and convoluted engagement strategies appearing in Asia.
What is different about channel engagements in Asia compared to the US market?
Neil McMurchy: The fundamental difference is one of the business and technical maturity of many of the channel companies in Asia. Whilst there are a number of very competent channel companies in Asia, many of them have a very strong product focus in what they sell and how they sell. Many of them talk "solutions" but in reality are much more comfortable with the technical aspects of the products than they are about really being able to drive business value to their customers through a true solution delivery. You can see this in the limited number of really good Asian partners of business software vendors. There just aren't enough of them to cover the market opportunity.
So the first issue is a genuine solution orientation and capability of typical channel companies in the US versus Asia; the problem becomes even more acute in the high-growth emerging markets once you get outside the main cities.
The second difference is the continuing Asian channel dependence on products sales and margin versus revenue and margin from services and solutions. This is a growing business challenge due to the rapid growth expected in cloud or everything as a service. Frankly speaking many Asian channel companies will have their business model threatened by this unless they learn how to sell solutions and provide a differentiated value to their customers.
Is the approach of local IT vendors any different from that of US or Europe IT vendors?
Neil McMurchy: By and large local IT vendors have fairly simple approaches to channels compared to the US and Europeans. Many Asian vendors still erroneously believe that relationships are all that matter in their selection and management of channel partners. This view is not proving to be successful any longer and our advice to such vendors is to become more scientific and process-oriented in their approach to recruiting and managing channels, like the US and European vendors. This is not to say that relationships do not matter but that there has to be a compelling business case and clear alignment between the vendor interests and the channel partner for these to be successful. In some cases, long-standing personal relationships have led to unsuccessful partnerships being sustained long past their use-by date.
U.S. and Euro vendors have a programmatic approach to channels; their challenge in Asia is always balancing their desire to leverage global programs and investments in channels and the requirements of local customers and partners. They are in a constant tussle between their in-country staff that push for greater local content and approach versus head office interest in global standardization.
How can end user customers mitigate the risks associated with IT projects that are executed via channel partners?
Neil McMurchy: Don't make your choice on price.
The essential key is to choose a partner who has previous experience in delivering projects of a similar scale and complexity to your project. Promises about "we're developing those skills" mean nothing.
You must check references early in the evaluation stage and the references must be relevant to your project. If a vendor or channel partner can't give you a relevant reference then you have to assume they either don't have one or else they have a limited number of them and are burning them out with over-use.
BIO: Neil McMurchy is a research director with Gartner, where he works in the IT Marketing and Channel Strategies group covering the topics of growth strategies, channel programs and enterprise sales strategies, both from a global perspective and with particular focus on Asia/Pacific and Japan. His areas of specialization include growth strategies, channel strategies and programs, enterprise and key account strategies, partner profitability and incentives, partner recruitment and coverage, go-to-market strategies, entry into emerging markets, and resolution of direct and indirect channel engagement.
Years ago as country manager for a storage vendor, customers would often question the commitment of my company to the customer given the fact that we did not have a physical presence in the country. We signed up some channel partners with strong roots in the community but for some of our larger customers, they still wanted the presence of the vendor as a guarantee that we would be there to offer first level support should the occasion warrant it.
I believe this is a common problem for many IT vendors coming into Asia. They see an opportunity but at the same time are unwilling to invest given the geographically dispersed nature of Asia it is neither a country nor a continent, but several countries with some separated by large bodies of water. This is particularly difficult to grasp for many US companies whose executives have very little understanding of Asian demographics.
It doesn't help that historically most of the channel engagements were focused on pushing point products solutions that solve a very specific problem. Many of today's enterprises are no longer interested in buying point solutions but are looking for integrated systems. They also want to reduce the interaction with vendors and channel partners to, preferably, one organization so agrees to take accountability for the different products being deployed at the company.
I spoke to Neil McMurchy, research director at Gartner covering IT Marketing and Channel Strategies, and asked him to describe the challenges faced by vendors, their reseller partners, and the end-users in navigating the increasingly complex and convoluted engagement strategies appearing in Asia.
What is different about channel engagements in Asia compared to the US market?
Neil McMurchy: The fundamental difference is one of the business and technical maturity of many of the channel companies in Asia. Whilst there are a number of very competent channel companies in Asia, many of them have a very strong product focus in what they sell and how they sell. Many of them talk "solutions" but in reality are much more comfortable with the technical aspects of the products than they are about really being able to drive business value to their customers through a true solution delivery. You can see this in the limited number of really good Asian partners of business software vendors. There just aren't enough of them to cover the market opportunity.
So the first issue is a genuine solution orientation and capability of typical channel companies in the US versus Asia; the problem becomes even more acute in the high-growth emerging markets once you get outside the main cities.
The second difference is the continuing Asian channel dependence on products sales and margin versus revenue and margin from services and solutions. This is a growing business challenge due to the rapid growth expected in cloud or everything as a service. Frankly speaking many Asian channel companies will have their business model threatened by this unless they learn how to sell solutions and provide a differentiated value to their customers.
Is the approach of local IT vendors any different from that of US or Europe IT vendors?
Neil McMurchy: By and large local IT vendors have fairly simple approaches to channels compared to the US and Europeans. Many Asian vendors still erroneously believe that relationships are all that matter in their selection and management of channel partners. This view is not proving to be successful any longer and our advice to such vendors is to become more scientific and process-oriented in their approach to recruiting and managing channels, like the US and European vendors. This is not to say that relationships do not matter but that there has to be a compelling business case and clear alignment between the vendor interests and the channel partner for these to be successful. In some cases, long-standing personal relationships have led to unsuccessful partnerships being sustained long past their use-by date.
U.S. and Euro vendors have a programmatic approach to channels; their challenge in Asia is always balancing their desire to leverage global programs and investments in channels and the requirements of local customers and partners. They are in a constant tussle between their in-country staff that push for greater local content and approach versus head office interest in global standardization.
How can end user customers mitigate the risks associated with IT projects that are executed via channel partners?
Neil McMurchy: Don't make your choice on price.
The essential key is to choose a partner who has previous experience in delivering projects of a similar scale and complexity to your project. Promises about "we're developing those skills" mean nothing.
You must check references early in the evaluation stage and the references must be relevant to your project. If a vendor or channel partner can't give you a relevant reference then you have to assume they either don't have one or else they have a limited number of them and are burning them out with over-use.
BIO: Neil McMurchy is a research director with Gartner, where he works in the IT Marketing and Channel Strategies group covering the topics of growth strategies, channel programs and enterprise sales strategies, both from a global perspective and with particular focus on Asia/Pacific and Japan. His areas of specialization include growth strategies, channel strategies and programs, enterprise and key account strategies, partner profitability and incentives, partner recruitment and coverage, go-to-market strategies, entry into emerging markets, and resolution of direct and indirect channel engagement.
The channel strategy dilemma
By: Jose Allan Tan
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