Channel Colonization

29 Sep

During the second year of my tenure at my last employer, a decision was taken to back away from our sales strategy, which up until then was largely focused on selling directly to end customers, and begin working with resellers. The ostensible objective of this strategic shift was to leverage the vast sales resources and client relationships of the channel to drive volume and cut our customer acquisition costs (CAC). What we were in fact doing was spending millions of dollars learning a lesson that we could have learnt by spending twenty bucks on Joe Benzel’s book: we were entering a superpower ‘no-fly zone’, the Microsoft channel.

Once we landed we discovered that Microsoft had completely ‘colonized’ the channel, in Benzel’s parlance. The systems integrators that we attempted to partner with had all made massive investments in obtaining (& maintaining) Microsoft certification. Their consultants and reps were glassy-eyed evangelists for all things Microsoft. Most significantly, their revenue projections were almost 100% Microsoft based. As you can imagine, they were not delighted to work with us. We only managed to sign a handful of partners, most of whom required special ‘early adopter’ rebates and lots of ‘sales mobilization’ (which basically meant embedding sales resources with their sales teams 24/7). The net result was that our indirect sales strategy  substantially increased our CAC! In all fairness things did improve some, as the company’s brand became more prominent, customers began to ask their advisers about the technology and that in turn resulted in some fairly respectable organizations approaching us with offers to partner on our terms.

In hindsight it might have been a lot more sensible to identify Microsoft as our strategic superpower before attempting to engage their channel. We could have then evaluated Microsoft’s strategy and made the appropriate adjustments to our own before proceeding. We might have tweaked the technology to drive adoption of one of their strategic systems or platforms, for example. We would then have been ‘co-opting’ Microsoft’s own momentum from within’ – leveraging their marketing might to drive sales through their channel.

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Posted by on September 29, 2010 in Technology


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