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Accenture white paper developing indirect channels
1. Letter Flyer Title
Customer Acquisition and Retention
Developing Indirect Channels:
A Structured Approach to
Reaching New Customers
and Growing Revenues
2. Overall, indirect sales channels entail
lower total costs compared to direct
channels. In challenging economic times,
when deal size tends to get smaller,
making effective use of indirect channels
can become a prerequisite for high
performance, by helping to boost revenue
and maintain profitability. Whether a
company is adopting indirect channels
for the first time, or is trying to optimize
the cost advantages of existing channels,
realizing the maximum benefit from
indirect channels requires a structured,
analytically driven approach to strategy
development, execution and management.
2 Customer Acquisition and Retention
3. Sustaining High Performance
through Uncertain Times
The Economic expanding market coverage. This has an indirect channel that boosts revenue
been particularly true in the electronics, and ultimately enables high performance,
Significance of Indirect communications and high tech sectors. a company must select the right channels
Channels For example, the indirect channel now partners, bring them on board in the
accounts for 66 percent of overall right way, and manage their performance
The mix of direct vs. indirect channels
technology sales1, up from 53 percent closely.
used by many companies has changed
in 1997. This change in the channel
significantly over the past 10 years. Based on leading practices and our client
mix—to include both direct and indirect
Direct channels are critical routes experience, Accenture has structured a
channels—has enabled companies to
into the marketplace, but diminishing five-step approach to help companies
better target customers and expand into
economic returns often require a address these requirements and harness
new markets (Figure 1).
company to add indirect channels to their the power of indirect channels.
go-to-market strategy at some point. However, while more companies have
incorporated indirect channels into their
The experience of many organizations
sales approaches, the success of these
over the past several years demonstrates
programs can vary significantly. To build
that indirect channels can be critical to
Figure 1. Technology sales distribution by channel type.
Technology sales through indirect channels increased
26 percent over the past 10 years
Technology Sales Distribution by Channel
1997 2007
33%
47% 53%
67%
Direct Indirect
Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 3
4. Cost Savings and Channel-specific costs can differ were able to package their offerings
so that their indirect channels could
significantly by firm. Conducting a
Strategic Growth thorough analysis of the overall cost enhance, sell and support products
Analysis and anecdotal evidence highlight structure for direct channels vs. indirect and services independently, and drive
a critical difference between the two channels helps determine the go-to- revenue growth. According to execu-
channel types: in challenging economic market approach most effective for tives at these companies, more than
times, deal size tends to get smaller each organization. In general, however, 80 percent of their sales are currently
(Figure 2). In a weak economy, therefore, indirect channels can lower distribu- derived from indirect channels.
it may become more important for tion costs, expand market coverage
According to published reports, Hewlett
companies to strengthen the strategy and enable improved performance by
Packard (HP) also grew revenue us-
behind their indirect channel programs supporting a rapidly growing product
ing indirect channels during a slow
and improve the execution of these portfolio targeted at new markets.
economy. When Mark Hurd became CEO
programs. In short, leading companies use a in March 2005, HP developed indirect
A recent analysis of total average IT combination of direct, indirect and channels to expand its market coverage.
distribution costs by channel type inside sales channels, taking advantage By 2006, the company identified more
indicates the cost advantages that of the complementary capabilities of than $68 billion in untapped spending
indirect channels offer.2 While indirect each channel type to serve specific by businesses that had never bought an
channels add more cost categories than customer segments. HP product. Capturing these custom-
do direct channels—for example, transfer ers through the indirect channel was
For example, two major companies in HP’s 2006 priority for new growth in
discount, market development funds, the software and high technology sector
price protection—both 1-tier indirect the slowing economy.3 By 2007, the
have both used indirect channel pro- company surpassed the $100 billion
channels (for example, value-added grams from the early 1990s onwards to
resellers, systems integrators) and mark in annual sales for the first time,
navigate economic downturns success- largely driven by its strong emphasis on
2-tier distribution approaches tend to fully, and both emerged stronger when
demonstrate lower total cost when the indirect channel.4
economic conditions improved. They
compared to direct channels (Figure 3).
Figure 2. Tradeoffs between deal size and volume for direct and Figure 3. Channel-specific IT distribution costs.
indirect channels.
Indirect channels save 11 percent in costs over direct channels
Total Average Sales Cost by Channel
Direct 63%
1-Tier indirect
(Value Added Reseller) 61%
Deal
Size
The Gap
$ Mail order/retail 58%
2-Tier indirect 56%
Web 50%
Direct Indirect Channel
Number of Deals Notes: IT distribution costs are shown as a percent of
sales. Total average costs are determined based on
business to business and solution sales.
4 Customer Acquisition and Retention
5. By studying practices employed by • Phase one identifies channel develop- several growth strategies at the same
these and other successful companies, ment requirements and creates a time. This approach can be a drastic shift
Accenture has developed a structured short list of qualified channel partners from a single-focus growth strategy that
approach for developing and manag- who can address those requirements. served a company well in a more stable
ing indirect channels to enable high business climate.
• Phase two develops actionable steps
performance.
for bringing new partners on board. To meet revenue goals in more challeng-
A Five-step Method Step 1: Review Go-to-
ing times, business units often embark
on competing and expensive channel
Our approach to channel development
(Figure 4) defines an effective
market Approach development efforts. In contrast, high-
performance businesses tightly align
multichannel strategy for selling Accenture’s research into leading their growth strategies across various
solutions and services, which helps industry practices shows that successful customer segments. Creating such
companies quickly identify the gaps in companies segment their addressable alignment results in a more unified and
their market coverage requirements, market and prioritize vertical targets.5 efficient go-to-market strategy.
identify the right channel partners for Because customer needs vary, it can
addressing these gaps and rapidly bring be difficult to establish new indirect Accenture’s approach to channel
new partners on board to boost sales. development begins with the premise
channels that concurrently address
The approach consists of three distinct the needs of multiple vertical markets. that a well-defined go-to-market
phases: Companies should first prioritize the strategy addresses specific customer
vertical markets they plan to target, and segments within target verticals using
• The prerequisite phase reviews the well-defined, differentiated offerings.
outline known routes to these markets
existing go-to-market strategy and
before developing new channels. Absent a clear go-to-market strategy,
its alignment to the overall corporate
we recommend that companies complete
strategy. Our research also shows that companies this prerequisite step before beginning
under pressure to boost revenues in a phases one and two.
challenging business environment pursue
Figure 4. Our approach to channel development helps establish a successful indirect
channel program to boost revenue and enable growth.
Accenture Channel Development Method: A Five-Step, High-Level Approach
Pre- Requisite Phase 1 Phase 2
1 Review Go-To- 2 3 Research and 4 5 Create Onboarding
Analyze and Map Evaluate and Qualify
Market (GTM) Develop Partnership and Implementation
Approach (Optional) Channel Structure Candidates Select Partners Approach
Assets
• GTM framework • Industry specific channel • Relationship with 3rd • Partner evaluation • Partner on-boarding
• Leading practices structure party channel framework best practices
development agencies
Activities
• Review target customer • Determine key players in • Evaluate existing • Adapt Partner • Evaluate current
segment profile value chain channels’ ability to evaluation framework on-boarding plan
• Confirm segment • Define players roles, high provide market coverage to meet client needs (Optional)
requirements level economics, operating (Optional) • Develop shortlist of • Identify caps
• Align channel segments protocols • Identify market coverage partnership candidates (Optional)
with target • Create specific product / gaps (Optional) • Conduct 1:1 interviews • Develop on-boarding
market/customers service channel map • Uncover potential with prospects approach
• Assess offering roadmap partnership candidates • Complete required due • Construct channel
and value proposition • Supplement list, as diligence specific ‘Business Plan’
• Assess channel program needed, with additional • Finalize shortlist • Define “100 Day”
value proposition research action plan
• Confirm GTM approach
Deliverables
• GTM approach - • Channel map • Target partner list • Qualified shortlist of • On-board approach
assessment partnership candidates • Business plan
• “100 Day” action plan
Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 5
6. Step 2: Analyze and Map sales model. Mapping the channel right customer segments. Similarly,
structure bolsters the company’s ability distribution partners and resellers
Channel Structure to support multiple partnering models. It help in transacting and delivering
Researching new channel partners for is also important to recognize, measure the product to the customer. The HP
a go-to-market strategy requires a and reward the specific contributions OpenCall platform facilitates a seamless
thorough understanding of the industry made by partners to growing the flow of information among all the right
channel structure and the relationships partner ecosystem, and it is equally entities in the partner ecosystem.
between market participants. Accenture important to manage the channels in a
Using a mapped channel structure,
recommends creating a channel consistent manner.
the HP partner program provides
structure map to identify key players For example, HP has instituted a a customer-facing directory of its
and how each influences solutions holistic partner ecosystem management complete ecosystem of partners
available in the market place. Because a program to support its HP OpenCall and solutions. An accurate partner
channel structure varies by market, such solution. This program engages an profile—available 24/7 through the
a map can be invaluable for identifying appropriate customer segment with portal—plays a critical role in engaging
worthwhile sales channels. the right channel partner, fostering the right entities on the channel map
For example, in an evolving channel profitable business momentum and and linking them with the appropriate
landscape high tech vendors use lowering development and testing costs. customer segments.
multiple channel partners and tiers, Results include faster time to increased
including systems integrators, resellers, sales and new revenue generation.
independent software vendors, direct This partner program also adds
market resellers and distributors. The momentum to development and go-to-
complexity of this kind of multi-tiered market plans. Software providers and
channel structure makes it essential to system integrators help influence deals
understand the role each partner plays during the initial stages of deal making
in the original equipment manufacturer’s by informing and interacting with the
6 Customer Acquisition and Retention
7. Mapping a channel structure is a three- The different colors show whether the
step endeavor: supplier or third parties determine the
1. Identify the customer segments you operational direction of each channel
participant.
wish to serve.
2. Lay out the basic channel functions An external market study would result
that route you to market. A typical in defining key channel partner groups,
model might include the routes you leading channel partners and their
use to: company profiles, the regions where
• Inform they operate, the segments they target,
• Interact the offerings they support and services
they provide, and the strength of their
• Transact
customer base. The study would identify
• Deliver
emerging channel trends and additional
• Service
channel considerations for future
3. Define how channel partners perform expansion.
basic channel functions exclusively
or cooperatively (systems integrators,
independent software vendors,
resellers and distributors).
The channel map offers a bird’s-eye
view of existing channel participants
and the topography of their existing
relationships. Figure 5 shows a
hypothetical channel map from the
perspective of an original equipment
manufacturer in the automotive industry.
Figure 5. Illustrative original equipment manufacturer channel map for customer
segments and channel participants.
Customer
Segments Inform Interact Transact Deliver Service
Dealer
Traditional Dealer Channel Dealer
Marketing
Traditional
Direct OEM Direct Dealer Dealer
Dealer
Other
Solution
Providers
Techno - New Media Ad Online Tech Online Dealer A, B or C
Friendly Agencies Site Logistics
Partner
OEM Sales Force OEM Service
Corporate OEM Direct Online OEM Buy
Direct Organization Back
Traditional Ad Agency
Variety - Channel Ads. Dealer Service Channel
Mass Merchandiser Facility Advertising
Seeker
Primary OEM Dealer Primarily Independent OEM/Dealer or Independent
OEM: Original Equipment Manufacturer
Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 7
8. Step 3: Research and Step 4: Evaluate and This step should also include developing
an approach for education, as well
Develop Partnership Qualify Select Partners creating materials to train new partners
Candidates In this step, Accenture recommends rapidly. Activities here should include:
evaluating the strategic fit of channel • Training content development and
This step in the channel development
process varies depending on a company’s partners against a desired partner management.
channel maturity level. Established profile. That profile derives from a • Training administration, registration
companies successfully improve channel comprehensive understanding of the and logistics.
performance by using advanced analyti- industry channel structure and the
• Training delivery and feedback.
cal methods. role the partner plays within that
channel. Another critical component is • Training competency management.
These methods help companies iden- the assessment of a channel partner’s • Partner certification, tracking and
tify poor performers in their channel ability to mobilize by evaluating the testing.
strategy and improve the potential of
partner’s business readiness, opera- • Events content development and
certified partners to improve channel
tional readiness and technical readiness. management.
efficiencies.
Lastly, determine a potential partner’s
To improve partner productivity, compa- ability to achieve rapid sales impact by
nies with established indirect channels evaluating the partner’s credentials,
should also redefine their desired partner market visibility, depth of territory and
profiles to align with their revamped opportunities in the pipeline.
metrics for partner productivity. They
reevaluate the current partner network Step 5: Create the
to weed out non-performers and add
partners who better fit the new profile.
Onboarding and
For example, shortly after the dotcom
Implementation Approach
bubble burst in 2001, a major network- Two key activities for bringing channel
ing manufacturer realized it needed to partners on-board are enablement and
transform its volume-based partner education. This step calls for a custom-
program into a value-based one to ized 100-day onboarding plan that
improve channel efficiency. Detailed addresses key requirements for imple-
analysis of its partner program showed menting the indirect channel program,
that about 1 percent of its partners and establishes the key capabilities
generated more than 70 percent of its required for effective enablement and
channel business. Only about 25 percent education prior to on-boarding partners:
of the company’s channel partners were
certified and had the potential to drive • Vendor intelligence (product,
additional business.6 The others were market and customer) dissemination,
registered partners. including product roadmaps,
addressable market data and
business planning input.
• Business planning and accountability
management.
• Partner contract amendment and
finalization.
• Partner activation and ramp up.
• Solution authorization.
• Joint solution catalog update.
8 Customer Acquisition and Retention
9. How Leaders Build Indirect
Channel Capabilities
Growing Revenues Diversifying the Entering New Markets
Sun Microsystems Channel Mix Juniper
In July 2008, Sun announced plans to Dell Juniper Networks started in 1997
streamline its sales organization and use using a direct sales channel to target
Michael Dell is another champion for
its 600 or so channel partners to support telecommunication carriers. After
customers below its top-300 accounts harnessing the power of indirect channels.
improving its suite of offerings the
worldwide. Sun’s senior executive When he returned as CEO in January
company sharpened its market focus
responsible for channels reported that 2007, he recognized the drawback of and targeted large enterprises a few
two-thirds of business came through it over-reliance on the direct sales model years later. In 2004, Juniper launched its
channel partners. By restructuring its he helped pioneer 20 years earlier. During indirect channel program and targeted the
sales organization, Sun expects to raise the previous three years, Dell’s indirect broader business market. This measured
channel revenue significantly, bringing channels had grown at a compounded approach helped Juniper make significant
it in line with industry leaders and—as annual rate of 16 percent without a inroads into the networking technologies
noted by industry experts—streamline its formal program structure and generated market and attain a more dominant
operations and improve market coverage 15 percent of Dell’s total FY07 revenues.9 position in the overall market.14
in spite of workforce reductions made This success prompted the company to
prior to launching the program.7 unveil a new indirect sales program in Telstra Incorporated
December 2007 to increase sales. By July Service providers typically use direct sales
Novell channels to sell and support complex
2007, the indirect channel was generating
Novell, owner of SUSE Linux Enterprise, 20 percent of Dell’s total revenues.10 offerings. Increased focus on solution
saw its 2008 first-quarter revenue selling has prompted providers to explore
increase by 69 percent and its 2008 Avaya options for leveraging their suppliers’
second-quarter increase by 38 percent. Avaya, a leading provider of high tech indirect channel capabilities to offer
Next year, corporate spokespeople communications products, is currently joint solutions. In August 2008, Telstra
report, more than half of Novell's SUSE transforming itself to become a strong Incorporated launched an indirect channel
Linux Enterprise revenue is expected to communications contender in the small- program to expand international sales.
come from the indirect channel.8 The to-medium enterprise market. To acceler- Telstra Incorporates is the US-based
challenge for companies with emerging ate this transformation, Avaya recently arm of Telstra International—a division
indirect channels is to rationalize and appointed a new senior executive with of Australia’s leading and largest tier-1
scale their programs and then to identify successful indirect channel experience telecommunications and information
and incorporate new partners in a at several companies to lead its global services company, Telstra Corporation
structured way. indirect channel division. Currently the Limited. In the company’s indirect
indirect channel accounts for 55 percent channel program, resellers maintain direct
of Avaya’s total sales.11 The newly control over relationships with Telstra
appointed channel lead set a corporate Incorporated clients and manage all
target to achieve 85 percent of total sales aspects of Telstra Incorporated services
through the indirect channel by 2011.12 as if they were their own. Conversely, the
One of Avaya’s senior executives reported program relieves referral providers of the
that a main challenge concerned auditing infrastructure requirements that come
and analyzing the performance of its with reselling, supporting and billing for
existing indirect channel and revamping an international telecom service. Referral
it to meet its very aggressive corporate providers share in the revenue based on
goals.13 prices that they can command; they have
no responsibility for service delivery or
troubleshooting.15
Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 9
10. To help clients achieve high performance by meeting the challenges
of reaching new customers and growing revenues in uncertain
times, Accenture offers insight, experience and a distinctive,
structured approach—for developing indirect channels. We have
developed leading practices for each activity in our approach,
based on our extensive experience as a leading provider of
management consulting and systems integration services, and as
a channel partner for more than 200 partner companies. We also
provide access to third-party resources to help identify and screen
prospective partners using established evaluation criteria, which we
customize to specific client needs.
For more information about out how Accenture can help your
organization on the journey to high performance, please contact
one of the authors, or call us at +1 (312) 737-8290 or send e-mail to
accenture.direct@accenture.com and reference this document.
To read more about Accenture’s Sales and Channel Services, visit
accenture.com/toplinegrowth
For more Accenture insights on customer acquisition and retention
in uncertain times, visit accenture.com/centricity
1 Dan Neel, “Positive Growth and New Market Perspective Paint Health Outlook for Pervasive
Technology Channel,” http://www.ChannelWeb.com, May 2, 2007. Accenture analysis.
2 Global Technology Distribution Council, “Cost of IT Distribution,” September, 2008.
3 Lawrence Walsh, “HP Welcomes Proposals That Target Non-HP Customers,”
http://www.Channel Insider.com, October 6, 2006.
4 Craig Zarley,”2008 Channel Champions,” http://www.ChannelWeb.com, April 25, 2008.
5 Accenture and the Economist Intelligence Unit, Innovation and Profitable Growth Survey,
2006. Accenture and CSO Insights, “Sales Performance Optimization,” 2006. CMO,
“CMO RealityCheck,” June, 2005.
6 Rivka Little, “Cisco Worldwide Channel Chief: Partners Are about More than Fulfillment,”
http://www.SearchITChannel.com, July 10, 2008. Accenture analysis.
7 James Niccolai, “Sun Moves to Indirect Sales for Most US Customers,” IDG News Service,
July 23, 2008.
8 Colin Steele, “Enterprise Linux Growing but Still Far behind Windows and Mac,”
http://www.searchitchannel.com, June 2008.
9 Tiffani Bova, Mark Stahlman and Mikako Kitagawa, “Dell Shifts Global Sales Strategy to Gain
Back Market Share,” Dataquest Insight, January 30, 2008.
10 Chris Gonsalves, “Dell Getting Partner Raves for Evolving Channel Program,”
http://www.channelinsider.com, July 2008.
11 Allan Sulkin, “Avaya CEO Giancarlo Talks to Industry Analysts at Avaya Conference,”
http://www.nojitter.com, October 23, 2008.
12 Brian Riggs, “New Faces in Basking Ridge,” http://www.nojitter.com, October 22, 2008.
13 Andrew R Hickey, “Avaya Looks to Channel for SMB, Services,” http://www.ChannelWeb.com,
July 2008.
14 Sean Michael Kerner, “Cisco Dominates in Routers as Juniper, Nortel Gain,” Datamation,
November 21, 2007. Mikael Ricknäs, “Nortel files for Bankruptcy,” http://www.NetworkWorld.
com, January 15, 2009. Company sources.
15 Telstra Incorporated. “Telstra Incorporated Launches Indirect Channel Program through
Comprehensive Reseller & Referral Partner Programs,” http://www.reuters.com,
August 19, 2008.
10 Customer Acquisition and Retention
11. About the Authors companies optimize their channel Ramesh Venkataraman is an
partner relationships and in enabling experienced manager with Accenture’s
Senior executive Kevin Bandy is the e-business strategies, business processes Strategy service line. He has a broad
global lead for the Sales and Marketing and change efforts for channel sales range of experience helping several high
Transformation practice of Accenture's and marketing initiatives. He is based in tech companies create and implement
Communications & High Tech industry Phoenix. their go-to-market and operational
group. He oversees the development of strategies. Prior to joining Accenture,
strategies, assets and tools that help ron.ref@accenture.com
he held senior-level positions at several
companies in communications and high Adrian Sawczuk is a senior manager startups and Fortune 500 companies,
tech industries improve sales capacities, with Accenture’s Strategy service line. which included developing, launching and
pursue large-scale transformation He works with companies across a wide managing sales and marketing initiatives
of sales organizations and enter new range of industries, helping them develop for three major technology product lines.
markets and geographic regions. He is and implement strategies for growth, He is based in Reston.
based in Atlanta. new business development, product
kevin.f.bandy@accenture.com and channel development and new ramesh.venkataraman@accenture.com
market entry. Prior to joining Accenture,
Ron Ref is a senior executive with he cofounded a telecommunications
the Accenture CRM service line, and infrastructure management company,
leads the Electronics & High Tech Sales where he also served as vice president
and Marketing service line in North of business development. He is based in
America. He has extensive experience Atlanta.
helping electronics and high tech
adrian.sawczuk@accenture.com
Developing Indirect Channels: A Structured Approach to Reaching New Customers and Growing Revenues 11
