Partnering Partnering is a complex but essential activity sometimes seen as a “dark art” in B2B sales. In this section, we will try to demystify it with a clear introduction to the basics.
Goals of Partnering in B2B Sales Copy link
|Improve reach||Get access to customers your direct sales force can’t reach (e.g. international distribution).|
|Reduce cost of sales||Sell more efficiency by enabling others to sell your product or service.|
|Generate pipeline||Get referrals into deals (e.g. get your expense management software included as part of a larger finance transformation initiative being led by a systems integrator).|
|Improve marketing efficiency||Share the cost of marketing campaigns with partners (e.g. joint webinars) or mitigate costs of major events (e.g. selling sponsorships).|
|Ease scaling||The ability to hire and onboard salespeople quickly becomes a limiting factor in B2B growth.|
|Diversify revenue sources||Make overall results more predictable by spreading risk across channels. For example, embedded resale (OEM) agreements can provide a stable keel on your new sales.|
Types of Partners Copy link
Many people try to classify companies as partners but it’s preferable to classify relationships. This is because, as you scale, you will often find you have multiple relationships with a single, partner company.
Take Deloitte as an example. You might have a worldwide SI implementation partner relationship, an embedded OEM relationship in Europe (where they embed your product in a financial solution), and channel sales relationship in Asia where they sell your software outside of packaged solutions.
Partner relationships tend to fall into one of two types:
Alliances – these are partners who collaborate with you, but do not sell your software Copy link
They work with you on deals, and may do joint marketing but they do not “take the paper” on customer orders.
- A regional system integrator who refers you into deals in exchange for the right to perform the associated implementation services
Channels – these are partners who sell your software Copy link
They sell your software either standalone or as an embedded component in their software. They also “take the paper” on customer orders.
- An international distributor in Japan
- A software vendor who embeds your reporting solution
Types of Alliances Copy link
Technology Alliances Copy link
These are ecosystem partners who build complementary products that customers use in conjunction with yours.
- A data catalogue vendor’s relationship with Snowflake
These typically involve co-marketing, salesforce education, and potentially, referral agreements.
System Integrators Copy link
These are services firms that vary from small, focused boutiques to large regional or global system integrators (SIs).
Regardless of size, they make money in the same way — by selling services to implement software or transformation initiatives.
- CFO Solutions (boutique), Slalom (mid-size), Deloitte (Big Four)
These alliances typically co-sell relationships by joint bidding on projects with co-marketing.
Types of Channels Copy link
Geographic distributors Copy link
Geographic distributors sell your software in a given region or geography, often on an exclusive or de facto exclusive basis.
They are typically used to help you get started in a region where you cannot yet afford to build a direct operation.
Original Equipment Manufacturers (OEMs) Copy link
While the term dates back to physical manufacturing (e.g. putting my company's compressors in your refrigerators), the term OEM is still used today in software, with the same conceptual definition: OEMs embed your software in their offering.
These are long-term supplier relationships with a long sales cycle that hopefully result in a “design win.” The OEM then develops their product, ships it, and pays your company royalties which are usually a mix of prepaid and ongoing.
These are called “white label” relationships when your product is rebranded. For example, NetSuite Planning for many years was a white label version of Adaptive Planning.
System Integrators (as channels) Copy link
System integrators can embed your offering in their packaged solutions.
By default, systems integrators tend to form co-marketing alliances, but over time those relationships may evolve into cases where the SI builds their own packaged solutions and “bakes in” several partner products to them. These are effectively OEM relationship but in the context of solutions, not products. They are rarely white-label.
Two-tier Distributors Copy link
Two-tier distributors = master distributors who distribute your software through their own network of resellers.
Typically used to reach small/medium businesses with easy-to-sell products that have pull in the marketplace.
- Ingram Cloud
The key to partnering: clarity Copy link
The best partner programmes have clear expectation management Copy link
This should cover areas including:
- How and when referral fees are earned (e.g. deal registration systems).
- How the company will manage tricky situations (e.g. multiple integrators each bidding their solution on the same project).
The best channel programmes have clear territories that minimise overlap Copy link
Typically, if channel partners don’t have their own territories, distinct from direct sales, the end result is cherry-picking (i.e. the best leads are taken by direct sales and only the bad ones are passed onto partners).
Geographic boundaries work well for separating direct and indirect sales (e.g. geographic distributors).
Size floors work well within geographies (e.g. direct sales only to companies about $500M in revenue).
Strategic business development Copy link
At some point, in addition to normal sales-driven partnering activity, many companies decide to invest in potentially game-changing partnerships, such as:
- OEM white label relationships (e.g. NetSuite selling Adaptive Planning)
- Strategic investments
In certain cases, strategic partners can pave the way for the eventual acquisition of the company by the strategic partner.
This so-called “elephant hunting” typically gives access to C-level executives and requires large investments in time and resources, meaning it’s usually best done by a separate team.
This avoids priority conflicts between long- and short-term activities that would develop in a single team, and allows the day-to-day partner function to remain highly sales-aligned and accountable.
This function is typically run by a direct report to the CEO with a title such as VP of Strategic Alliances, VP of Business Development, or VP of Corporate Development.