Vendors have long dominated their partner relationships; however, through practices like vendor relationship management, solution providers are taking control.
Solution providers are paying closer attention to their vendor relationships, many going so far as formalizing vendor relationship management roles within their organizations, and, as a result, make shrewd decisions about which vendors they want to partner with. From a vendor’s perspective, while this is perhaps threatening, principle consultant Ryan Morris of Morris Management Partners thinks evening out the balance of power in the relationship is healthy for the overall marketplace.
“Ten years ago, 15 years ago, the balance of control between a vendor and a solution provider was tilted almost exclusively in favor of the vendor. They had a program, you had to apply to belong to that program [and] meet their standards and qualifications. You had to do what they said in order to be allowed to be in that relationship,” Morris said. “Now it [has] shifted … to where I would say it’s much more of an equal relationship. … It’s more balanced.”
The power shifts have several implications for vendors, Morris said. First, vendors must take on higher costs when it comes to acquiring channel partners, since recruiting, partner relationship management and partner communications demand more resources than they did before. Second, vendors need to continuously maintain their partner relationships. Whereas in the past, a vendor might check in with a partner once a year to see if the partner is complying with partner program requirements, vendors today must make their efforts surrounding program compliance an ongoing activity. And third, vendors now find that they coexist with direct competitors in the solution provider’s portfolio, he said.
One of the factors behind this changing relationship is the availability of information. “In the past, where information was either not available or not easily attainable, a vendor could come to you and say, ‘Listen, this is your discount structure. This is the way you’re going to qualify [and] participate in my programs,'” he said. Today, information about vendors is proliferated throughout the Internet, as well as through formalpeer groups, giving solution providers the “ability to weigh and evaluate options in a much more open and clinical fashion” than in previous times, greatly expanding their “ability to shop,” he said.
“There’s tons of information out there, and [solution providers] can compare and contrast multiple vendors in a category in a matter of minutes. … [And ] there’s very easy access to other people’s experiences and opinions about which vendors are good to do business with and which ones are not,” Morris said.
According to Diane Krakora, CEO of consulting company PartnerPath, another influential factor behind the change is that solution providers are examining their profitability. “I think in the last two years, we’re seeing [solution providers have] much more rigor around their vendor management… in terms of who they’re bringing on as vendors,” she said. “And it really all stems from the solution provider looking more closely at their profitability. And as they look at their profitability — and they’re looking at profitability by vendor lines — they’re saying, ‘Are these people we really want to continue to carry as a product? … Is it profitable for us? Is the relationship strong? Is there a high cost of doing business around getting orders placed, etc.?'”
Vendor relationship management has evolved, “because the solution providers are now seeing they have more detailed data around what their profitability is for vendor lines, [and also] they have more power in developing the solutions,” she said. “[Solution providers] used to sell more of a ‘best of breed’ product line, and it really now needs to be an integrated solution that solves a customer’s business needs.”
Harry Zarek, president of Toronto-based solution provider Compugen, had only positive things to say about vendor relationship management and encouraged all solution providers to adopt it. “I think [vendor relationship management] should be part of strategic business planning for every solution provider organization,” he said.
Reflecting on how the relationship between vendors and their partners has changed, Zarek said, “In an earlier time, it would have been, ‘Oh, wow! Gee whiz! Isn’t that an exciting product?’ We’re past that now. It’s about the business value and how these products can help our business grow more profitably. It’s truly a business-to-business relationship now,” he said. “I think it’s much more balanced on both sides … [and] most vendors understand today that they’re just a component of the overall value proposition, and they need to encourage us to take as [much] broad additional value [as] we can garner out of that product.”