From the earliest beginnings of the transition to the Cloud, doomsayers were predicting that either the new model would fail – because “the channel” wouldn’t like it – or that the day of the channel itself was over. There were a variety of reasons being quoted, but the major point was the change in the profit model over to incremental income streams. With no up-front burst of profit from sales of perpetual licenses, it was claimed, there would be no funds to pay adequate commissions to partners, etc. Here we are years later, and the channel has not gone away in the SaaS/Cloud world. Its role may have been redefined in some areas, but partnering in the Cloud remains a basic reality. Why?
There are some very good reasons why it is in the best interests of both vendor and customer to have 3rd party partners involved in the ongoing relationship. The critical driver is the imperative of customer retention. If the contract is terminated or not renewed, the money stops. If the end comes within the first year, before the customer acquisition cost has been recouped, what was a profitable relationship instantly turns into a net loss. The success of the customer in fully adopting the application and receiving value from its use is therefore necessarily too vital a matter to be left to chance or the customers’ own resources.
Covering the Bases
Not every software vendor is able or even wants to cover all of the potential service bases in the new business model. The vital point is not who provides what service to ensure the longevity of the customer relationship, but that the services are available and effective. The presence of competent partners extends the value of the application to the customer, and therefore encourages the continuance of the relationship to the benefit of all concerned.
While it might seem that some aspects of providing software as a service to customers are necessarily limited to the vendor due to access to sensitive information or resources, there are many examples of very trusted relationships between vendors and channel partners. It is not at all uncommon, for example, for an implementation or integration partner to have direct access to the application source code. That same level of confidence can be built to justify giving a partner access to application monitoring tools so that they can see what their customers are doing with specific features, etc.
Intimacy + Expertise = Trusted Advisor
Traditionally, the channel partner has always been viewed as being closer to the customer. That was the key advantage that the partner brought to the three-way relationship. If anything, the shift to the Cloud has increased the importance of that closeness, since the operating realities of of the new model argue against fielding large sales teams. The result is a loss of intimacy; where sales are made over the web, it’s not uncommon to have a situation where the large majority of customers have never met anyone from the vendor in person. That’s a serious risk scenario. Application features & functionality, and price, are too easily duplicated by the competition. In-depth relationships, on the other hand, are not easily matched – they take skill and time to build and nurture.
As the new Customer Success Management profession continues to develop, the demand for qualified people is becoming intense. One major Cloud company recently told me that they literally cannot find enough people to hire and are therefore actively talking with their channel partners about assuming additional roles. Others are finding that the best source for new CSM’s is former implementation consultants of large implementation firms. As noted earlier – it isn’t how you fill the role that is the key, it’s that the role be properly filled.
About the Author
Mikael Blaisdell, publisher of The HotLine Magazine, brings 30+ years of experience in the strategy, process, people and technology of customer support, retention and profitability to the emerging profession of Customer Success Management. He is also the moderator of the CSM Forum on LinkedIn. Read more about The Customer Success Management Initiative, sponsored by Totango.
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The State of Customer Success Management 2012 says:
[…] a commitment that requires a dedicated executive is only the beginning. There is much more to Customer Success Management than just establishing a new box in the overall corporate organization […]