What’s the True Cost of Channel Conflict?
Almost every business encounters an occasional disagreement, no matter which industry or corner of the world they operate in. Sometime the issues seem minor and they tend to be rooted in miscommunications or simple differences of opinion between the parties. No matter their origin, these concerns should always be acknowledged to help keep emotions at bay and allow each side to resolve business disputes amicably. A vast majority of those situations can be decided quickly and fairly for all involved with a little communication and empathy.
Of course, the best way to resolve conflict is to avoid it altogether. That’s especially true in the IT channel, where a well-developed and properly documented partner program can foster engagement and minimize issues. While that may oversimplify things a bit, the principle creates a great starting point for vendors looking to attract and retain top-notch providers.
It all starts with listing out the rules of engagement and the processes both sides must follow when a channel conflict arises. The latter should be focused on equitable resolutions. Suppliers place a great emphasis on their deal registration processes and, despite some industry misconceptions, it’s a rare occasion when either side deliberately violates the rules of engagement. That is, as long as the program guidelines are easy to understand.
Miscommunication and simple mistakes are often to blame for disagreements between partners and vendors, though confusing and complex rules contribute to a growing number of disputes. The increase in those issues should concern everyone in the industry, according to the most recent CompTIA Research that covered that topic. In that report, approximately 60% of solution provider organizations suggested that the number of engagement clashes has increased over the past two years. An estimated 80% said conflict had affected their business negatively, with 21% describing the impact as “major.”
When you consider the significant amount of time and money each side typically invests in a long-standing business relationship, the cost of these failures is substantial for both suppliers and providers. That research also took a closer look at the underlying causes of channel conflict, including:
- 60% of providers believed that an increased focus on vendor direct sales is a result of changes in the customer dynamic. End user demand and choice seemed to be a major factor in the transition away from the indirect channel as suppliers contended with a growing number of online and direct sales competitors. Many vendors were continuing to increase their engagement with their end customers to aid their future product and development planning. While they may gain valuable insight going that route, bypassing their provider network leads to increased angst in partner relationships.
- Approximately 40% of respondents expanded their own services capabilities to counter channel conflict. By increasing their support capabilities, providers can minimize their reliance on vendor partners, improve their incremental sales margins and develop closer customer relationships.
- Whether countering a single or multiple instances of channel conflict, approximately 1/3rd of providers indicated they offered a competing vendor’s products to counter their suppliers offer.
Of course, defining the rules of engagement with between channel partners isn’t easy and, as cloud and managed services sales continue to rise, those guidelines will become much more complex and difficult to manage. Vendors with clearly defined channel programs and engagement rules have a leg up on those who don’t, especially when they back it all up with their actions. They earn the trust and respect of their partners by walking the walk…not just talking the talk.
The process for developing and maintaining productive business partnerships is not a perfect science. It requires constant attention to detail and great flexibility from both parties. Those are particularly crucial elements of a successful channel relationship, especially when a vendor maintains both a direct and indirect sales team.
Partner engagement agreements must be reasonable for all involved and there should be clear and well-defined rules for all end user engagements. With a solid product or service offering and a fair engagement model in place, the opportunities for building and maintaining successful partnerships are virtually inexhaustible. The cost of channel conflict is simply too high to ignore ─ especially when experienced professionals (blatant plug for the GetChanneled team) are ready, willing and able to help you build a highly-effective program.