#1 What Exactly Are Channel Partnerships?

Channel partnerships are strategic alliances where technology companies join forces with complementary businesses. These partners act as extensions of the company's sales and expertise, forming a collaborative ecosystem that fosters accelerated growth. They're not just middlemen; channel partners are trusted advisors who translate a company's technology into solutions that resonate with specific customer segments.  This symbiotic relationship allows the tech company to scale rapidly, leverage partner expertise, and navigate the intricacies of new markets, all while the partners benefit from access to innovative solutions and expanded revenue streams. 

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#2 Is Channel The Way To…Grow?

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Here are some key stats:

• A staggering 95% of Microsoft's revenue streams through its vast network of over 400,000 channel partners. This robust ecosystem is considered one of the largest and most intricate in the tech industry.
• According to Forrester, mature partner programs can generate up to 28% of company’s total revenue
• Growing internationally without the local knowledge is always risky, yet Zoom, grew its business by 40% in Japan relying solely on a partner network
• Trialpay reached 10,000 new customers within 2 years by leveraging channel partners

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#3 Channel Partners: Friend or Foe?

Channel partnerships offer a tempting shortcut to market dominance by opening doors to new regions and industries. They allow them to leverage partner expertise to accelerate growth and increase product adoption. Lastly, channel partners are cost-effective, acting as a helping hand to your sales and marketing teams. 

But there's a flip side (as with everything in life!) you gotta be ready to give back by sharing profits and relinquishing control over your branding and sales. Another aspect to consider when giving away control is that your success is no longer dependent on you but also on your partner’s performance. Sometimes, if you lack certain processes direct sales can create competition with partners leading to conflict of interests. 

So, how to determine if a channel is the right strategy for your company? Well, you have to weigh pros and cons, but also consider the following:

• Is your product mature enough? Complex solutions might need initial direct sales for proof of concept but also ensuring that you know how to sell your product (if you can’t, don’t count on channel)
• What is your target market? A well-defined ICP might benefit from direct sales.
• Can you afford having an in-house sales team? If not, partners are your best option.

Channel partnerships can be a powerful tool, but evaluate your specific goals and situation before exploring your options.

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#4 Types of Channel Partnerships

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Channel Value Added Resellers (VARs)

Who are they?

VARs act as one-stop shops for businesses, offering a curated selection of third-party software, hardware, and applications. They go beyond simple sales by adding their own expertise - the "value-added" part. This can include consulting services, configuration assistance, and even customization to meet specific customer needs.

How do they operate?

The MVPs of the channel ecosystem, Value-Added Resellers (VARs), act as an extension of your sales team. These tech-savvy partners take your product, add their expertise and services, and deliver a customised solution to end-users. 

VARs come in all shapes and sizes: some focus on specific regions, while others tackle entire countries. There are even VARs specializing in particular industries, like healthcare or oil & gas, technology, bringing their in-depth knowledge to the table.  

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VARs are ideal for companies who want to:

• Launch a new technology coming to market
• Reach a broader market
• Break into specific regional or vertical markets
• Scale up their own marketing and sales efforts but have no internal resources

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Resellers

Who are they? 

Reseller partners prioritise quick market penetration by selling a vendor's products with minimal customisation to different customer segments.

The term "reseller" may conjure images of a straightforward intermediary, simply purchasing products from manufacturers and distributing them further. However, within the modern technology landscape, resellers have evolved into key strategic partners, playing a critical role in expanding market reach and delivering value-added services.

Think of resellers as an extension of your own sales force, leveraging their established customer bases and distribution networks.  For instance, a software company's reseller network can act as a nationwide sales team, bringing their product to a vast audience.  Similar to Nordstrom's curation of diverse fashion brands to suit different customer preferences, resellers can tailor their offerings to specific industry segments, ensuring a more relevant product pitch for clients.

Furthermore, resellers provide significant value beyond simple product distribution.  Many  resellers possess in-depth technical expertise, offering configuration support, post-sales assistance, and even product training. This "value-added" service fosters a seamless customer experience, promoting brand loyalty and long-term customer relationships.

How do they operate?

Resellers are more than just resellers; they're strategic partners who acquire software licenses (or products) from vendors and then resell them to customers, often adding value through services, support, and tailored solutions.

‍Resellers are ideal for companies who want to:

• Tap into instant customer network - resellers bring a built-in customer base, 
• Expand but have limited resources, resellers have well-oiled distribution channels in place, ensuring efficient delivery of your products or services
• Gain industry intelligence (e.i access to customer feedback and guidance) as resellers are industry veterans with deep knowledge and expertise who can provide invaluable insights.

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Technology Partners

‍Technology alliance partners offer a technology that is complementary to the solution you offer. As with service delivery partners, this partnership often involves no reselling; it simply brings two products together as an integrated solution.

Example: You’re offering a Product Information Management (PIM) solution and partner up with a Data Asset Management (DAM) software, which offers wider DAM capabilities than in-built features.

How do they operate?

Technology partners can complement existing solutions (think software for a hardware company), integrate technologies for a more powerful offering, or co-market to reach new audiences. This often involves companies with different specialties working together for a win-win.

Ideal for companies who want to:

• Access wider market reach with co-marketing opportunities 
• Integration with their technology creates a stronger, combined solution
• Partnering with a trusted brand boosts your reputation
• Expand your reach to new customer segments through collaboration

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Referral Partners

Similar to a personal recommendation, referral partners connect you with potential customers within their network. Compensation might be a simple thank you, a discount, or a commission based on the sale.

How do they operate?

Imagine your company sells cloud storage software (SaaS). A referral partner could be a consultant who doesn't offer storage but has clients who need it. This partner recommends your service, earning a commission (percentage of sale, flat fee, etc.) while you gain a new customer and the client gets a solution. ‍

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Ideal for companies who:

• Offer niche products or services as referral partners with a targeted audience can be a goldmine for qualified leads
• Provide Subscription-based businesses (SaaS, memberships) by incentivising existing customers to spread the word, leading to recurring revenue from new subscribers
• Offer complex solutions - referral partners with expertise in your field can pre-qualify leads and educate potential customers, making the sales process smoother
• New or lesser-known businesses: Partnering with established referral partners can boost brand awareness and credibility quickly
• Businesses with limited marketing budgets - Referral programs offer a cost-effective way to acquire new customers by leveraging your partners' existing audience.

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Affiliate Partners

In an affiliate partner program, partners refer customers to vendors and earn a referral fee. These partners promote your products or services on their online platforms, earning commissions for each sale or lead generated through their unique tracking links or codes.

How do they operate?

Affiliate partners function as a promotional arm for your business, earning commissions by driving traffic or sales your way. 

Affiliates, often bloggers, influencers, or content creators, recommend your products or services to their audience. They typically use unique tracking links or codes to identify referrals. These links or codes embedded in promotions allow you to track customer clicks and conversions (purchases, sign-ups, etc.) generated by the affiliate. Once a customer completes a desired action, you compensate the affiliate based on your pre-determined agreement. This could be a percentage of the sale, a flat fee, or other incentives.

Imagine you sell VPN software. An affiliate partner, a popular tech blogger, could rave about security provided through a VPN in a blog post or YouTube channel, including your affiliate link. If readers click that link and purchase a VPN subscription, the blogger earns a commission for the sale. One of the most successful affiliate marketing programs of this type is offered by Surfshark.

Ideal for companies who have:

• E-commerce stores while affiliates can promote your products to a wider audience, driving traffic to your website and boosting sales

• Subscription-based Businesses (SaaS, memberships) - just like referral programs, affiliate marketing incentives partners to promote your service, leading to a recurring revenue stream from new subscribers acquired through their efforts

• Niche Products or Services - similar to referral partners, affiliates with a targeted audience that aligns with your niche can be incredibly valuable. They can effectively reach a pre-interested customer base, generating qualified leads for your business.

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Global System Integrators (GSI)

GSIs are tech giants like Accenture, Deloitte, and IBM. They combine different parts – hardware, software, networking, and storage – from various vendors, just like picking the best building materials from different suppliers. The result? Huge, intricate tech solutions tailored for giants like Boeing or Bank of America.

How do they operate?

GSIs act as a one-stop shop, bringing together best-in-breed hardware, software, networking, and storage components from a variety of vendors. They handle the sourcing, integration, and implementation, ensuring all the pieces work seamlessly as a single, powerful system. This expertise allows GSIs to tackle massive, complex projects that would be overwhelming for most companies to manage on their own.

Ideal for companies that want to:

• Reach the big leagues (blue-chip enterprises)
• Disrupt the status quo (if your solution outperforms existing technology used by GSIs, it could become their new go-to option)
• Scale up, since GSIs have the reach to handle massive deployments, so your solution can serve a wider market quickly.
• Add another level of revenue creation since GSIs often offer complementary services (for instance, earn more from installations and ongoing support)

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Cloud Service Providers 

Cloud service providers often don’t resell a product, but they offer some component of cloud computing—typically IaaS, SaaS or PaaS—by hosting your solution in the cloud. In other words, cloud providers offer a way to run your software online, making it faster, more secure, and more adaptable to your needs. Examples include Amazon Web Services (AWS), Microsoft Azure and Google Cloud Services (GCS).

How do they operate?

Cloud providers like AWS or Azure rent out computing power in their data centers. This "cloud" gives tech companies the muscle they need to run software without worrying about maintenance or security. It's like having a giant, on-demand computer that's always up-to-date. Some cloud providers even partner with tech companies to build specialized, user-friendly solutions. Cloud providers offer a flexible, cost-effective way for tech companies to innovate and scale.

Ideal for companies:

• Startups with limited resources get access to powerful servers without upfront costs
• Established companies gain scalability, handling surges in traffic with ease

What’s worth mentioning, almost any tech company can benefit from cloud providers.

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Independent Software Vendors (ISVs)

ISVs are companies that create and sell software that works on various platforms, like computer operating systems (think Mac or iOS) or cloud services (like Amazon Web Services).

‍How do they operate?

Partnering with ISVs can help larger software companies expand their product offerings by integrating specialized software solutions into their own platforms. This allows them to cater to a wider range of customer needs. Also, ISVs can create software that complements a hardware provider's products. This partnership can increase sales for both companies by offering a more comprehensive solution to customers.
Additionally, VARs can leverage ISV solutions to enhance the value proposition they offer to their customers. By bundling ISV software with their existing services, they can create more attractive packages.

‍Ideal for companies that want to:

• Tap into ISVs customer base and reach new markets, as often they have expertise in specific industries or niches
• Enhance product offerings by integrating ISV solutions more comprehensive and differentiated products can be offered to customers (this can result in increased satisfaction and customer retention)
• Leverage ISVs existing solutions, saving on development resources if built in-house.

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#3 Business Value

Channel partnerships offer several benefits for both vendors (technology companies) and partners. Here's a breakdown:

1. Reaching a Wider Audience

Partners act as an extended salesforce, allowing vendors to tap into new customer segments and geographical markets they might not have access to independently.

2. Gaining Valuable Expertise 

Partners often possess specialised industry knowledge or technical skills that complement the vendor's offerings. This combined expertise strengthens the value proposition for customers.

3. Reducing Time-to-Market

By leveraging partner networks, vendors can expedite product launches and reach customers quicker, gaining a competitive edge.

4. Significant Cost Savings

Building and maintaining a direct sales force can be expensive. Channel partnerships offer a cost-effective way to expand sales and marketing efforts.

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#4 Shifting Sands: How Channel Partners Are Changing

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The way customers discover, research, and purchase technology has undergone a dramatic transformation. Gone are the days of relying solely on salespeople or channel partners to dictate the buying journey. These days, consumers are in the driver's seat, armed with information and empowered by online research. This shift in buying behavior has major implications for channel partnerships.

Firstly, customers are conducting more self-directed research online. Review sites, social media recommendations, and in-depth blog posts are all influencing factors. This means channel partners need to be present in these digital spaces, offering valuable content and building trust with potential customers. 

Example:  Imagine a company selling new accounting software. Partnering with a blogger who writes about financial technology solutions could put their product directly in front of a highly relevant audience.

Secondly, the buying journey is no longer linear. Customers often hop between different channels – a partner's website, a vendor's social media page, and online review forums – before making a decision. This necessitates seamless handoffs between partners and vendors. Consistent messaging, integrated marketing campaigns, and readily available resources across all touchpoints are crucial. 

Example: A cloud storage provider could ensure their website seamlessly directs potential customers to a partner's page for a free trial, creating a smooth transition point.

Finally, the focus has shifted from simply selling a product to providing a holistic customer experience. Consumers expect support, training, and ongoing guidance after purchase. Here, channel partners can play a vital role by offering localized expertise and personalized service. 

By adapting to these changing buying behaviors, channel partnerships can become even more successful. Vendors need to invest in channel enablement programs, a strategic process of equipping your network of partners – resellers, distributors, system integrators, and more – with the tools, resources, and knowledge they need to effectively promote and sell your offerings. If you want to know more about how to nurture a flourishing partner ecosystem, check out this article for Top 10 Tips.