Building InternationalPartner Channels

AIM InternationalInternational Expansion for ISVswww.aimcorpinternational.com

Copyright © AIM International

Paul SolskiManaging DirectorAIM Internationalpaulsolski@aimcorpinternational.com

Introduction

This GuideIs designed for software companies (ISVs) CEOs, VPs of Sales and Marketing as a resource to create awareness of the strategic business issues when planning their international expansion.

Outlines the key challenges to consider when expanding into international markets through partner channels that add value to the product with industry knowledge and services.

Is presented as a five step process with specific approaches to addressing the key business issues at each step.

Is a collection of practical learning from numerous international and channel expansion projects with ISVs in the Microsoft partner ecosystem.

For more information, email information@aimcorpinternational.com

DisclaimerThis guide is not a promise of performance or actual results. AIM International will not be held responsible for any undesirable outcomes or damages arising out of the provision of the guidance offered within.

TrademarksAll trademarks are the properties of their respective companies.

Copyright © AIM International

International Partner Engagement

OBJECTIVE:Engage with potential partners that fit the “ideal” partner profile best and thoroughly qualify them.

PROSPECT RECRUIT ACTIVATE

OBJECTIVE:Present a compelling business case that makes your solution strategic to their business.

OBJECTIVE:Accelerate VARs time to becoming self sufficient through certification and shadowing.

GROW

OBJECTIVE:Execute sales and marketing campaigns agreed in joint business plans.

PLAN

OBJECTIVE:Determine your readiness and establish the business case for investment in international expansion.

FRAMEWORK

Are You Ready Yet?

• Do you have a proven product?– A proven product is one that has been deployed repeatedly in (at least 20) customers’

production environments and has been delivering the specified functionality for an extended period of time (at least 1 year).

• Who are your target customers?– The ideal customers should be defined in terms of: industry or vertical, revenues size,

specific business challenges, available budget, decision maker roles, likely competitors.

• How do you differentiate?– In respect to the market leading competitors, how does your product solve specific

business challenges, faster, cheaper, better than they do. Is there a compelling ROI?

• How many customers do you have?– The minimum number of customers needed to project credibility depends on the

product type and vertical or horizontal focus. This can be 10 or 1 million.

• How many references do you have?– The minimum number of reference-able customers depends on the product type. For

business applications at least 5 globally recognizable brand names are desired.

• What is your domestic market share?– If your domestic market share is less than 20% then may be better off focusing locally

where the complexity and expense of expanding internationally can be avoided.

In your domestic market:

20% Share

5 References

+ Profitable

PLAN

Customer Value Propositions

The customer value proposition outlines the business benefits customers will realize when they make an investment in your product. One form is:

For customers with need, who would consider a solution from competitor(s), our product provides a better solution that realizes benefits.

Where:Need = a high importance business need, challenge or pain pointCompetitor(s) = identifies the recognized market leader(s)Better Solution = differentiating featuresBenefits = customer business benefits

Example:

For ISPs that are challenged to accommodate the diverse anti-virus, anti-spam filtering requirements of thousands of customer types, and would consider CISCO Ironport as a solution, MailCleaner provides the best in class scalability, flexibility, and configuration granularity needed to enable them to accommodate all customer types with a single solution while reducing operational costs and complexity.

Why should I buy your product?

PLAN

Before You Begin

• What is the financial business case?– The business case is determined by the size of the market, a realistic expectation of

revenues in a given time and the cost to achieve those sales.

• How many competitors are active?– Choosing a market should also determined by which and how many competitors are

already present there and how well they are established.

• Is there an established market leader?– A single market leader that services customers well, may be harder to displace than a

fragmented market with many similar sized competitors.

• How difficult is it to do business?– Cultural considerations play a role in choosing the market especially if customers are

adverse to foreign companies, government policies disadvantage foreign companies, buyers expect “unofficial” payments and much more.

• Is there a driving business need?– Addressing a business imperative such as a consequence of regulatory requirements,

government initiatives, changing customer buying behaviors can drive sales.

– Understanding which verticals are growing and customers’ spending priorities is vital.

Is there a business case?

PLAN

US: The Largest IT market

The GDP of individual US states is comparable to many European countries

Source: IMF

ME

NHMA

CTRI

NY

PA NJMDDE

VAWV

NCTN

KY

OHIN

MI

SCGA

FL

ALMSLA

AR

TX

OK

MO

IA

IL

WIMN

ND

SD

NE

KS

NM

CO

WY

MT

ID

UTNV

CA

OR

WA

AZ

VT

IRELAND

RUSSIA

CANADA

NEW

ZEALAND

THE NETHERLANDS

AUSTRALIA

POLANDNORWAY

CHINA = CA+TX+NY+WA

ARGENTINA

EGYPT

PLAN

• While the US is the largest single IT market in the world, it is also the most competitive. • The proven strategy is to initially pick specific verticals and states to focus on well defined customer segments where the

probability of success is high. Then use these as references for more sales and broader expansion to more states and verticals. • Depending on your industry focus, it is possible to be very successful just targeting several states. • For example; New York for finance, California for Retail, Michigan for Automotive, Texas for Oil & Gas.

Where Should I Start?

Direct Vs Channels

DIRECT:

For:

• Committed and focused resources.

• Quality sales and support.

• High margins.

Against:

• High infrastructure costs.

• High sales, marketing support costs.

• Fewer opportunities addressed.

CHANNELS:

For:

• More opportunities addressed.

• Low infrastructure costs.

• Low sales, marketing, support costs.

• Better leverage of local relationships.

Against:

• Challenge to maintain focus.

• Lower margins.

• Higher training requirements.

Which business model is best?

PLAN

Business Case For Channels

DIRECT

Mid-Market Solution, 3 Person Office

ITEM Per Year

Software License Value/Sale $100,000

Services Value/Sale $200,000

Net Income $803,500

Company ROI 1.2:1

INCOME Per Year

Number of Sales/Year 5

Revenue from Sales/Year $1,500,000

Margin from Sales (@100%) $1,500,000

EXPENSES Per Year

Country Manager $250,000

Business Development Manager $180,000

Technical Consultant $100,000

Serviced Office, Communications $80,000

Travel (domestic) $50,000

Taxes, Insurance $36,500

TOTAL $696,500

CHANNELS

Mid-Market Solution, 12 VARs

ITEM Per Year

Software License Value/Sale $100,000

Number of VARs 12

Number of Sales/VAR 5

Net Income $3,338,000

Company ROI 12.7:1

INCOME Per Year

Number of Sales/Year 60

VARs’ Revenue from Sales/Year $6,000,000

Margin from Sales (@60%) $3,600,000

EXPENSES Per Year

Country Manager $0

International Business Manager $180,000

Technical Consultant $0

Serviced Office, Communications $2,000

Travel (International) $80,000

Taxes, Insurance $0

TOTAL $262,000

PLAN

What is your priority:control or cost?

When To Use Partners

• Low Touch Solutions – Sell online and distributors

• Medium Touch Solution – Sell through partners

• High Touch Solutions – Sell directly

Complexity

Price

Direct onlineMarketplacesDistributors

Direct

Partner ChannelsVARs, SIs

PLAN

Is my product a good fit for partners?

Partner Channel Opportunities

Increased Market Reach:• Give access to more markets, clients and opportunities by combing your product with others they sell and their own industry expertise.

• Partners create awareness through their own sales and marketing.

More Sales and Implementation Capacity:• Partners can prospect, win, install and support many more clients with their own resources than you could, without a large investment in staff and facilities.

• The capacity is only limited by the number and geographic distribution of partners that are trained, self-sufficient and pro-active.

Larger Pipeline:• Tap into partners’ installed base.

• Shorter sales cycles with repeat clients that partners have existing relationships.

Lower Costs:• No fixed costs for an “army” of sales, consulting, support and marketing resources.

• No overhead for staff and facilities such as offices, equipment, communications, insurance and taxes.

What can partners do for me?

PLAN

Partner Channel Pitfalls

Very Competitive• Over 30,000 ISVs, Over 300,000 resellers

• The top VARs and SIs are always being courted

• Cold calling is tough – get introduced or meet at a conference (WPC).

Wrong Partners• The one hit wonder syndrome. Partners who stumble across a single opportunity and don’t ever sell again.

• On going commitment required with training, marketing plans.

Lack of Mindshare• Too many products, not enough focus – need to have a resource allocated.

• Understanding of partners’ overall business needed

• Commitments required with joint business plans

Not Self Sufficient• Partners unable to win and support clients independently. Usually because partner does not allocate sales or technical resources.

• Not willing to invest time & people to become certified. Usually, because they are unconvinced that they can get an ROI from their investment.

What can go wrong with partners?

PLAN

Finding The Right Partners

THE IDEAL PARTNER PROFILE:

• Proven target customer/industry expertise– Understands target customers’ business pain points & speaks their language.

– Has knowledge about industry best practices & customers’ competitors.

• Substantial number of customer references– Demonstrates ability to sell to target customers.

– Can deliver quality service and maintain customer loyalty.

• Portion of sales derived from target segment– At least 25% of sales come from target customers.

– Has invested in expertise tailored to target customers’ needs.

• Committed to marketing– Can drive on-going demand and build a pipeline of opportunities.

• Certified on the appropriate technology platform– Has developed expertise in the platform technology & can quickly ramp up.

• Offering complementary products or solutions– Can offer a more complete solution and increase total sales value.

• Willing to allocate sales and consulting resources

PROSPECT

Who is my ideal partner?

Partners Need Differentiation

• More packaged solutions

• More online purchasing

• Highly educated clients

• Declining product margins

• Increased competition

• Decreasing application complexity

• Declining Install/configure services

• Add higher value

• Demonstrate business acumen

• Focus on business outcomes

• Become a trusted adviser

• Go vertical

• In a world where standard software is available online as an on demand wizard driven utility, partners must add value with services and add-on products to differentiate and secure on-going revenues.

• Your product is their opportunity to add customization and on-going support services.

Partner Value Proposition

The partner value proposition can be written in the following format:

For partners of type, who have a need, and would consider providing a solution from competitor(s), our product provides a better solution that realizes benefits.

Where:Of Type = partners business focus or specializationNeed = a high importance business need, challenge or pain pointCompetitor(s) = identifies the recognized market leader(s)Better Solution = differentiating featuresBenefits = partner business benefits

Example:For partners providing managed infrastructure services, who want to scale their services offerings to more divers clients without substantially increasing their operational costs, and would consider CISCO Ironport as a solution, MailCleaner provides the best in class automation, scalability, and flexibility to enable partners to deliver better customer service to more customers while reducing costs and increasing margins.

Why should I sell your product?

Is It A Good Fit?

STRATEGIC IMPORTANCE:

• Does the product allow the partner to win more customers?– Your product should be a catalyst for winning new customers or more sales from partners’

installed base of customers.

• Does the product pull through more services?– Partners make more margin on services and maintain longer revenue streams.

• Does the product pull through complementary products?– If it does, then the total value of the solution may be many times more to the partner in

margin and services than your product alone.

• Does the product position the partner more strategically?– Good partners are moving away from transactional sales to consultative sales. – Enhancing their strategic value with customers builds better relationships.

• Does the product give the partner a competitive advantage?– Partners have to compete for sales so they are looking for a source of differentiation and a

way to deliver more value to customers.

• Does the product agree to their roles & responsibilities?– The two companies must agree to work in lock-step to leverage each other.

RECRUIT

Why should I sell your product?

ISV Cloud Opportunities

• Tailored solutions to client types

• Tailored pricing

• Repeatable implementations

• Increased global exposure

• Try & Buy acceptance

• Potential for long term annuities

• Appeals to more diverse clients

• Appeals to price sensitive clients

• Easier to implement

• Potential to sell globally

• Faster sales cycles

• Focus on customer service

Software Services

RECRUIT

Defining The Business Case

• Market trends & purchasing drivers– Define the real need for your product by customers with market research,

analyst predictions, case studies.

• Customer business pain points– Identify the specific needs your product addresses and the benefits it delivers.

• The ideal customer profiles– Define a specific ideal customer profile that has a need for your product.

Characteristics: vertical industry, revenue, location, business pain points.

• Number of addressable customers– Define the size of the addressable market so that partners can estimate how

many sales they can make a year.

• Partner return on investment (ROI)– Model the ROI for partners so that they can see how quickly they will get a

return on staff, training & marketing investments.

• Solution differentiation– Specify how your products address customer’s urgent needs better than

others and especially the market leader.

• Strategic value to the partner– Define how a partnership with you can advance the partner’s business in

terms of growing sales of their entire portfolio of products and services.

– Define how your product can make the partner more strategically important or a trusted adviser to their clients.

RECRUIT

Why should I sellyour product?

Partner Market Opportunity

ME

NHMA

CTRI

NY

PA NJ

MD DE

VAWV

NCTN

KY

OHIN

MI

SCGA

FL

ALMS

LA

AR

TX

OK

MO

IA

IL

WI

MN

ND

SD

NE

KS

NM

CO

WY

MT

ID

UT

NV

CA

OR

WA

AZ

VT

North-East

North-West

West

South

Mid-North

South-EastMid-West

Central

USA Territory # Potential ClientsNumber in

Market (25%)

Number Likely to

Buy (20%)

Average Win (Gross)

Average Win

Software

Average Win Partner Software

Margin (35%)

Average Win

Services

Potential Partner

Revenue

NORTH-WEST 200 50 10 $225,000 $75,000 $26,250 $150,000 $1,762,500

WEST 200 50 10 $225,000 $75,000 $26,250 $150,000 $1,762,500

MID-NORTH 200 50 10 $225,000 $75,000 $26,250 $150,000 $1,762,500

MID-WEST 200 50 10 $225,000 $75,000 $26,250 $150,000 $1,762,500

CENTRAL 200 50 10 $225,000 $75,000 $26,250 $150,000 $1,762,500

SOUTH 200 50 10 $225,000 $75,000 $26,250 $150,000 $1,762,500

NORTH EAST 200 50 10 $225,000 $75,000 $26,250 $150,000 $1,762,500

SOUTH-EAST 200 50 10 $225,000 $75,000 $26,250 $150,000 $1,762,500

Total 1600 400 80 $14,100,000

RECRUIT

What is the market opportunity?

# Potential Clients from Hoovers or Insideview.

The Complete Picture

MySolution+ Implementation Services

+ Business Processes Consulting

+ Implementation Services

+ Business Processes Consulting

+ System Integration Services

+ Installation Services

RECRUIT

+ Implementation Services

+ Business Processes Consulting

Your solution can pull through the sales of many more products and can therefore become strategic to partners.

Cloud Platform

Data Base

Content

Management

Business

Application

Partner ROI Model RECRUIT

COST PER YEARSOLUTION SALES RERESENTATIVE

SOLUTION TECHNICAL CONSULTANT

WAGES & COMMISSIONS $150,000 $100,000

OVERHEAD $30,000 $20,000 SUM OF COSTS $180,000 $120,000 TOTAL COSTS $300,000

INCOME PER SALE $75,000 $150,000 MARGIN ON SALES $26,250.00 $150,000 TOTAL MARGIN $176,250.00

NUMBER SALES FOR ROI 1.7

Business Application Add-on Example:

In this example, a partner can recoup their investment of a sales and a technical person in less than two sales.

Vertical Selling

Partners need to:

1. Understand the clients’ industry.

2. Understand the clients’ business.

3. Recognize the clients’ business pain points.

4. Define the clients’ needs.

5. Tailor your solution to clients’ needs.

6. Define how your solution solves clients’ problems

better than the competition.

7. Present the client with a financial justification (ROI)

ACTIVATE

These are the essential topics of a partner sales certification class.

Building Self-Sufficiency

• Provide sales and product certification• Define the ideal customer profiles – company profile• Define specific customer scenarios - customer business needs• Provide key differentiators versus competitors• Look to partners’ installed base first

ACTIVATE

Competitive Positioning ACTIVATE

How are you different?

• Strategic Positioning:– Position your product to the specific market segment where its benefits make the most

impact to customers and drive measurable outcomes. – Where the customers have pain points that the product is best suited to address.

• Significant Differentiating Benefits:– Think of the target customers business needs and how they are addressed by the specific

benefits that your product delivers. – Benefits include: lowering costs, increasing sales, faster to market, competitive advantage.

• Financial Benefits:– What is the ROI to the customer and how long will it take to recoup the investment?

• Major Differentiating Capabilities:– E.g. Ease of Use – reduces operator time & cost, frees –up knowledge workers, increases

customer self-service, increases customer satisfaction and loyalty.

The Partner Program

OBJECTIVES:

• Accelerate revenue growth through partners

• Enable partners to establish & grow a profitable business

• Rapidly make partners self-sufficient and pro-active

The partner program is the detail that defines:

• The internal roadmap for establishing & growing partners

• The processes, benefits and resources

• The roles and responsibilities of partners

• The set of operational business terms and requirements

ACTIVATE

How do we work together?

Partner Program

BENEFITS:

• Scalability and Repeatability

• Faster time to sales

• Better leverage of partner resources

• Operational Quality and Consistency

• Professionalism and Credibility

ACTIVATE

Partner Development Framework

PROSPECT RECRUIT ACTIVATE GROW

Review

Ideal PartnerProfile

Geographical Coverage MAP

Competitive PositioningPartner ROI Model

Customer Value Propositions

Business Terms

MDF Terms

Business Plan

Marketing Plan

Training & Support

Quarterly Business Reviews:- Commitments- Marketing Plan

Customer Scenarios

Monthly pipeline review

Roll out planDefine Market Opportunity

Ideal CustomerProfile

Partner Value Propositions

Additional Resources

Guides, Self-Assessments & Case Studies:

aimcorpinternational.com

Partner Directory:

microsoft.com/solution-providers

partner-finder.oracle.com

sap.com/partner/find.html

Foreign Country Research:

cia.gov/library/publications/resources/the-world-factbook/

doingbusiness.org

US & International Companies Research:

hoovers.com (paid)

insideview.com (paid)

AIM InternationalInternational Expansion for ISVswww.aimcorpinternational.com

Copyright © AIM International

Paul SolskiManaging DirectorAIM Internationalpaulsolski@aimcorpinternational.com