What is a Channel Partner?
Channel Partner Definition
A channel partner is a company that sells products and services for a technology manufacturer or vendor. This technology may include hardware, traditional software, Software as a Service (SaaS), or cloud computing solutions.
The channel partner is part of the vendor’s indirect sales force, meaning that they sell the products and services on behalf of the vendor but they are an independent company. They may also sell products and services produced by other vendors as well as items they develop themselves.
Different types of channel partners include:
- Original Equipment Manufacturer (OEM): Traditionally, the Original Equipment Manufacturer or OEM was the company that built a product to be modified, rebranded and resold, but this has changed over time. Today, many OEMs purchase technology products and services, and either:
- rebrand them as their own and resell them exactly as they were built or
- add additional features or bundle an additional product produced by the OEM, then reselling the bundled offering.
- Systems Integrator (SI): A systems integrator is a company that buys individual hardware and software components from many different vendors and integrates them into one customized solution which meets the business needs of its customers.
- Distributor: A distributor is a middleman between two companies – between the manufacturer of a product or service and a channel partner who will resell the item to their end customers. A vendor may choose to sell through a distributor to shorten its time to market because the distributor already has an established distribution channel. The distributor may also augment the vendor’s resources by providing training, technical assistance, marketing and sales support to all of the channel partners.
- Value Added Reseller (VAR): A value added reseller is a company that purchases technology products, adds value by bundling additional features or services to the original product, and resells the bundled offering to its customers. The VAR might purchase a piece of computer hardware and build a specific software application to be sold with it or the VAR might add value by providing technical support, training, or installation to go along with the product to be sold.
- Managed Service Provider (MSP): A managed service provider is a company that manages, monitors and maintains a company’s IT infrastructure. This may include remote monitoring of the company’s network to ensure that it is accessible by employees at all times, management of end user devices, data security and storage, product installation and upgrades, and more. MSPs are frequently hired by:
- small and mid-size businesses that do not have an IT professional on staff and want to off-load this responsibility to a company expert in IT management.
- larger enterprises that want to eliminate the day to day tactical responsibilities from their IT team so they can focus on more strategic technology initiatives.
- IT Consultant: An IT consultant provides independent IT advice, network design services, project management, support, and administration to businesses. An IT consultant may provide similar services to those offered by a managed service provider but does not provide the long-term monitoring and management of the client’s network infrastructure.
Learn more about channel services for MSPs, CSPs, SIs, VARs, and IT Consultants.
A channel partnership can be a win-win for both the vendor and the partner. By choosing the right group of channel partners, the vendor is able to get a big bang for their buck. They can increase sales exponentially by gaining access to the partner’s existing customers. Conversely, the channel partner is able to increase revenue by cross selling or upselling a new product to its existing customers and by acquiring additional customers who are interested in the new offering.
The challenge for both the vendor and the potential channel partner is to find the right fit. The 80/20 rule is well known in channel sales. It states that, on average, 20% of a vendor’s partners will generate 80% of the indirect sale channel’s revenue.
Channel Partnership Benefits
Different partner programs offer different benefits to both the vendor and the partner. Here are a few benefits to each which may be achieved depending on the type of partnership that is implemented.
Benefits to Becoming a Channel Partner
- Provide a Full Suite of Products and Services – Offering products and services from a number of different vendors enables a channel partner to deliver to their customers a diverse product portfolio which meets the customers' specific business and technology needs.
- Sell the Latest Technology – Deliver to clients the latest technology products and services.
- Take Advantage of Additional Expertise and Resources – Channel partners have access to a vendor’s human and financial resources including technical support, product and market training, marketing assistance including MDF (Market Development Funds) or co-op funds, campaign templates, and more.
- Receive Leads – Some vendors continue to market their products and services on their own and then pass the leads they receive onto their channel partners for follow-up.
- Increased Margins – Depending on the amount of product sold, additional discounts and revenue opportunities can be achieved.
- Benefit of an Established Name – Small MSPs, IT consultants and other companies can benefit from the name recognition and reputation of large vendors. For example, Microsoft, Cisco, Citrix, and others. Utilizing established brands like these in sales and marketing materials conveys to potential customers that the partner has a business relationship with a well-known and respected manufacturer and it lends immediate credibility to the channel partner's reputation.
Benefits for Manufacturers and Vendors to Have an Indirect Sales Channel
- Quickest Way to Your Target Customer – The quickest way to gain market share is to work with a partner who already has your target customers as their customers. They have spent a great deal of time and effort building personal relationships with their clients and their recommendations on new products or services carry a great deal of weight with the customer.
- Reduce Cost of Sales – For all manufactures, reducing the cost of sales is important but it is especially important for start-ups and small businesses. Establishing an indirect sales channel rather than employing an in-house sales team can save on employee salaries and benefits as well as travel costs to visit prospects and the time wasted on unqualified leads which never convert to sales.
- Break into New Markets – Many channel partners have an established presence and reputation in specific market segments. The legal, financial services, and healthcare markets, for example, require specializes knowledge. Channel partners who have a deep understanding of these industry verticals can deliver new customers at a fraction of the time and cost.
- Take Advantage of Additional Expertise and Resources – Channel partners can give smaller vendors the resources they need to succeed. Vendors can use their partner’s team of IT professionals to deliver technical support and training to customers as well as their marketing team and budget to develop campaigns.
Additional Channel Resources
- Cisco Channel Partner Program
- Citrix Channel Partner Program
- HPE Channel Partner Program
- IBM Channel Partner Program
- Kaseya Channel Partner Program
- Lenovo Channel Partner Program
- Microsoft Channel Partner Program
- Oracle Channel Partner Program
- VMware Channel Partner Program
Industry Trade Associations: