Channel Partner Recruitment

in the Software Industry

Whitepaper from TBK Consult

Author
Hans Peter Bech, M.Sc. (econ)

 Hans Peter Bech 2013

First edition
Unless otherwise indicated, Hans Peter Bech copyrights all materials on these pages. All rights
reserved. No part of these pages, either text or image may be used for any purpose other than
personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission,
in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal
use, is strictly prohibited without prior written permission.
Published by TBK Publishing (a division of TBK Consult Holding ApS)
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CVR: DK31935741
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ISBN: 978-87-93116-05-4

Channel Partner Recruitment in the Software Industry

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Table of contents:

Targeted audience

Abstract

Author

Acknowledgements

What is a Channel Partner?

The challenge of the indirect channel approach

The difference in value propositions

5
6

The Three Steps to Market Leadership

Bootstrapping
Bridgehead
Scaling
What do the three steps mean in a channel recruitment context?

7
7
8
8

The Preparation

Your ambition
Your customer value proposition
Your value chain
Your business partner program
Ideal Partner Profile
The information package

9
9
10
10
11
11

The Recruitment Process

12

Market Assessment
The Long List
The Short List
The Assessment Centre
Letter of Intent
Sales and Marketing Training
Business Planning and Business Partner Agreement

12
12
13
13
13
13
14

About the author

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Channel Partner Recruitment in the Software Industry

Targeted audience

Abstract

The target audience for this whitepaper is the board of directors,

the CEO and the sales and marketing executives of software
driven companies1 with ambitions for achieving global market
dominance through a channel of independent business partners.
The whitepaper primarily addresses the challenges of software
companies with long value chains.

This whitepaper discuss the best approach for recruiting channel

business partners in the software industry.
The whitepaper focus on the most difficult scenario where the
software vendor has neither customers nor business partners in
the territory. We call this the bootstrapping phase.
The whitepaper recommends what to prepare for being successful
with the recruitment process itself and it also discusses what it
takes to find and sign-up those partners who are most likely to
become successful in winning new customers in the market.
A successful partner recruitment activity for a new market is
estimated to take approximately 9 -12 months including an
initial market assessment performed prior to contacting any
potential partners.
The whitepaper concludes that successful business partners are
made by dedicated and committed professionals. Until you have
met your potential business partners in person you will not be
able to make the right choices.

Author

Hans Peter Bech

Acknowledgements

Design and lay-out: Flier Disainistuudio, Tallinn, Estonia,

www.flier.ee

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Proof reading: Emma Crabtree, TBK Consult,

ecr@tbkconsult.com

Independent Software Vendors (ISVs)

Channel Partner Recruitment in the Software Industry

The word channel is traditionally used in the software industry

What is a
to describe independent companies that assume various roles
Channel Partner? and obligations in bringing a software product to the customers.
The definition is rather broad, since the roles and obligations can
vary substantially from simple reselling to system integration,
solution development on top of the software, implementation in
terms of consulting, project management, customization, training
and support.

This definition collides somewhat with the contemporary business

model framework definitions2. In the business model context the
channel is the way you get new customers irrespective of who
operates the channel. The role of the channel is to get your brand
to the customers3. Thus, a company can operate the channel
directly with his own resources or he can assign independent
companies to operate some or all of the activities in his value
chain4.
This whitepaper deals exclusively with the process of recruiting
independent channel business partners, which operate in their
own name and at their own risk and cost. It is also assumed that
these channel partners are supposed to find, win, make and keep
happy customers for the software vendors product(s).

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The challenge of
the indirect channel
approach

Using a channel of independent companies to resell, implement

and/or service your customers has a long tradition in the history
of the software industry. For some software companies the
Introduced by Alexander Osterwalder in 2010 through his book
Business Model Generation.
2

Thus, OEM and white labeling operations are not considered a

channel, but rather market segments in its own right.
3

Please see Your value chain on page 8

Channel Partner Recruitment in the Software Industry

channel has been a major contributor to global success, but for

most software companies making it work is a constant struggle.
When software vendors have been successful in selling their
products directly to customers, why do they then fail to repeat
this success through a channel of independent business
partners?
The failure of an indirect channel can normally be traced back to
the lack of quality in the channel recruitment activities and in
the elements of the channel program of the software vendor. We
hope this whitepaper will help software companies avoid such
mistakes.

The difference in
value propositions

In our whitepaper The Software Partner Channel and the

Customer Value Propositions we explain how the value
proposition of a software vendor differs completely from those of
his channel business partners. We also explain the impact of this
difference on the way business partners think, operate and the
skill sets they possess.
Channel business partners do not think and act like
Independent Software Vendors!!

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To be successful with an indirect channel of business partners

the software vendor must understand the idiosyncrasies of
his partners. The software vendor must design his products,
strategies and programs so they are aligned with business
partner thinking.

Channel Partner Recruitment in the Software Industry

The Three
Steps to Market
Leadership

The road to market leadership in the software industry goes

through three major steps:

Bootstrapping

How do you get the first customers in a new market? How do you
convince potential customers to engage with you when you have
no references or if all your references are in faraway countries
and maybe even in other industries?

Bootstrapping

Bridgehead

Scaling

This is the Pre Crossing the Chasm stage that any company
must go through first. We call this stage Bootstrapping.
Predicting how long the bootstrapping stage will take and how
much it is going to cost is very difficult5.

Bridgehead

The Bridgehead is the stage where the software vendor

establishes his own representation. From this base the software
vendor will work to systematically cover the entire geography of
the market and drive past the tipping point6.
Few software vendors are prepared to establish the bridgehead
prior to having successfully bootstrapped the first 5-10 lighthouse
customers and secured a stable revenue stream. This is certainly
understandable, but unfortunately not always possible to avoid.
Certain markets (e.g. Germany, France, the UK, Brazil, China,
Japan and the USA) are known for being reluctant to deal
with off shore software vendors. Thus, depending on your
value proposition, you may have to take the investment in the
bridgehead up front or you may be wasting your time and money
in a premature channel building and bootstrapping effort.
Irrespective of channel strategy you will never make it to market
For any type of product requiring sales people calling on potential
customers the time for bootstrapping is seldom less than 12 months.
6
The Tipping point is the market share where demand dynamics
change and the market starts pulling the products.

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Channel Partner Recruitment in the Software Industry

leadership if you are not prepared at some stage to establish your

own presence in a market.

Scaling

What do the three

steps mean in a
channel recruitment
context?

In this phase the software vendor pushes beyond the geographic

coverage and starts mapping his market into horizontals and
verticals ensuring continued potential for growth.

Why do we mention the three steps to market leadership in a

channel partner recruitment context?
The three steps are important because channel partners have
the exact same behaviour as the market in general.
Channel business partners have the same behaviour as the rest
of the market they shy away from anything that is new.
The rule of thumb that only 15% of the market is available to a
newcomer also applies in the business partner channel.
We will explain how to compensate for this disadvantage below.
However, please remember that having something new and

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revolutionary may be a prerequisite for breaking into a new

market, but it does by definition also mean that most of the
market wont listen to you (or your business partners) simply
because you represent something new, which they consider too
big a risk.
In the rest of this whitepaper we will assume that you are in the
bootstrapping phase. If you have managed to get a few customers
through a channel of independent business partners, but dont
grow as fast as you had expected, then you may also find value
in our recommendations.

Channel Partner Recruitment in the Software Industry

The Preparation

Before you start calling on potential business partners there are

a few concepts you must have in place.

Your ambition

The majority of business partners prefer to play with the

market leaders. There is a strong pull for the products of the
market leaders and the business partners have less to explain to
potential customers when carrying the products from recognized
market leaders.

There is also more competition in the channel of the market

leader and that motivates the business partners to be curious
about new opportunities from time to time. However, being
curious is not the same as acting. When the business partner
does the math of taking a new product on board they tend to
stay where they are7.
You must bring a very convincing story to the meetings with your
potential partners, and the first chapter of your story should be
about your ambitions for achieving market leadership. You must
be ambitious, but you must also be realistic. Rome was not built
in a day.

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Your customer value

proposition

Your customer value proposition answers two crucial questions:

How your solution provides value to compelling customer
needs way over and above the competitive alternative.

The situation may be different if your product is a complementary

add-on to a product they already carry.
7

Channel Partner Recruitment in the Software Industry

Which customer segments that derive the highest value from

using your product.
There are mainly two formats available for developing customer
value propositions: the value proposition canvas from Alexander
Osterwalder and the NABC approach from the Stanford Research
Institute.
For B2B software we recommend the NABC format. Please see
our fact sheet Customer Value Proposition for the details.

Your value chain

The value chain explains what steps represent the best way to
find, win, make and keep happy customers.
This is exactly what you expect your business partners to do, so
you better be prepared to share your own experience with your
potential partners.

Your business
partner program

Your business partner program will explain how you will

take your partner from the signature on the business partner
agreement to his first two or three customers. You can find
the details of the business partner program in our whitepaper
Designing Effective Channel Partner Programs in the Software
Industry.

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The most important element in your business partner program

is the business partner P&L.

10

The business partner P&L is the specification of all the

financial elements of your business partner program and the
investments the business partner must make to start and grow
his business with your product.

Channel Partner Recruitment in the Software Industry

Your business partner program and the business partner P&L

makes up your business partner value proposition.
In broad terms the business partner value proposition is 25%
about your products and 75% about doing business with you in
the joint effort of winning new customers.

Ideal Partner Profile

The last concept you need to define is your ideal partner profile.

The ideal partner profile has three sets of criteria. In this respect
you can use the same approach for defining your ideal partner
profile as you use for defining your ideal customer profile.
Please see our fact sheet Ideal Customer Profile for the details.

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The big difference is that the most important source for success
in the future is hidden in the psychographics criteria. You
cannot predict the potential of a business partner by assessing
his demographic and sociographic characteristics alone. Among
business partners it is the people that make the difference. Until
you have met the people behind your potential business partners
you will not know where to put your bets.

The information
package

11

From the materials developed for documenting the ambition,

the customer value proposition, the value chain etc. you produce
an Information Package with which you can brief potential
partners about the business opportunity you offer.

Channel Partner Recruitment in the Software Industry

Market Assessment

With the preparation described above completed you can now

start the business partner recruitment process:

Sign-up

Go-To-Market
planning

LoI

The Assessment
Center

The recruitment process includes the following steps:

The Short List

The Long List

Market
Assessment

The
Recruitment
Process

Moving into a new market of which you know absolutely nothing

may not put you in the most favourable light, when you talk to
your potential business partners for the first time.
We recommend doing a simple market assessment before you
start talking to any potential business partners. How to perform
a market assessment may vary depending on the nature of your
product and your value proposition. Please see our fact sheet
Market Assessment for inspiration.

The Long List

Based on the Ideal Business Partner Profile you can now produce
a long list of candidates. The information sources for the long
list are the Internet, LinkedIn, XING and other social media
platforms. If you have a good idea of the keywords to use for the
search, then you should be able to identify 15-20 candidates per
location where you are to recruit. You must be able to perform
these searches in the local language of the country where you
are recruiting8.

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Now you pick up the phone and call the potential business
partners on the long list to start the qualification process.
You call on the CEO of the potential business partners and if
there is curiosity you submit your information package. You tell
her that you will be visiting in the near future and would like
her feedback soon.

12

8 In the small countries business partners will be able to and will

also accept having these conversations in English. As you move into
bigger markets such as Germany, Italy, Turkey, France etc. it becomes
increasingly difficult to avoid the local language.

Channel Partner Recruitment in the Software Industry

The Short List

Based on your phone interviews you should be able to short list

at least 5-10 candidates. You will have to visit these short listed
business partner candidates in person to produce the final short
list.
At these personal meetings you will be introduced. You will
present your business opportunity, your partner program and
how you support your business partners. You will also present
what you expect of your business partners. The business
partner will present her business and her ambitions for the
future. After this meeting the potential business partners will
have to consider if this opportunity is worthwhile pursuing.
Likewise you will have to consider if this business partner has
what it takes to represent your brand and perform her channel
obligations successfully.
Your objective should be at least 3-4 potential business partner
candidates that are prepared to participate in an Assessment
Centre.

The Assessment
Centre

The objective of the Assessment Centre is to review the value

chain and build the business partner P&L model together.
The software vendor and the potential business partner must
share the same picture of what it will take to bootstrap the
relationship and make it all the way to break-even.

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The outcome of the Assessment Centre, which is typically a 1

or 2-day exercise, will be the most important appendix to the
formal agreement, which you will sign with the chosen business
partner(s).

Letter of Intent

Based on the outcome of the Assessment Centre a Letter of Intent

is signed with the partner(s) who are qualified and motivated.

Sales and Marketing

Training

Based on the Letter of Intent the software vendor will provide

introductory training for the potential business partners
management, sales and marketing staff that are to be involved
in the actual business planning process.

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Channel Partner Recruitment in the Software Industry

Business Planning
and Business Partner
Agreement

Where the Assessment Centre provides the conceptual alignment

between the software vendor and the potential business partners,
the business-planning sessions are used to develop the detailed
execution plan for the activities to be initiated to find, win and
make the first happy customers.
As the software vendor has been through this process before,
the business partner will expect most of the input to be provided
by the vendor. The training mentioned above is required for
an intelligent planning session, where the potential business
partner has sufficient insight to form an independent view of
what is required to move forward.
The final plan should include short term KPIs and milestones
allowing for regular follow up and instigation of corrective
actions as and when required.
Now the business partner agreement can be signed and the
actual work commences.

The Time Schedule

Activity/Months

The time schedule for accomplishing the partner search and signup as described above is illustrated in the Gant chart below:
1

10

Preparation
Execution
Market Assessment
Long List
Interviews and short list
Assessment Centre and LoI
GtM planning and Sign-up

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The first business partners you sign up in a new territory are

critically important to your success and your reputation in that
market. It pays to take the time required and be thorough with
the expectation alignment and the business planning process.

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Channel Partner Recruitment in the Software Industry

About the author

Hans Peter Bech has been developing and managing global
partner channels in the software industry for more than 30
years.
Hans Peter built the partner channels for companies such as
Dataco (now Intel), Mercante, Dansk Data Elektronik (now
CSC), RE Technology (now Barco), and Damgaard/Navision (now
Microsoft).
As a management consultant Hans Peter has been providing
consulting on channel development and management issues
to companies such as Microsoft, Danfoss, Proekspert, Jeeves
Information Systems, eMailSignature, SoftScan (now Symatec),
Netop, EG A/S, CSC Scandihealth and Secunia.
Hans Peter is the author of several whitepapers on channel
development and management and he frequently writes articles
on the subject.
He started his career as a management consultant in 2003
and founded TBK Consult in 2007. Since then he has built the
company to its present position with 24 senior consultants in 16
countries.
Hans Peter oversees the development of TBK Consult as well
as performs management consulting assignments for selected
clients.
Hans Peter holds a M.Sc. in macroeconomics and political science
from the University of Copenhagen. He speaks Danish, English
and German and is a certified ValuePerform, ValuePartner and
Business Model Generation consultant

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More about Hans Peter Bech

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