THE Y ORK GROUP

INTERNATIONAL TECHNOLOGY PARTNERS

Comprehensive
Channel Development Roadmap
A step-by-step approach to building profitable channels

Workbook

We Make Going Global Easier

PAGE ii
 Table of Contents

Table of Contents ················································································ iii

Introduction ························································································· 1
SECTION I - INTERNAL PREPARATION ············································································ 3
This page left intentionally blank. ··························································· 4
Initial Target Markets············································································· 5
How Many Markets? ············································································ 14
Revenue Objectives ············································································ 16
Subsidiary – Build or Buy? ·································································· 18
Resellers/VARs/Distributors ································································· 23
Marketing Agents, Integrators and Consultants ······································ 24
OEM & Bundling ················································································· 26
Recommended Pricing Policies ···························································· 30
Forms of Payment ·············································································· 31
Sample Order Form ············································································ 34
Price Protection ················································································· 35
Discount Structure ············································································· 36
Maintenance Policies for License Sales ················································· 38
Credit Terms ······················································································ 41
Withholding Taxes ·············································································· 43
Recruit and Hire an International Manager ············································· 44
Company and Product Profile······························································· 45
Competitive Matrix ·············································································· 49
ROI Analysis ······················································································ 50
Documenting the Sales Process ··························································· 52
Pre-designed Web Pages ····································································· 54
Software Translation and Localization ··················································· 55
Integration Issues & Complementary Technologies ································· 60
Providing Technical Support to Channel Partners ··································· 61
IP Protection ······················································································ 64
Partner Application Form ····································································· 65
Non-Disclosure Agreement ·································································· 69
Letter of Intent: XYZ Company - ABC ···················································· 71
Formal Contract ················································································· 72
Sales Training ···················································································· 82
Technical Training ·············································································· 83

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 Typical Agenda for 3-Day Partner Training ············································· 84
Partner Manual ··················································································· 86
Site Visits ·························································································· 88
Partner Conferences ··········································································· 89
Checklist – International Channel Program ············································ 92
SECTION II - PARTNER RECRUITMENT ········································································· 95
This page left intentionally blank.Define the Partner Profile ······················ 96
Define the Partner Profile····································································· 97
Develop a Database of Prospective Partners ········································· 102
Resources for Partner and ISV Searches ·············································· 104
Sample Outreach Letter 1 ··································································· 106
Sample Outreach Letter 2 ··································································· 107
Get a Contact Name ··········································································· 108
Using LinkedIn ·················································································· 109
Initial Prospect Contact and Qualification Script ···································· 110
Send Out One-Pager ·········································································· 112
Getting Past Voice Mail ······································································ 113
Follow-up ························································································· 115
Deadline for Response ······································································· 116
Check Vendor References ·································································· 117
Call Client References ········································································ 118
Financial and Credit Information ·························································· 119
Completion of the Product Evaluation. ················································· 120
Conference Call Agenda ····································································· 121
Reseller Meeting - When to Schedule ··················································· 122
Prospect Meeting Objectives ······························································· 123
Suggested Agenda for Meetings ·························································· 124
Reseller Meeting - Who Should Attend? ················································ 125
Follow-up to reseller visits ·································································· 126
Mandatory Partner Training ································································ 127
Partner Recruitment Checklist ····························································· 128
SECTION III - PARTNER MANAGEMENT ····································································· 131
This page left intentionally blank.Lead Registration ······························· 132
Lead Registration ·············································································· 133
Market Segmentation ········································································· 134
Compensation Neutrality ···································································· 136
Cross-Border Sales and Margin Splits ·················································· 137

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Market Development Funds (MDF) ······················································· 139
Sales Contests ·················································································· 140
Quota Clubs······················································································ 141
Spiffs ······························································································· 142
Initial Marketing Reports····································································· 143
Pipeline Report ················································································· 144
Sample Pipeline Report ······································································ 145
Partner Portal – Main Elements···························································· 146
Regular Newsletters ··········································································· 148
Annual Partner Review ······································································· 149
Terminating Partners ········································································· 157
Importance of Notices ········································································ 159
Master Checklist – 12 Month Activity Plan ············································· 160
12 Month Activity Plan Worksheet ························································ 162

PAGE v
Copyright 1997-2008 The York Group International, Inc. All rights reserved.

PAGE vi
 Introduction

Welcome to The York Group‟s Channel Development Workbook. The processes,

templates and recommendations are the result of having worked with hundreds of
software companies from all over the world, building or expanding their channels to
drive accelerated revenue growth since 1993.

We are pleased to make our methodology available to Microsoft Certified and Gold
Certified ISV partners, and by following the steps described in it you will be better
prepared to enter new markets, and/or generate more sales from your existing
partners.

The workbook is organized into three sections:

1. The internal processes a company needs to put in place in order to build and
support a channel. Prospective channel partners are much more likely to
invest their time, money and resources to make your product a success if
they are confident that you are going to be a good partner for them, providing
the support they will need to represent you properly;

2. The recruitment process. This section describes how you build the right
partner profile, how to identify them, and then explains in detail the steps you
should take to qualify prospects in a way that will produce motivated partners
able and willing to actively sell your products on an on-going basis;

3. Managing the channel once it is in place. Your channel partners will need
constant care and feeding to make sure that you remain an important part of
their business.

Our channel workbook is continually being improved and expanded as we learn from
our client engagements. Please check in on Microsoft‟s partner portal from time-to-
time to make sure you have the latest version.

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SECTION I - INTERNAL PREPARATION

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Initial Target Markets

This is the first critical decision for a company, and for many it is also the first critical
mistake they make. Companies have a tendency to want to go after the largest
markets first, on the theory that if they are going to spend a certain amount of money
to enter a market, the potential pay-off is going to be bigger in a larger market. This
is rarely the case, especially for small and emerging companies, and depending on
the technology, there are many factors that can be evaluated in order to determine
the best initial target market(s), including:

 Language requirements - Can the product be sold and used in English, or

does it require translation and localization? Markets where many products
can be sold in English:

 U.S.
 Canada
 UK
 Australia and New Zealand
 India
 Singapore and Malaysia
 Hong Kong
 South Africa
 Israel
 Middle East
 Netherlands
 Nordic Region
 Brazil (for many business applications)

 Size of the population – Does the product sell to a broad range of individual
users? Is the total population a good indication of the market potential? The
10 most populous countries:

1. China 1,297,003,000
2. India 1,082,851,000
3. USA 300,000,000
4. Indonesia 217,136,000
5. Brazil 179,114,000
6. Pakistan 151,677,000
7. Bangladesh 147,607,000
8. Russia 143,171,000
9. Nigeria 128,771,000
10. Japan 127,908,000

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 GDP and ICT spending per capita – Is the relative wealth of a country and
the amount it spends on ICT a good indicator? The ten largest ICT markets,
in absolute and per capita terms:

Absolute ($000s) Per Capita US$

1. U.S. 1,055,661 1. U.S. 3,587
2. Japan 349,099 2. Switzerland 3,480
3. Germany 150,384 3. Norway 2,739
4. UK 146,689 4. Japan 2,729
5. France 114,669 5. Sweden 2,627
6. China 85,600 6. Denmark 2,517
7. Italy 67,406 7. Singapore 2,471
8. Canada 52,460 8. UK 2,453
9. Korea 44,441 9. Finland 2,352
10. Brazil 38,183 10. New Zealand 2,325

 Spending in major vertical segments – Is your product designed for

specific segments, such as retail, manufacturing, government, etc? Spending
can vary from country-to-country. Are those segments fully developed, or are
they growing rapidly? For example, the retail sector in India is growing very
quickly as the concepts of franchising and multi-outlet chains take hold, and
many emerging chains are purchasing foreign systems.

 Number of potential clients in key verticals – Continuing the example of

India, while the retail market is expanding rapidly, the number of significant
players is still relatively small. This is also true in China, where the industry
gorillas have not yet emerged in all sectors. See “15,000 largest companies
in Europe” for European data.

 Presence of competitors – Who are your major competitors, where are they
from, and how firmly entrenched are they in your target markets? Are they
selling direct or are they using a channel? Have they localized their
products?

 Piracy rates – If your product does not have a security mechanism built into
it, or if it can be easily replicated, then the piracy rates will have a direct
impact on your potential revenues. If China is a relatively small market to
begin with, then what is your revenue potential if 90% of software is pirated?
The software piracy rates in some high profile markets are:

o United States 22%

o UK 29%
o Japan 29%
o Germany 30%
o Australia 31%
Page 6
 o South Africa 35%
o France 45%
o Italy 49%
o India 73%
o Russia 87%
o China 92%

 Time zones and support requirements – If your product is complex and will
require your involvement in the first few installations, it may influence where
you start, and how many partners or markets you can support.

 Technology adoption – Is the market an early adopter, and is this important

for your product? If you are a wireless application, the Nordic region is an
early adopter, but it is also home to many technology companies specializing
in wireless applications. Are you better off being an early entrant in a slower
adopting market?

 Transferable references – Have you sold to the local office of a multi-

national? Is it possible to “upstream” the relationship and get a foothold in the
market where the parent company is based?

 Exit strategy - You need to have a clear understanding of what your exit
strategy is, because it will impact the market selection. Is an IPO likely? Are
you positioning yourself for a trade sale? Is the company being operated for
cash flow?

Page 7
Overview of the largest markets

If we look at the largest IT markets, they all represent significant challenges:

The United States

 The largest, but the most competitive market in the world

 For most products it is not a single, national market, but a collection of
regional markets that have to be approached individually
 Cost of client acquisition can be prohibitive because of high marketing costs
required to establish brand awareness. Listed software companies in the
U.S. with under $50M in revenues spend an average of 89% of their revenues
on sales, marketing, general and administrative expenses
 Potential channel partners are inundated with opportunities

Regionalizing the United States

There are many different ways to geographically segment the U.S. A general
principle is to try and make them roughly the same size in terms of economic activity
and/or the presence of prospects. The map and chart below are meant as examples:

Page 8
 Region Geographic coverage
U.S.A.
Northeast Massachusetts, Rhode Island, New Hampshire, Vermont, Maine
Greater NY New York, New Jersey, E. Pennsylvania, Connecticut
Mid-Atlantic DC, Virginia, W. Virginia, Maryland, Delaware
Southeast Georgia, Florida, Alabama, Tennessee, South and North Carolina
Upper Midwest Illinois, Missouri, Kansas, Iowa, Nebraska, S. and N. Dakota,
Minnesota, Wisconsin
Midwest Ohio, Kentucky, W. Pennsylvania, Indiana, Michigan
Southwest Texas, Oklahoma, Arkansas, Mississippi and Louisiana
Mountain States Arizona, Colorado, Utah, Nevada, New Mexico, Wyoming
California California
Pacific Northwest Washington, Oregon, Idaho, Montana

Setting Priorities

After defining the geographic regions and the key factors, the final step is to put
together a scorecard to help determine the best markets to go after, and in which
order. Each of the regions and key factors should be ranked on a scale of 1 to 5.
This will result in an objective assessment of the regions that make most sense.

Pacific Northwest
Mountain States
Upper Midwest
Mid-Atlantic
Greater NY

Southwest
Southeast
Northeast

California
Midwest

Number of Prospects
Competition
Proximity
Channel Partners
References
Total

Page 9
Japan

 Localization of software products often a requirement

 Cultural differences and language can be a big hurdle to market entry
 Distribution channels are much different from the U.S. and Europe, and are
often tied to the corporate structure in Japan (Keiretsus)

United Kingdom

 The first port of call for most companies wanting to enter Europe, so a
company is likely to find the same competitors in the UK as at home
(especially true for U.S. companies)
 There are more good products looking for a channel than there are channel
partners willing to invest in representing new products, so the competition for
good partners is fierce
 The UK is not considered part of Europe, so it is not always a logical entry
point for the rest of the continent

One salesperson rule of thumb

When establishing an agreement with a new distributor, a software ISV will get, best
case, one full-time equivalent salesperson. For lower cost products it is unlikely that
they will become a strategic product for a partner due to the level of competition;
rapid changes in the market (which increases their risk); and the fact that the ISV will
want multiple partners in all of the larger markets. This means that there may not
even be one dedicated full-time equivalent driving the sales. But regardless of how
large a market is, there is only so much one person can sell and it can be easier to
achieve this potential in a smaller market that is less competitive. Additionally,
channel partners in second and third tier markets tend to be more flexible and
understanding in their dealings with less experienced software ISVs.

General Recommendations

Phase 1 markets

Canada – a good expansion point for North America, with a business concentration
in and around Toronto

UK – very competitive, but an important market to have a presence in. Will likely be
a frustrating market in which to find good partners.

Netherlands and the Nordic markets (Norway, Sweden, Denmark and Finland) – very
high Internet adoption, English OK for many IT products, relatively quick decision-
making

Page 10
South Africa – English-speaking, good partner infrastructure

India – a rapidly growing market with more potential for many companies than China.
English-speaking, recognizable legal system, less competition

Singapore/Malaysia – Singapore a major communications hub, high Internet

penetration, both countries are English-speaking, good way to expand footprint in
Asia

Hong Kong – similar to Singapore, and could be a gateway to China with sales to
multi-nationals before localization

Australia and New Zealand

Brazil – largest market in Latin America (55% of total), many products can be sold to
corporate market in English, relatively sophisticated business market

Characteristics of Tier 1 markets:

 Products can be sold in English

 Well-developed channels
 With the exception of India and Malaysia, relatively low piracy rates
 High Internet penetration rates
 Significant international trade/communications

Note: If an ISV only does these countries it would have a channel in 15 markets and
a presence on every continent

Phase 2 Markets

France
Germany
Italy
Spain
Portugal
Argentina
Mexico

Characteristics:
 Initial sales possible in English
 Translation required to maximize sales
 Good to excellent channel structure used to dealing with international
suppliers
 Lower Internet penetration

Page 11
Special case: Eastern Europe
 more strategic than revenue-generating
 a market poorly served by American firms
 relatively few good channel partners, but they exist
 higher piracy rates
 translation less of an issue – no one else does it

Phase 3 Markets

Japan
 Complicated market structure
 Product will need to be localized
 Best to find a strategic partner who assumes responsibility for everything

Rest of Latin America

 Highly fragmented market, i.e., lots of small markets
 Low Internet penetration
 Good partners hard to find, and often need a personal introduction
 Poorly served by U.S. ISVs

China
 Small domestic market due, in part, to piracy
 Could be done on an ad hoc basis, but may not be worth a focused effort, at
least not in the early stages of international growth
 Initial market probably limited to multinationals operating in China
 Beijing a more significant market than Shanghai

Page 12
Microsoft Resources

The International ISV portal provides a number of resources, including expert

articles, checklists, market assessment and planning tools as well as market
research from IDC and DataMonitor. The portal can be accessed through the
following link:

https://partner.microsoft.com/US/program/competencies/isvsolutions/4002909
3

Once on the portal, click on “Select the right markets”, which will bring up a list
of major IT markets, and within each market there are sub-sections with
market research.

Page 13
How Many Markets?

It can be tempting to go after every international market simultaneously. However,

this can lead to problems that can have a negative impact on the company. The
number of markets to go after initially will depend on a number of factors:

 Does the company have enough people resources to provide marketing and
technical support to multiple partners?

 Does the company plan to hire a full-time international manager, or will an

existing employee be given international? If so, will they be full-time, or is
international just one more thing they need to do?

 Does anyone in the company have experience with channel development? If

so, will this person be assigned the responsibility for international? Again, will
it be full-time or part-time?

 Is the product sold through an indirect channel in the domestic market? If the
company does only direct selling in its domestic market, they will have to
become familiar with channel management in general, as well as doing it
internationally, so they might want to ease into the process. If the company
has a successful domestic channel, they already have the mindset on how to
deal with partners, and may only have to modify their approach for the
international markets

 Does the product have to be translated and localized? This can be an

expensive and time-consuming process, and it may limit the progress to one
market at a time.

 How competitive is the market? In other words, is the technology something

that has to be established quickly, in order to get to the market ahead of the
competition? Or is it a niche product with little competition?

 How complex is the product? Will the ISV have to be involved with initial
sales and installations, or is it an out-of-the-box solution that a partner can
handle with a minimum of training and involvement from the ISV?

In many cases, especially for smaller companies with little or no channel experience,
it makes sense to start with two or three English-speaking markets as a way of
testing the international arena. This will give them a chance to:

 fine-tune their recruitment program. For most companies this will be a new
process, and they will have to get used to dealing with partners in different
countries. And not everything they implement will work right away. Perhaps
the marketing materials have to be revised. Will the pricing make sense in
other markets?
Page 14
 build up the necessary support infrastructure. The company will have to sell
its employees on the importance of being responsive to international partners.
For most employees this will be an additional burden, and it will be important
to have the right procedures in place before an aggressive roll-out.

 develop international reference accounts that can be used when opening new
markets. Nothing succeeds like success, and it makes a big impact on the
market (both for prospective partners and end users) when a product is a
proven success outside its own market. This is particularly true for products
from non-English speaking markets. For instance there is often a perception
that a French product did well in France simply because it is French. But
once the English language version has been successfully sold and installed
outside France, the perception changes dramatically. To a certain extent, the
same is true for American products, but for cultural reasons, rather than
language. People tend to think that their own market is different, so just
because it works in the U.S. doesn‟t mean it is going to work in Europe.

 generate revenues that can be re-invested to accelerate the international

channel development program. Building international channels is going to
take time. Partners have to be found and recruited, then they have to be
trained, and only then do they start marketing the product. If they then have a
3-6 month sales cycle, and a 30-90 day collection cycle, it will usually be 6-12
months before a company starts to see any meaningful revenues. In the
meantime it costs time and money to support the partners. If a company
focuses on two or three markets first, they can start to generate revenues that
can be used to provide additional support to existing, successful partners, as
well as go into new markets.

Page 15
 Revenue Objectives

Companies develop a channel in order to increase their revenues, scaling the

business without having to hire a lot of direct salespeople, but they often do it without
having any idea of what their expectations are. If revenue objectives are not
established it becomes difficult to select the right markets to go after, set up a
budget, determine the number of channel partners required, or to negotiate
meaningful targets.

Some of the factors that should be included are:

 Exit strategy (is the company being positioned for an IPO or a trade sale?)
 Size of the target market – revenue objectives should be established for each
individual market, and within each market geographic and vertical markets
should be segmented. For example, for some products the Northeast can be
segmented into multiple verticals (financial institutions, health care, education,
etc.), as long as each sub-segment is large enough to support at least one
partner
 Competition
 Product maturity
 Sales cycles
 Marketing support budget (revenues don‟t happen by themselves)
 Existing client and revenue base (the more successful a company is already,
the greater the likelihood of success in new regions)

Basic Formula:

1. For each market, determine the optimal number of partners based on vertical
segments and the number of prospects in each vertical
2. Establish minimum license sales in order to retain partner status
3. Define the size of the most likely buyers (100 users? 5000 users?)
4. Multiply the number of partners by the number of licenses and the expected
price, adjusted for the reseller discount.

Example:

In Germany, there might be one partner in the north, one in the south, and one in the
east. Each partner is expected to sell 10 licenses, with an average account having
500 users and a transaction value of $50,000. The reseller discount is 40%. The
revenue objective for Germany would be:

3 x 10 x $50,000 x .60 = $900,000

Page 16
Microsoft Resources

The market research available on the International ISV Portal includes a DataMonitor
report on the number of Microsoft Certified Partners broken down by revenues and
vertical market coverage. While not a comprehensive study, it can provide an
indication of the availability of reseller partners in various markets. The portal can be
accessed through the following link:

https://partner.microsoft.com/US/program/competencies/isvsolutions/40029093

Once on the portal, click on “Select the right markets”, which will bring up a list of
major IT markets, and within each market there are sub-sections with market
research.

Page 17
 Subsidiary – Build or Buy?

The Pros of Building

Why do companies build rather than buy, particularly as a first step? The reasons
are as varied as the companies. There are many advantages to having your “own
people” in markets outside the domestic base. This is by no means an exhaustive
list, but covers some of the answers found repeatedly in client meetings.

Control – This is the key to the remaining arguments. Building an operation means
you have the right to choose location, corporate structure, pricing, sales channel,
marketing strategy, and of course, personnel. By choosing the people who sell,
support, and market your products, a certain consistency in approach and execution
can be achieved.

Quality – This comes back to control … the way to make certain quality remains
consistent, is to do it yourself. By controlling your process from end to end, you can
ensure that it is carried out in the way you want – whether that process be sales,
support, marketing or any other part of your overall business.

Profit – Prices internationally are often higher than in the domestic (USA) market,
particularly for localized products. The ability to set end user and transfer pricing
allows for greater control over profitability and repatriation of those profits.

Flexibility – Having your own employees provides a measure of control over the use
of time and resources, as well as sales model. Resources can be marshaled to
whatever event or activity is important to your business at that moment (within
reason). It all comes back again to control – if you own the resources, you can
control what they do and when.

People – By recruiting the people in your organization, you have the freedom to
assemble a team that works best within your corporate culture. A well assembled
team will be an extension of your company in a distant market, bringing your
customers consistent service and support.

Consistency of the company profile and marketing message - Indirect channels

are often more concerned about building their own brand and profile in their local
market, and do not always follow an ISV's marketing strategy.

Page 18
Control of the customer base - When going through a channel, the ISV will not
always know who the end users are, and issues such as customer support,
maintenance collection and upgrade sales can get very messy.

Channel recruitment challenges. In some markets, developing a channel is

difficult. In the U.S., for instance, indirect channels are inundated with product
opportunities from the U.S., and they are resistant to taking on products from
overseas.

Eliminating risk - Channel partners are at risk of being acquired, may be or become
financially unstable (through loss of a major product line) or may be mismanaged.
Acquisition of a previously independent partner to eliminate these risks and secure
control is not uncommon.

Investors prefer them - First, revenues ramp faster if they are not shared with a
channel, so the potential value of the company as a function of a revenue multiple
increases faster. Second, there is still a "bricks and mortar" mentality among many
investors, who like the feeling of company-owned assets on the balance sheet.

The Cons of Building

Now a look at the cons to building a subsidiary. To illustrate a point, let‟s discuss the
same topics above, but from the other side.

Control – Short of going to manage the business yourself, control over a subsidiary
is usually a matter of degree and compromise. Notwithstanding the often misguided
belief that “they all speak English”, cultural differences account for some of the most
difficult, frustrating, and time-consuming management challenges in managing a
successful international operation.

Subsidiaries take on a personality of their own, similar to the head office, but
influenced strongly by the culture, laws and attitudes of the local market. Over time,
control changes in character, particularly with the second generation of employees -
people who also have history with the company, but a very different one to those
working in the home office - regardless of frequent head office visits.

Thus, we believe control is perceived, and often fleeting. For example, the location
chosen initially for the convenience of visiting home office executives, goods import
and shipment, or tax holidays, may have to be abandoned if potential employees do
Page 19
not want to travel there to work.

Sales strategies that work successfully in the home market may not work at all in
other places (telemarketing or direct mail, for example), and require the adaptation of
methods more suitable for the markets in which your subsidiaries operate. Marketing
campaigns may cause strongly negative reactions in foreign markets (e.g.
Chevrolet‟s “Nova” model which failed in Spanish speaking markets where its name
translated to “no-go”). Every such change relinquishes another element of control to
some extent.

Quality – Perceptions of quality are culturally biased. A product or service that is

perceived as positive at home may have quite the opposite characteristic and/or
connotation in other markets. Some products enjoy a very positive reputation in
some markets based their country of origin (German cars, Swiss watches, Belgian
chocolate, American software, etc.) while others carry strongly negative connotations
in others, often based on cultural, economic, and social influences completely
unrelated to the products themselves.

An American software company that releases three new versions per year may be
viewed as leading edge, or innovative in the USA, while potential customers in
Germany or Switzerland may view the company as unstable – in an environment
where evaluation cycles are often longer than release cycles! Thus, quality is not
innate, inanimate, or obvious – a product perceived as high quality in one market
does not guarantee it will enjoy the same perception in others.

Profits – Let‟s examine the opposite side of profit – cost, since higher costs directly
impact profits. Consider that while price for your product is often higher in
international markets, it is by no means unique - every other item and business
service in these markets is also more expensive – taxes, housing, office space,
transportation, utilities, communications, food, insurance, financing, computers, etc.
The domino effect drives overall business costs higher, pushing salary demands
higher, and the cost of doing business significantly higher. Get the picture - prices
are higher for a reason.

Employment costs are another significant area often overlooked. In Europe, for
example, American companies accustomed to the labor flexibility of their home
market are often shocked by contract based employment laws. These reduce labor
flexibility, and complicate hiring practices – or cost a lot of money to fix if you get
them wrong.

Page 20
Social insurance costs paid by the employer over and above gross salary in most
European countries are 100%-300% higher than in the USA. Vacation allowances
hover around 4 weeks, but routinely go to 6+ weeks, meaning that every 8 th
employee just covers vacation time for the first 7. Benefits packages, particularly in
Europe, routinely include company cars or commuting costs, a 13th, and sometimes
14th month‟s salary, phone lines at home complete with fax machines, club
memberships, and much more that is unusual in the USA, but normal in Europe.

Flexibility – Employment contracts, particularly in European countries, reduce

flexibility in many important ways. Contract based employment means that any
significant policy change affecting labor may require government approval (and they
can just say no), and then cost thousands to implement in the approved fashion, or to
pay out the often-generous severance allowances for employees who do not want to
move, change positions or possess skills the government believes to be in surplus
(for whom you may be responsible for re-training). The presence of unions is
another factor reducing labor flexibility – they are much more widespread in the white
collar work force than in the USA, and take an active part in worker welfare as well as
industrial actions.

People – the very base of your business. After investing considerable time, effort,
and money recruiting, creating equitable labor contracts, leasing company cars,
buying cellular phones, and all the rest… why is it not working?

Management directives are met with “why” instead of “when”, and challenged at
every turn. Seemingly innocent corporate policies meet with vehement disapproval
or worse, legal challenge. People who seemed to wave the company flag during
interviews now challenge headquarters on seemingly basic issues. What changed?
Why? Welcome to one of the greatest management challenges in running
international operations – cultural conflicts. Just because people look alike, speak
the same language does not, repeat not, mean they are the same. Perceptions of
work ethic, management, responsibility, mobility, and every other aspect of life will
surprise and amaze.

Managers in many European companies cannot conceive of the idea of making sales
calls – “our job is to manage”. Hiring employees does not guarantee a smooth
implementation of company policy or culture – usually because there is more than
one culture to be considered. At least in Europe, the caution for hiring managers is
to review employees carefully, because they may be with you forever.

Page 21
Summary – Building

Arguments on building can either support or oppose the strategy very easily,
depending on the tack taken on viewing each one as we have shown above. There
is no clear method by which a company can determine empirically whether to build
their own operation or not. It is a complex combination of internal needs, market
forces, and sometimes, just the fortitude to take on the challenges involved in setting
up the first (and every) subsidiary, and move ahead. One piece of advice based on
the author‟s experience in setting up many subsidiaries: Add 25% to implementation
plan time frame, and 50% to expense estimates in order to have a greater chance of
being correct.

Microsoft Resources

The International ISV portal contains information on what it costs to set up a three-
person office in various markets. Log on to
https://partner.microsoft.com/US/program/competencies/isvsolutions/40029093 , then
click on “Select the right markets”, pick the market you are interested in, and in the
third column over, link to “Establishing a Business” which contains a spreadsheet
with the indicative costs.

Page 22
 Resellers/VARs/Distributors

Resellers can also be a part of Channel Management, but rather than having a direct
relationship with the developer, the reseller has their relationship and buys their
product from a distributor. This becomes common when a developer has so many
resellers that it becomes too costly to deal with them directly.

Generally, distributors will look to a developer for at least 50% margin plus additional
funds to help in the marketing and promotion of a product. Distributors will usually
not take on a product unless:
 There is a significant existing or potential market
 Resellers are already aware of the technology and have a desire to buy
 The product offers features that substantially differentiate it from the
competition.
 There is an effective marketing program in place
 The developer is able to provide technical support, training and
merchandising tools

The difference between resellers and VARs is based primarily on the level of
services provided with a sale. Resellers tend to be product-oriented, and VARs tend
to be solutions-oriented. Resellers are expected to market specific products, be they
hardware or software, while VARs will include those products in an overall solution
that they are selling to their clients. VARs will rarely advertise or market specific
brands, so they do not represent a direct conflict with traditional resellers.

Page 23
 Marketing Agents, Integrators and Consultants

This category of channel partners influences the purchase decision, but does not
control the sales process. They can open the door to sales opportunities, but the ISV
is usually involved in closing and supporting the sale, which can result in higher-than-
expected costs.

Sales Consultants

Sales consultants are a step up from referral agents in that they actually meet with,
educate and bring to the developer a customer who is prepared to sign a contract.
Once the contract is signed, the ISV owns the relationship as it relates to installing
and supporting the solution. The ISV will also invoice the end-user directly.
Generally in this type of relationship a consultant will be paid a 20%-25% commission
on all revenues generated through the end-user for specified period time (usually a
year).

Marketing Partners

Some companies may want individuals or companies representing their products to

have a higher level of commitment than a consultant normally provides. Some of that
commitment may come in the form of:
 Completing an application form
 Some type of certification testing (which has to be matched with the developer‟s
ability to provide some type of training – even if it is nothing more than stepping
through slides on the company‟s web site).
 Development of a marketing/business plan
 Minimum investment annually in proactive marketing efforts

As with a consultant, a marketing partner would meet, educate and bring a “ready-to-
sign” prospect to the ISV. From the time an agreement is signed the ISV would be
responsible for delivering and supporting all company-related products and services
to the prospect. The ISV would invoice the prospect directly, and receive payment
directly from the prospect. For this extra level of commitment a marketing partner
would expect to receive 30 to 35% commission on all products and services sold by
the ISV to the prospect for a specified period of time.

Page 24
Integrators & Technology Consultants

Like VARs, integrators and technology consultants work with their clients to provide a
total solution, and do not focus on selling specific products or brands. However,
integrators can approach the projects in a couple of different ways:

1. Project management. Companies such as EDS, Cap Gemini Ernst & Young and
Accenture take on large projects for their clients, where their responsibility is to
evaluate a problem, find a solution, and then implement it. In most cases they
will design the solution, and then present product options to their clients, who are
ultimately responsible for making the decision. For instance, if the project
requires file transfer, the consulting firm might present three possible products,
their technical specifications and pricing, and the client makes the choice. The
challenge for a developer is to get visibility with consulting firms so that they are
in a position to evaluate and possibly recommend their products.

2. Systems integration. Integrators are very similar to VARs, in that they integrate
software and (often) hardware into a custom solution for their clients. A strong
relationship with system integrators can be hard to achieve because they get
called on by many software ISVs, but once it is in place can lead to repeat
business with a low cost of sales.

3. Facilities management/Outsourcing. There are some large IT companies, such

as EDS and IBM Global Services, that take over the entire information systems
management for their clients. This is often done on a fixed price basis for
managing the current infrastructure, and cost plus for enhancements. In either
case, the facilities management firm has a strong incentive to purchase products
that reduce the operating costs or that make the environment they are managing
more efficient. Since FM firms tend to be very large, with clients around the
world, if a product becomes adopted as a standard, it is often installed at many
other sites around the world, with both existing and new clients. Getting selected
by an FM firm is difficult, but can be very profitable.

Page 25
 OEM & Bundling

Entering into an agreement to license or bundle one‟s technology with a vendor that
has an established market position can be an excellent, low-cost approach to getting
started in a new market. This is commonly referred to as “OEM agreements”
(Original Equipment Manufacturer – a term that originated in the automotive industry
but is now applied to software products as well as hardware products) or “private
label agreements”. An ISV‟s software is typically integrated with an existing solution,
and either sold as part of a new release, or as an add-on module under the name
and label of the OEM partner.

Advantages

1. Quicker time-to-market. The OEM partner should have a large client base that
the product is sold to, and depending on the pricing structure, the business
arrangement can generate a significant, and immediate, revenue stream;
2. The cost of sales through this partner is virtually zero since they have, or should
have, an installed based that they sell the product to;
3. It does not consume any internal advertising/marketing efforts – this is the
responsibility of the OEM partner;
4. Technical support requirements are minimal – the ISVs product or module
becomes part of another solution that is supported by the OEM partner;
5. The sales and pricing strategies used by the OEM should have little impact on
direct sales efforts or other indirect sales alternatives – thereby keeping all
options open. Although resellers are sometimes concerned with having the same
product sold through other channels in their market, the fact that it is sold under
another name to a defined client base helps limit channel conflict. In larger
markets an OEM model can co-exist with a reseller channel.

Potential Challenges

1. Certain technologies do not lend themselves to being integrated with any other
software solution, especially those that require a fair amount of customization
with each installation. The more “packaged” the solution is, the easier it is for an
OEM to sell and distribute the product;
2. It can be difficult to find software companies willing to integrate another
company‟s technology. In part this can be due to the “Not Invented Here”
syndrome, but it can also be due to technical issues involved in integrating the
solutions, or becoming dependent on a third party for part of the company‟s
solution;
3. There is a loss of identity, so building a brand becomes more difficult. Having
one‟s own brand is often important in the valuation of a software company, and if
an ISV is essentially an anonymous supplier of technology to other, branded
ISVs, it has a negative impact on the value of the company;

Page 26
4. Contract negotiations have to be handled carefully, to prevent the ISV‟s product
being included as a low-cost add-on that could possibly undermine the ability to
sell the product separately. If the pricing is so low that the OEM partner becomes
a low-cost competitor, it will have an impact on the ability to establish a viable
channel for the ISVs own solution;
5. If an OEM agreement is very successful, and the OEM partner becomes a large
part of an ISV's business, the OEM partner could be in a position to exert a lot of
pressure on the ISV when it comes time to renew the contract.

Pricing Considerations

There are no established pricing policies for this type of relationship - they are usually
negotiated on a case-by-case basis. However, there are two basic pricing models
that are used:

Percentage of the overall solution. Under this pricing model an ISV is paid for the
value of their code relative to the overall solution. For example, if the module in
question represents 30% of the total solution, the ISV would get 30% of the revenues
from the sale of the combined product. In theory the OEM partner will always be
motivated to maximize their own revenues, but there are some risks with this pricing
model that need to be addressed in a contract:

 The bundled module becomes a loss leader for other products the OEM is
selling. If the contract does not establish a minimum price for the ISV‟s
module, there is a risk that the OEM partner greatly reduces the price in order
to sell other parts of their product line, or to maintain a higher price on other
products at the expense of the ISV;
 The OEM partner increases the size of their own modules to reduce the
relative value of the ISVs product. For example, if the initial value of the ISV‟s
contribution was set at 30%, if the OEM partner adds substantially more code
to its own part of the solution they could potentially drive down the relative
value of the ISV and reduce the license payments to 10 or 15% of each
transaction.

Discount from the list price. Under this pricing model the OEM partner would pay a
per unit price, with volume discounts for larger purchases. By way of example, if the
list price is $1000, the OEM might get a price of $500 or $600 if they do not commit
to specific volumes, only purchasing the product on an as-needed basis. They would
get volume price breaks as they purchase 100 or 1,000 units. There are two distinct
advantages to this pricing structure:

 If structured properly, it can generate significant up-front cash. Rather than

simply reducing the price over time as an OEM partner reaches defined
purchase levels, an ISV should encourage an OEM to “buy down” the price

Page 27
 based on an initial purchase. If the baseline discount is 50% for ad hoc
purchases the OEM can establish a lower price for the full year of a contract
by making an up-front purchase. For example, the price might be $400 per
unit if they buy, and pay for, 100 units up-front, and $300 if they pay for 1,000
units and $250 if they pay for $2,500 units. The unit price would then remain
at $250 for the remainder of the contract year, guaranteeing the OEM partner
a low per-unit price for every additional purchase;
 It is a good indication of how serious the OEM partner is about selling the
product. If they really expect to sell a lot of the product they will want to
establish a unit price that is as low as possible, thereby making it more
attractive for them to make a more substantial up-front purchase. If the OEM
declines to purchase products up-front, preferring to order products on an “as-
needed” basis, it is a good indication to the ISV that the relationship is unlikely
to produce a lot of revenues, and they should be careful about investing too
much time and resources.

Legal Considerations

 The cost of technical integration. Some products require significant modifications

in order to integrate properly with another solution – who pays for what should be
clearly spelled out in the agreement;
 Derivative technology. If the OEM partner makes significant modifications or
improvements to the ISVs underlying technology, in some cases they can end up
with ownership of the new and improved product and no longer have to pay
royalties to the ISV;
 Defining the markets. If an OEM agreement is just one part of multi-pronged
distribution strategy that might include direct sales and/or reseller channels in
certain markets, the target market that the bundled solution can be sold to should
be clearly defined. For example, this could be by geography, or specific client
groups.

Hardware Bundling

Some software solutions may lend themselves to being bundled as part of hardware
sales. However, it would be rare that a new technology could utilize this option. The
only reason a hardware ISV would include software is if it helped to push the
hardware. And in order to have that spin, either the market needs to already know
the benefit of the software or the benefit of the software must be very obvious and
compelling (e.g., doubles processing speed).

The advantages include:

1. The cost of sales are virtually zero;
2. An implied (if not actual) endorsement from the hardware manufacturer;

Page 28
3. The opportunity for upselling to users that get an entry-level version of the
product (“Lite” vs. “Pro”)
4. Will rarely have any impact on the company‟s pricing model through any other
sales alternatives.

The disadvantages include:

1. Low per unit pricing. Hardware margins tend to be low, and manufacturers are
not willing to pay much for OEM software;
2. May require supporting an uneducated buyer (potential high support costs);
3. May diminish the market‟s perceived value for the product;
4. There may be very little contact with the end-user and therefore diminished
opportunity for add-on sales.

Page 29
 Recommended Pricing Policies

 Establish an international price in a single currency, preferably $US and Euros

(same value in each currency, i.e., 100). Establishing and trying to control local
currency prices creates a lot of potential problems:

 exchange rates are constantly moving, so if the partner is on a fixed discount

from the list price, the list price will have to be modified as exchange rates
change; this is an administrative headache
 if the discount is based on the local price, the ISV will be asked to participate
in special discounts required to close the sale

 Don‟t publish pricing on the Web

 the Web makes pricing transparent to the end user, and this creates a real
conflict with and for partners.
 if pricing is available, end users will often call and try and order direct if pricing
is lower
 lower pricing on the Web makes the partner look bad vis-à-vis his client, who
might feel that the partner is trying to rip him off

 Might want to consider two-tiered pricing, with lower pricing in low-cost countries
such as China, India, Turkey, or if a region is going through a financial crisis,
such as Southeast Asia in 1998; this is common with most large ISVs, because
"normal" pricing might be prohibitive in many developing markets

 Allow partners to establish local currency pricing to cover:

 exchange rate fluctuations
 cost of doing business in a small, often expensive market
 cost of translation/localization
 additional discounts that are often required in the local market, e.g., Italy
 withholding taxes, customs and duties that make the product more expensive

Page 30
 Forms of Payment

Wire transfers

Wire transfers are the industry standard. They are reliable, they can be traced, and
they can't be reversed once the payment has been completed.

Things to consider:

 Wire transfer fees. Virtually all issuing banks charge a fee of $25-50 for
international wires, and this fee, as well as any fees charged by
correspondent banks, are the partner's responsibility. Make sure that
payment terms clearly indicate that your prices are net of bank charges.
The receiving bank might also charge a fee, but that is the ISV's expense
 SWIFT/BIC codes. When providing partners with wiring instructions,
always include your bank or branch SWIFT code. This is an alpha-
numeric code that is unique to every bank, and it allows a wire to be sent
directly from bank to bank without going through a correspondent. It can
save time and money.
 IBAN (International Bank Account Number). The international
standardized format for account numbers. The IBAN always starts with a
two-digit country code which is followed by a two-digit control part, a
reference to the bank (the bank's local code) and the beneficiary's
domestic account number. We recommend that you send your IBAN and
the bank's SWIFT/BIC to your foreign partners, who make payments to
you from other countries, well in advance.
 Transfers can normally be completed in two or three days but they can
take up to ten days depending on the country of origin. If there is a delay,
and the partner is pushing for product delivery or a permanent code, ask
them to fax a copy of the wiring confirmation from their bank. This will
confirm that the wire has been processed.

Credit cards

Credit cards are often used for lower priced, high-volume products, but there has
been a marked increase in the use of credit cards since American Express started to
award mileage points for business purchases. It is not uncommon for some partners
to make purchases of several hundred thousand dollars per month with their Amex
card. Credit cards have the advantage of being processed immediately, and can
therefore expedite the ordering and shipping process.

Things to consider:

 Credit card orders can be reversed if the partner disputes the charge, so
an order isn't necessarily final just because the credit card authorization
has been issued
Page 31
  Credit card fraud is widespread, especially in Eastern Europe, so
payments should only be accepted from companies that have been
properly qualified
 Credit card payments are typically used by smaller partners who do not
expect to build up a lot of volume (they will usually run into a problem with
their card limit)
 Credit cards, especially for companies, are not widely used outside the
U.S., so this should not be the only way for a company to pay
 Banks will normally charge a 2-3% processing fee for each transaction, so
make this the responsibility of the partner. A $100,000 purchase with an
Amex card could result in a $3000 processing fee for the ISV

Cashier’s checks and international money orders

These are rarely used, but in some cases where partners have credit terms and pay
monthly for their orders, there are companies that prefer to use checks.

Things to consider:

 Make sure checks and international money orders are issued in the
currency specified for payment, be it $US, or the ISV's local currency
 Encourage partners to use an overnight courier service when paying by
check, to avoid possible postal delays

Letters of Credit

Letters of credit are still used for manufactured goods, but because of widespread
fraud and bank failures during the 1980s they are more complicated to get, and the
wording has become tighter which can make them more difficult to cash in.

Letters of credit can be used to make a payment, or to guarantee that the payment
will be made. They can be issued for specific purchases, or for an amount that
corresponds to the credit limit issued by the ISV. In this case the distributor would
make payments based on the terms provided, e.g., 30 days net, and the ISV would
only invoke the letter of credit in the event of a late payment.

Things to consider:

 The creditworthiness of the issuing bank. If your bank does not have a
direct, correspondent relationship with the issuing bank, it can be a good
idea to have the letter of credit guaranteed (“confirmed”) by another bank
that has a correspondent relationship with both your bank and the issuing
bank
 The LC should be irrevocable
 The wording has to be precise, and if payment is being requested against
an LC, the instructions have to be followed to the letter. The issuing bank
Page 32
is going to protect the interests of not only its client, but itself. Invoking a
standby letter of credit for payment is usually the result of a financial
problem on the part of the buyer, so the bank will not cover the obligation
unless it absolutely has to.

Page 33
 Sample Order Form

Partner Name
Purchase Order Number
Ordered By
Order Date

Product Information

Product Product Qty* License Qty* Unit Price Line Total

Subtotal
Shipping
Total Purchase

*Note: Please specify if the order is for additional licenses to an existing client

Maintenance Table

Maintenance Calculation
List Price
Multiplied by maintenance %
Less: 90 day warranty period
Total First Year Maintenance
Less: Partner Discount
Total Maintenance Fee

Payment Information

 Wire Transfer

Remit funds to:

Note: This space to be used for ISV's bank information (bank name, SWIFT
address, account name, account number)

 Use the credit card you have on file:

 VISA  MASTERCARD  AMEX

Page 34
 Price Protection

The sales cycle for every product is different, but a partner has to have some
assurance that the price he is quoting will be valid while the customer is going
through the buying process. The standard procedure is to have new pricing go into
effect 30 days after it has been announced, with an additional period of protection
tied to the normal sales cycle, usually 90-180 days. In other words, the partner can
maintain the old pricing for an additional, defined period of time for deals that he has
already quoted in writing, but he should be required to document those to the ISV
when the new prices are announced.

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 Discount Structure

Discounts tend to be higher outside the U.S. In the U.S. 30-40% might be enough to
attract good partners and distributors if the company is established in the U.S.,
providing lead generation and technical support, whereas internationally the discount
tends to be 40-50%. There are a number of reasons for this:

1. The markets are smaller. Individual markets outside the U.S. will be a fraction of
the size of the U.S., so the potential revenues from a given product will be lower
2. Costs of doing business are usually higher. This is especially true in Europe,
where marketing expenses, labor costs, office rents, taxes and government
charges are much higher than in the U.S.
3. In many markets an on-site sales call is often necessary to close the sale, and
this drives up the cost of sales.

While it might be possible to attract partners with lower discounts, very few quality
partners and distributors are willing to entertain products with less than a 40%
discount, and they certainly won't spend much money promoting them. For
enterprise solutions and large platform products that require on-site visits, installation
and pre-sales support by the partner, a 50% discount is the industry standard.

There are two recommended ways of setting up the volume discount structure:

1. Rolling quarters. Sales in one quarter determine the discount for the following
quarter. The discount should be tied to how well they are doing compared to
the business plan, with the first trigger point based on achieving the quarterly
equivalent of their contractual minimum (e.g., $125K if the annual minimum is
$500K). This would mean that their sales in a quarter would determine their
discount for the following quarter. Discount structure could be:

 40% for quarterly sales up to $125K at list

 45% on sales in excess of $125K (equal to ¼ of the contractual
minimum)
 50% if sales exceed $175K

Under this program they would get a 45% discount for any sales in a quarter
following a quarter in which they had sales of $125K. If they exceed that
number in the quarter, they maintain the discount for another quarter. If their
sales drop to $90K in that quarter, their discount would drop to 40% for the
next quarter.

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 2. Deal size. Discounts are applied to the size of individual transactions as a
way of encouraging the partner to focus on larger deals. For example:

 40% for transactions under $50K

 45% for $50-75K
 50% for deals over $75K

Customer Discounts
It is usually a good idea to give the channel partner some level of discretion in
offering additional discounts without getting approval from the ISV, without having to
absorb all of the pain himself. For example, they might be authorized to offer
discounts of up to 20%, and the reseller discount would be applied against the net
deal. Any customer discounts in excess of 20% would require approval from the ISV
in writing, or would be the responsibility of the reseller (he absorbs it).

Should you charge the partner an up-front fee?

This was a fairly common practice in the 1980s, but it has become the exception
today:

 most partners that have been in business for any length of time have
been burned at least once with pre-payments, and as a result have made
it a policy to pass on products that require up-fronts
 requiring up-fronts is seen as a sign of financial weakness on the part of
the ISV
 up-front payments have to come from somewhere, and it is usually taken
from the marketing budget, leaving the partner with little or no money to
push the product. The cost of the initial license(s) will reduce potential
sales by much more than the initial revenues from the pre-payment

The purpose of an up-front is usually to guarantee that the partner is serious about
the product, and has a strong incentive to market it. This can be better achieved
through requiring training at the ISV's facilities, and establishing a formal marketing
plan and budget from the partner.

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 Maintenance Policies for License Sales

Maintenance is becoming a "manageable" expense for many companies. For large

companies with thousands of installed programs, maintenance is a significant fixed
cost and more and more companies are taking a closer look at what they get for their
maintenance dollars. As a result maintenance payments are no longer "automatic",
and ISVs are being required to justify the value they are providing.

There are two ways to structure maintenance, voluntary annual maintenance, and
mandatory annual license fee renewals.

Voluntary

The typical program is a rate of 15% (but large enterprise ISVs such as Oracle are
pushing this to 18-22%), starting after an initial 90 day warranty period. In theory this
payment is used to cover three levels of service:

1. Technical support related to the installation and on-going use of the product.
The ISV, or his local partner, provides first level (telephone) and second level
(on-site) support to resolve problems directly related to the product. In
addition the ISV provides code level support in the form of bug-fixes and
maintenance releases that incorporate these fixes
2. New releases, with some additional functionality. ISVs are normally expected
to provide a new release at least once per year
3. Discount on new versions or chargeable upgrades.

In theory, roughly half the maintenance fee covers the cost of providing tech support,
while the other half is used to reinvest in continuing developing of the product. In
reality, most ISVs have an objective of building a recurring, predictable revenue
stream from maintenance revenues, and after the product is stable and has a large
user base, a large portion of the maintenance stream goes to the bottom line. Large
users know this, which is why they have become more demanding.

If the product is simple to install, and requires no on-going support, users will look at
the second component to see if they are "getting their money's worth", especially if
the product is expensive and the maintenance payment is a large one. If the product
does not require much support, users will be more reluctant to pay for chargeable
upgrades. The general rule is to provide users with new releases or upgrades within
the same version number at no additional charge, e.g., when going from 2.0 to 2.1,
while going to a new version number, e.g., going from 2.1 to 3.0, constitutes a
chargeable upgrade.

Users that are on maintenance would usually get a discount of 40-75% off the list

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price of upgrades, depending on:
 the cost of the upgrades,
 the number of new features included, and
 how many times per year a new version is released.

If a client is no longer on maintenance, they would have to pick up the missing

maintenance or pay full price for new releases. For example, if a client has used the
product for 18 months without paying maintenance, and wants to benefit from the
discount (or has technical problems and needs support), they would be required to
pay for two years of maintenance. For this reason, some software ISVs use large
discounts on upgrades as a way to encourage companies to stay on maintenance.

Other issues to consider in defining a maintenance policy

Warranty period

While 90 days has been the traditional policy, it is becoming increasingly common to
offer the first year free as part of the pricing.

Resetting the maintenance

Maintenance is calculated based on the list price of the product (not the actual
selling price if a discount has been offered) the first year, and then the current price
list in subsequent years, so if there has been an increase in the price of the product,
the maintenance payment goes up accordingly. Some ISVs with a large installed
base, and few new products or clients, have been notorious for increasing prices
every year as a way of increasing their maintenance revenues. For this reason some
companies insist on a limit on annual price increases, at least for the purposes of
calculating the maintenance.

Escrow accounts

If the product is critical to the client's operations, or if there is some doubt about the
financial strength of the software ISV, some companies will require that the source
code be placed in an escrow account, so that they can access it if the ISV goes
bankrupt, or can no longer provide source code support. This is unlikely to happen
with a product that is not mission-critical.

Timing of payments

Many large users, who might have thousands of programs installed, prefer to make
all of their maintenance payments at the same time, usually at the beginning of the
year. It makes it easier for them to manage, and it also makes the total amount of

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maintenance they pay transparent. These companies are more likely to look at the
value they are receiving.

Mandatory Maintenance

Mandatory maintenance is often referred to as an annual license renewal fee, and it

addresses some of the issues encountered with voluntary maintenance. Since it is a
renewal fee, the first payment is due on the anniversary date of the contract, and
there is no initial warranty period.

The amount is usually 20-25% of the list price, which generates a significant
recurring revenue stream for the ISV. However, in return the client gets all new
releases and upgrades at no additional charge, and the ISV is normally contractually
obligated to provide new releases every six months.

Recommendation:

 15% maintenance
 One year warranty
 Industry is moving in this direction
 Lowers the barrier to sales
 Still build recurring revenue base for subsequent years
 Include maintenance releases, but not new versions

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 Credit Terms

Payment terms will depend somewhat on factors such as the cost of the product,
length of the sales cycle, software protection, length of the relationship with the partner,
etc. As a general rule payment terms are to be avoided, and permanent keys should
not be given until the payment has been received (help the partner manage his
collection cycle):
 the financial information received is often unreliable
 suing for payment overseas is difficult and expensive
 market conditions and exchange rates can change rapidly, so a company
should avoid having large receivables

Credit Terms and the Use of Keys

Software security keys are an excellent way to manage the sales and payment cycles.
Some of the issues to consider are:

 Temporary and permanent keys. The product would typically have a 30-
day evaluation period, so that prospects can try it for a month
 Renewals for trials would normally be 30-60 days if an extended evaluation
is required. A new temporary key would be issued, at the end of which the
prospect has to either issue a purchase order or stop using the product
 Once the P.O. is issued, a new temporary key would be issued that
matches the payment terms, e.g., 30, 45 or 60 days
 A permanent key is not issued until the ISV has been paid by the reseller
 Decisions have to be made regarding how the key is structured:
 Is it machine-dependent, i.e., does it read a serial number or does a
serial number have to inputted by the user? This can make it easier to
prevent unauthorized reinstallation (see below)
 Does it count the number of users, or the amount of data that passes
through the product?
 Are keys issued for each module? In other words, do you deliver an
evaluation version of the product that lets the user try all of the
modules, but they have to have separate keys for the modules they
want to purchase?
 Does it have an automatic 30 day key, or is it a zero-day key that
requires that a key be issued just to test it. The advantage of a zero-
day key is that it prevents a user from simply reinstalling the product
every 30 days, and potentially using the product perpetually without
paying. The disadvantage is that it creates another hurdle to a prospect
evaluating the product.

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Recommendation:

 No credit terms
 Permanent key issued when payment received
 Use temporary keys to enforce payment policy
 Customize payment terms by territory
 30 days for U.S., Canada, UK, Australia, Germany, Netherlands and
Nordic
 60 days for Japan, France, Spain, Latin America
 90 days for Italy

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 Withholding Taxes

Many countries require withholding taxes on products imported to their country. The
tax usually varies between 5-30%, and is deducted from the payment made to the
ISV. If, for instance, the withholding tax is 20%, and the partner owes the ISV
$1,000, he will send $800 in cash, and a tax certificate (issued by his government if it
has a tax treaty with the ISV's own country) for the other $200. The ISV can then
apply the tax certificate against his tax bill when he files his annual return, if his
country has a tax treaty with that particular country.

Things to consider:

 Latin American countries often have a withholding tax of 20-35% on

software product sales and royalties

 Some countries, e.g., Italy, make a distinction between royalties and

product purchases, and apply different withholding tax rates. It is
generally considered a royalty if the partner/distributor has the right to
duplicate the product media and resell it in his territory. It is a product
purchase if the product media and documentation are physically imported.

 India has a flat withholding of 20% on all products and services

 The partner agreement will often require that the purchase price be paid
net to the ISV, so the partner becomes responsible for paying the
withholding tax. In that case the local pricing will have to be adjusted to
compensate for the withholding tax, and this could impact the product's
ability to compete

 Tax certificates will only be of value if the ISV reports a taxable profit. If
he is losing money, or if the cumulative value of the tax certificates
exceeds his tax liability, they will represent a potential loss of revenue.

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 Recruit and Hire an International Manager
Depending on the complexity of the software, a channel manager has the bandwidth
to actively manage 5 to 20 partner organizations without additional personnel. For a
product that is not overly complex the upper part of the range would apply. This
person should be the partners‟ single-point of contact for any and all matters.
Although orders do not need to be processed by the channel manager, they should
pass through him/her. And likewise, although technical support questions do not
need to be answered by the channel manager it is best that they (at least initially)
pass through him/her. As the company‟s gatekeeper, the channel manager will be
able to minimize the impact of channel partners on the company, while at the same
time maximizing the value that the ISV brings to the partner. The channel manager
will have a vested interest in making sure that partners are being taken care of, so it
is less likely that a support question will stay in someone's in-box.
Based on this, the most important qualities to look for in a person for this position are:

 Strong communication skills (speaking, writing and listening)

 Collaborative in nature (team player)

 Strong organizational skills

 Good understanding of business basics (they are going to be dealing with

entrepreneurial business people)

 5 to 7 years of business experience if the person is going to be fairly

autonomous in their position

 2 to 5 years of business experience if reporting within a structured

environment

 Independent and assertive enough to champion partners‟ interests and needs

within the ISV organization as well as to represent and enforce the ISV‟s
position with partners

Positions that might be similar in nature to this might have titles such as: Marketing
Program Manager, Product Marketing Manager, Customer Support.

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 Company and Product Profile

The purpose of the company profile is to give the partner information about your
company in an organized format. The checklist in this questionnaire is designed to
compile much of the information that a prospect will be interested in knowing. Some
of the information will be confidential and you may want to have a prospect sign an
NDA before making it available.

Once the information has been compiled, it is often useful to put it into narrative form,
a descriptive overview of your company and technology that might be 4-6 pages
long. This gives your partner a “story” to tell when he is dealing with his prospects,
who often want to know more about the company that is behind the product.

It also gives the partner a document for internal use. Salespeople tend to come and
go in an organization, and by having a detailed profile on hand, it makes it easier to
bring a new salesperson up to speed on the ISV and his products.

1) The Product

(a) Product Background

(i) What does it do?
(ii) How does it do it?
(iii) What is the operating environment (operating system, platforms)?
(iv) What is the suggested retail price and typical configuration (examples)?
(v) What is the Return on Investment for an end user?
(vi) Why do people buy it? What are the business benefits? What is the
single most compelling reason for buying the product?
(vii) How large is the installed base (clients, sites and seats)?

(b) Product life cycle

(i) Why was the product first developed? (What was the “aching need” it
solves?)
(ii) When was the first release?
(iii) Summary of the release history
(iv) Current release and version number
(v) Development plans

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2) The Company

(a) When and why was the company started? (The aching need?)

(b) How many full-time equivalents are employed in the following areas, and of
these, how many are dedicated to this particular product:
(i) Marketing
(ii) Development
(iii) Tech support
(iv) Administration
(v) Other

(c) Ownership and management structure

(i) How much of the company is owned by management?
(ii) Are there any significant outside investors?
(iii) Please provide a profile of the key management people.
(iv) What is the contact information, i.e., direct line, e-mail address, for your
key management people?

3) Sales and Marketing

(a) What marketing materials are currently available? Are any of the following
available, and if so, their costs and quantity available:
(i) Demonstration or evaluation units
(ii) General Information Manual
(iii) Customer testimonials/case studies
(iv) Published product reviews and comparisons
(v) Industry studies, e.g., Gartner Group

(b) Sales cycle?

(i) Is the sales process a primarily “technical” sale or a “financial” sale?
(ii) Describe the primary marketing methods the company uses to generate
interest in its products.
(iii) How long does the sales cycle typically take from initial customer contact
to P.O. issue?
(iv) What are the typical steps in the sales process?
(v) Is an evaluation critical to the sales process? If so, how long does this
typically take? How much resource from the company is required to
ensure a smooth evaluation? Can the evaluation take place at the

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 customer site?
(vi) What people, by title, are typically involved in the decision-making
process?
(vii) Does the sale require extensive pre-sales tech support? If so, what is
involved?
(viii) Does the product typically generate service revenues as part of the
sale? If so, what is the ratio between service revenues and the sales
value of the product itself?

4) Pricing
a) What is the average transaction amount?
b) Are there financing options?
c) What are the volume discounts, if any?
d) What percentage of sales are typically made at full retail price?
e) What is the average discount given to the customer, and for what reasons?

5) Customer profile
a) Can you list the five industry segments that make up most of your sales, and
the percentage of your sales that comes from each. For example:
i) Banking and insurance – 23%
ii) Retail industry – 18%
iii) Wholesalers – 17%
iv) Health care – 14%
v) Automotive – 10%

b) Can you list the size of your five biggest customer groups, either by the
number of seats they have purchased, or by the company revenues, if
available? For instance:
i) 500-999 seats – 23%, or $5-10 million revenues
ii) 2,000-4,999 seats – 18%, or $20-50 million
iii) 1,000-1,999 seats – 17%, or $10-20 million
iv) 250-499 seats – 14%, or $2-5 million
v) 5,000-10,000 seats – 10%, or $50-100 million

c) Do you have a published customer list?

i) What customers have agreed to be contacted as references?
ii) Can these names be given out to potential customers?

6) Competitive analysis

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 a) Competitors‟ company information:
i) How many are there? Who are the primary competitors?
ii) How large are they?
iii) What is their relative market share?
iv) How many installs do they have?
b) Product information
i) What are the product name(s)?
ii) What are the differences, good and bad?
iii) What are the prices?
c) Why would someone buy the competition's product, and how do you
compensate for this?
d) Marketing Information
i) What distribution channels do they use?
ii) Do they have any major references that you are aware of?
iii) What international markets are they in?

7) Why are sales lost?

8) What are the ten most frequently asked questions about the product, and
the answers?
a) Question 1
b) Question 2
c) Question 3
d) Question 4
e) Question 5
f) Question 6
g) Question 7
h) Question 8
i) Question 9
j) Question 10

Page 48
 Competitive Matrix

Every product has competitors, sometimes with virtually the same functionality,
sometimes as part of a larger suite that has overlapping functionality.

It is important for the channel partner to know everything about your product and how
it compares with other offerings, good and bad. The competitive matrix should be as
complete as possible, and it has to be more than a checklist of features that you have
and others don‟t. Your partner needs to know which features to emphasize, and how
to position your products against features that your competitors might have. If your
partner finds himself in front of a prospect and gets blind-sided by questions or
comparisons that he is not prepared to respond to, he will lose faith in you and your
product.

If there are many known competitors, the matrix should be limited to those that have
the largest market share and/or have the highest profile. If the ISV or the partner can
identify the major competitors in the target market, every effort should be made to
benchmark those products.

Microsoft Resources

The partner site provides industry research, analyst reports and competitive
intelligence that can be used to position Microsoft-based solutions:

https://partner.microsoft.com/US/salesmarketing/competitiveintelligence

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 ROI Analysis

Once beyond the “early adopter” sales, where purchasing decisions are typified by a
CEO driving the purchase, the purchasing process in main-stream large companies
has changed over the past few years. Purchasing decisions are determined more
and more by financial, rather than technical factors. 30 years of IT procurement
“disasters” and a more widespread general understanding of technology in the
business process have forced a mandate on the CFO to question the returns from
technology investments.

Technical solutions now have to do more than just solve a problem; they have to
either reduce costs or increase sales, and for large purchases the benefits have to be
quantified. In the U.S. the benchmark is an ROI of 12-18 months, while in Europe we
would suggest it tends to be a bit longer, in the range of 18-24 months. The practical
implication is that the selling process is often two-phased: the first is selling a solution
to the department that has the problem, and the second when the potential client has
to sell the investment internally to the finance department.

In many cases the ROI has to be proven in a pilot installation over a relatively short
period of time before a client will purchase a larger license and roll out the product
throughout their organization.

By providing partners a tool or model with which to document the potential ROI, the
purchase process for large licenses can be accelerated. The potential client is given
the financial justification he needs to get budget approval internally.

The ROI analysis could be a relatively simple spreadsheet that includes the cost
factors that will be reduced or eliminated by using the product. The compelling case
is to prove pay-back in hard $ and reinforce confidence in the decision through a
valuable collection of important but unquantifiable benefits. And to the extent the
ROI analysis can be illustrated with real life examples or case studies, the impact will
be greater.

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Microsoft Resources

ISV partners with a competency can access an ROI calculator on the following site:
https://partner.microsoft.com/US/program/competencies/isvsolutions/40013153

Create ROI Analyses for these Templates include:

solutions: Microsoft Office programs
Customer Relationship Management Enterprise storage
E-commerce Security management
Enterprise Resource Planning
Financial Management
Human Resource Management
Retail Management Systems
Supply Chain Management

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 Documenting the Sales Process

Every company, through its own marketing efforts, will build a knowledge base of
what works, and what does not. Documenting its own sales and marketing
processes will improve the direct sales effort as well as provide partners with an
invaluable tool. Some of the areas this should include are:

 Document the steps in the actual sales process and provide support
information for each step
- Note any dialogue that might be associated with any particular steps
- Most common questions/answers for prospects calling in
- Scripts for any type of outbound telemarketing
- Most successful techniques in closing a sale

 The costs associated with each step. Although these will be the company's
own costs, it will give partners a benchmark to budget from.
- Typical cost of mailing lists
- Cost of mailing
- Cost of materials
- For any marketing materials ordered from the company:
- Establish minimum orders
- Establish quantity pricing (Don‟t forget freight – or indicate freight collect)
- Establish method of payment

 The time associated with each step

- Preparing a mailing
- Delivery of mailing
- Typical customer response times
- Time on telephone with prospects
- Time to close a prospect
- Success ratios of various steps (i.e., 100 mailings produce 20 calls which lead
to 10 sales)

 Steps to Include
- Time-line for campaign preparation and implementation
- List selection
- Successful industries in the domestic market
- Description of characteristics as to why those industries are successful (this is
important, because the nature of industries may be different from country to
country. The partners can use the successful demographics to identify the
most appropriate industries in their market.
- Company size (number of people/number of PCs, sales volumes)
- Type of company infrastructure (large/small IT support staffs)
- Technology base (complementary technologies already installed)

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 - Other
- Most successful professional titles (i.e. CEO, CIO, Graphics Manager, etc.)
- Copies of marketing materials used
- Hard copy
- Digital elements of marketing materials (i.e. pictures, logos, copy)
- Follow-up process
- Process for closing a sale
- Terms and conditions with customer (credit card, PO, etc.)

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 Pre-designed Web Pages

Partners and distributors are known for having lousy websites, and when an ISV‟s
product appears on a lousy website it is going to reflect poorly on the product no
matter how wonderful the product might be.

ISVs should develop 2-6 pages of templates using HTML that they can pass along to
the partners. The partners can translate the text, where necessary, and post them
on their company site. This allows the ISV to control the presentation of their product
worldwide, and it saves the channel the time and trouble of trying to come up with
something on their own.

Microsoft Marketing Resources

Microsoft‟s partner page contains a wide range of tools and resources to help their
partners build and implement effective marketing programs. The best place to start
is https://partner.microsoft.com/US/40019331, which contains links to:

 Sales and Marketing Resource Guide for Partners

 Marketing collateral
 Logo Builder
 Photo Library
 Structured marketing campaigns

Page 54
 Software Translation and Localization

A common misconception amongst software ISVs is that, in order to sell their product
in foreign language markets, all that needs to be done is to take the text strings in the
product and re-write them. Reality, however, is somewhat different. To avoid a costly
failure, consideration must be given to all of the work required to properly prepare a
product for operation in another language. This process is usually referred to as
“localization”.

Localization is more than just changing the language of the words in the product‟s
vocabulary - otherwise there would be a temptation to call it “translation”. True
localization takes into account a number of technical and cultural factors as well as
the target language itself. The resulting localized product looks and feels right to
native inhabitants of your target market country.

Localization is the sum total of all the changes of language, usage, program code,
and technology that need to be made to your product in order to offer a product of
equivalent industry standard in a foreign language market. Indeed, many localization
issues can also occur between two markets with a common spoken language. For
example, there are many differences of spelling and usage between the US and the
UK.

Localization is actually a very specialist subject and you will be faced with the task of
either building this specialty within your organization, or using external sources of
help.
Below we have picked just four facets of localization to illustrate the level of fine
detail that needs to be considered when producing a high quality product.

Translation

This is clearly the fundamental constituent of a localization project and there are four
main factors that need addressing during a translation. First is the translation of the
text of the many components of the product from its original language to the target
language.

Second is the character set. Look at the keyboard of your own PC. In many
markets, we use a “qwerty” keyboard specifically designed for entering English text.
A German keyboard is different. A French one is different again. They have been
optimized for slight differences in the frequency of characters used, as well as for the
use of accented characters.

Third are character codes. Behind the keyboard layout is the question of how the
computer recognizes the characters that are being entered. There is no (not in

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common use anyway) single set of computer codes that can handle all known
languages. Luckily in Western Europe there is such a common code set, but the
keyboards differ even so.

Fourth is the length of the text strings. Text length provides a real challenge to the
user interface designer. Screen layouts shrink and grow dependent on language.
For example, German needs nearly 50% more space than English to convey the
same meaning. A title or message that only just fitted in the available space in
English could precipitate a screen re-design in German, if you believe, as we do, that
interface design is very important, then simply stretching or squashing to
accommodate foreign words is going to look (and be) second rate.

Related to text length is word length. Particularly notorious in this respect are the
Germanic languages with their frequent use of compound words. Simple algorithms
for finding words in blocks of text, that we take for granted in English, do not work in
German. Screen layouts that rely on lists of (“normal” length) words are frustrated by
Germanic spelling.

Counting and Time Keeping

There is a wide variation, even over a limited geographic region such as Western
Europe, in the way that numeric information is displayed. There is a similar diversity
in culture that seeps through into computer software “look and feel”.

Arithmetic is handled in the same way in all Western languages. What differs is the
way the numbers are represented. The commonest example is the US practice of
writing mm/dd/yy for a numeric date contrasted with the UK usage of dd/mm/yy,
which can result in ambiguity with dates such as 5/6/2006. Equally, the French
practice of transposing decimal points and commas in numbers (e.g. “1.000,1” for
1,000.1) needs to be catered for.

Currency notation is also quite different from region to region. This can range from
prefixed special characters (e.g. £1 or ¥200) to prefixed alphabetic strings (e.g. FF1,0
and DM 3.0) to suffixed alphabetic strings.

Holidays also have significant regional variations (e.g. don‟t assume December 25th
is Christmas Day). If your application has a diary facility then these factors need to
be taken into account.

The best quality products show the consumer that the product has been designed
with this in mind.

Application Specific Variations

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This is a “catch all” category for sweeping up those things in your own product that
may not function correctly in another region or culture. Any part of a product which is
driven by, or assists in meeting, laws or regulations in the home market will very
likely require modification to fit different rules in the target market (e.g., finance).

Any application where alphabetic ordering was important may produce different
results in different languages - and would be virtually impossible to operate in some
Asian languages.

An application that operates across national boundaries can also cause problems.
Simple electronic mail is an example of this in that many systems do not cater for
different character sets and languages, never mind different document formats.

The Whole Product

There are constituent elements of the product that, whilst not strictly software, may
need to be localized. A simple example is the Software License, normally displayed
on the user‟s screen at the time the product is started up. You need specialist legal
help to get this translated, since the minutiae of the rules vary from country to
country. Copyright notices are similar in this respect.

We would include in this section any tools you use to manufacture and support the
product. If a regional support office is to be set up, then will the help desk tool you
currently use also work in the local language?

Other examples are the product packaging, marketing collateral, training materials
and any internal technical support documentation. Also of course, are the language
variants of your website.

Performing a Localization

The first step, assuming this product has never been translated before, is to survey
the product for the kind of localization issues we described earlier. It is essential that
this survey is accurately done. Only then can cost and the project time scales be
calculated. Indeed it may reveal hitherto unknown issues that completely change the
commercial viability of the venture. This is a skilled task and it is best performed with
the help of someone who has had previous experience of localization.

Once the survey is complete then the project can be planned. From here onwards
there are several methods of translation:

1. Do the complete project in house using your own permanent staff

2. Outsource the complete task to a translation specialist
3. Use your local re-seller to do the translation

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 4. Manage the project yourself and hire specialist sub-contractors

The first of these is inappropriate for a small company because the cost of full time
employment of the specialist (linguist) staff would be prohibitive.

The second method can also be very expensive unless the project is a very simple
and straightforward translation. If a high level of change is required to the product‟s
code, then outsourcing this change would be both expensive and high risk.

When a product has already been localized once or twice, it may be possible to ship
a translation “toolkit” with the product which would enable distributors and resellers to
do a translation. This may not only save translation costs, but it can also form a
component part of the overall commercial arrangement you have with those
particular resellers.

For most software ISVs embarking for the first time on product localization we would
recommend the fourth method - namely that you keep the project under your direct
control, and use specialist sub-contract effort to supplement your skill set. For most
Western European languages there is a pool of expertise that can be hired on sub-
contract terms for a specific project. The actual boundary between what your
company does and what the sub-contractors do is highly dependent on the degree of
code change to your product that is necessary and the level of resources that you are
able to deploy onto the project.

The typical project commences with a translation of the vocabulary of the product,
usually called the “glossary”. This is a list of all the specialist words that are visible in
the software and documentation. For Microsoft Windows based products much of
this material has already been made available by Microsoft and can be accessed
freely. Translation of the glossary is the key quality step in the project. It is
absolutely essential that contemporary translations having exactly the correct shade
of meaning in the target language are found for the English terms in your product.
This can only be achieved by someone who is not only a native target language
speaker but is also computer literate and familiar with the translation of technical
software. This step is so important that the glossary translation should be
independently checked.

The software changes needed for the localization should now be done, and the
product tested for correct operation. Now the software translation proper can begin.
For most average sized products one or two translators should finish the job in a few
weeks. On completion of the software translation the product should again be tested
for function, since text changes often reveal bugs that have been dormant in the
product. Following that the language elements of the translation should be
independently checked.

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Once the software translation is complete and checked, the help text and then the
documentation can be translated. It is best to keep to this sequence because, until
the translated operation of the product has been established, then not only is it
difficult to translate the operational parts of the documentation but the diagrams and
screen shots in the documentation cannot be included.

We would recommend that translated software is always beta tested. By its very
nature, it is impossible for your (source territory) staff to have a view of a translation‟s
target language quality. You are always reliant on the judgment of third parties.
Therefore this extra step of checking, by a customer, gives you the confidence that
the product is ready for market. It is not always necessary to wait until the
documentation is available to start this test. It will depend very much on which
customers, or potential customers, are available for beta testing at the time, and what
their documentation needs are.

In conclusion we reiterate the critical success factors in any translation project:

 We cannot over emphasize the value of good preparation. The survey
stage is essential to scope and plan the rest of the project. Time
spent on this activity at the start of a project can save considerable
cost in wasted translator effort and expensive re-work later on.
 Translation itself is a skilled task. Speaking the target language is not
enough. The translator must have high levels of computer literacy and
be familiar not only with the application being translated, but also with
the vocabulary being used.
 Localization will inevitably bring to the surface bugs that have been
dormant in the product. Be prepared to test the product well, and to
budget for sufficient technical support and bug fixing activity.
 Always check translations at least once using an independent
translator. Ideally, get a customer or a local office involved for a final
approval of the linguistic style and content.

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 Integration Issues & Complementary Technologies

Many products are installed in a complex environment where they have to interact
with other technologies. An ISV should document known problems, complications or
performance issues that can have in impact on the functioning of the product in
different environments, or with other applications.

Along the same lines, there may be configurations that make it easier to sell and
install the product. For example, if the product integrates with applications from
certain software companies with a large installed base, the extent and nature of the
integration should be documented. More important, the benefits of using the product
in those environments should be detailed, so that the channel partner can identify
clients or prospects with similar configurations.

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 Providing Technical Support to Channel Partners

The greatest impact on future support requirements is in engineering within the product
itself. The increased cost of supporting an international channel and the objective of
maintaining committed partners should put “low maintenance” even higher up the
development priority list. Beyond this, proper initial partner training and good technical
support documentation are a critical base to ensure that the support burden of adding a new
partner channel will not will not overtax an ISV‟s technical support infrastructure. However, it
should be kept in mind that regardless of the technology, partners will go through a learning
curve. Therefore, if it is expected that a reasonable number of partners will be joining the
network at approximately the same time, there could be an initial bump in demand for
technical support resources, which will need to be planned for and managed.

Management of this extra load needs to be addressed prior to rolling out a partner
recruitment program to help ensure that a partner's first experiences in accessing the ISV‟s
support organization are positive. This will help reinforce their decision to partner with you,
whereas initial negative experiences will give the partner reason to doubt their decision.

Of course, one of the key decisions for a company is whether to support the channel from
home or whether to open a support office elsewhere. Some considerations regarding this
decision include:

 The number of partners and software partners that you decide to add in year one. If this
number suggests that you will need to hire one or more additional technical support staff
in some location, serious consideration should be given to hiring these staff in the key
regions. Although office costs must obviously be considered, the additional local
resource will be of considerable value in promoting the channel program
 Whether you are prepared to operate the HQ technical team during regional business
hours. As discussed below, some overlap will probably be required in order to provide
support for key markets.
 U.S. and UK partners are rather “spoiled” about the accessibility of support from most of
their ISVs. Usually, it is available via a quick telephone call or email. If an ISV can
manage a quick turnaround response on all support emails from his home location, it
may be quite feasible to provide support from the HQ for at least an initial period of 6-12
months or more.

Another support option to mention is that you could consider outsourcing technical support to
one of the many outsourcing companies. This has become an increasingly popular way for
software companies to reduce their fixed costs. However, there are certainly drawbacks:
 Loss of control over quality of service

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 May not capture info that would assist you in improving product functionality and features
for the international markets
 Tendency toward high turnover in outsourcing companies, so continual training is
needed
 Still requires back-up support in company's HQ support team and development team

Technical Support Staffing

If the company is providing support from its HQ, there should be at least one tech support
person (and a back-up to cover for holidays and illnesses) designated to provide support to
international partners. This does not mean that the person is solely dedicated to
international partners. It just means that when there is a call or an e-mail, the designated
person is responsible for it. It also means that the international partners should be top
priority for that person.
Almost without fail, when there is not a person officially designated to provide international
partner support, all inbound support requests from international become a low priority and
the partner level of satisfaction drops significantly. This is true because, in general, support
requests from international partners are more time-consuming to deal with. The questions
tend to be more difficult and are often worded more vaguely; the time delay makes it more
difficult to get any additional information the support team requires to answer the question,
and because the communication is often by e-mail rather than phone, it seems less urgent.
Therefore, the requests tend to get shifted to the bottom of the pile, when in reality time
delays mean that they should always get first priority. This is undoubtedly a key obstacle to
recognize and overcome before the first partner is on-board.
The designated international support person and the international manager should be
working as a team, so that the manager can be kept “in the loop” via “cc: e-mail” or other
means in order to monitor a partner's overall progress.

Technical Support Hours

If an ISV decides to provide all partner support initially from its HQ, it will be necessary to
maintain technical support hours that coincide with the normal business hours in the key
markets, or at least provide overlap of several hours per day. Even if the company opens a
local support office, it would be wise to provide some overlap of hours for an initial period,
until the local staff is sufficiently well trained to respond to all levels of questions. This does
not mean that an ISV has to have people sitting in the office waiting for calls; initially it can
be handled by making sure that at least one technical support person is available by cell
phone.

Technical Support Communications

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Due to time differences most technical support questions will come in the form of e-mail.
Generally, partners will tend to send e-mail before the close of their business day with the
expectation that they will receive an answer the next day. It will be important for an ISV to
maintain this level of responsiveness as a minimum. The key issue for partners will be that
answers are provided quickly, and if there is going to be a delay, that they be notified and
advised when a solution should be expected.

Technical Support Documentation

ISVs should be able to identify some of the most frequently asked technical support
questions. It will be important to provide partners with this information in a format that can
be quickly searched. Depending on the amount of data, this can be done on paper, on disk
and/or provided access to the knowledge from a secure area of the website.

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 IP Protection

If an ISV is planning to do business in the United States, they should seriously consider
having an attorney complete a patent search before any significant investments are made.
In 2006 the U.S. Patent and Trademark Office (USPTO) approved roughly 40,000 software
patents, and many of these were business process patents. “Patent trolling” (where
companies hold patents without actually making anything, and look for opportunities to sue
anyone that might infringe one of their patents) has become big business in the U.S. A
patent search is a relatively inexpensive way to determine if a product could potentially be
infringing on an existing patent. While we strongly recommend using a law firm for the
formal search, a company can complete an initial search on its own by using
www.google.com/patents.

A first level of protection, without going through the expense of perfecting a patent, is to get
an FTO (“Freedom to Operate”) from a law firm that specializes in intellectual property rights.
This is effectively a guarantee that your technology does not infringe on any existing patents,
and if you are sued, and lose, the law firm is responsible for the costs. It is an excellent
“insurance” policy, and when done in conjunction with a patent search the total cost will be in
the range of $20-25,000.

It is also important to register company trademarks. It is surprising how many companies

will start selling their product, recruit partners or hire employees without first determining
whether the name can even be used. On-line searches and applications can be processed
on:

For the U.S.: http://www.uspto.gov

For Europe: http://oami.europa.eu/en/mark/marque/efentry.htm

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 Partner Application Form

Instructions:
This form is the first step towards becoming a Channel Partner. The information you provide
will help us evaluate whether the products and your capabilities are a good match. We may
contact you to request additional information about your company, marketing strategies and
financial position. If there is anything else you would like us to know as we review your
application, please include additional sheets or materials. Once this form has been
completed, please e-mail it to _____________.

Company Name:
Address
Telephone
Fax
E-mail Address
Website URL

Primary Sales Contact:

Primary Sales Contact Phone:

Primary Sales Contact E-mail:

Primary Technical Contact:

Primary Technical Contact Phone:
Primary Technical Contact E-mail:

Year and Place of Incorporation:

Parent Company:
Public Company (Yes or No)?
Current Fiscal Year Revenue:

Last Fiscal Year Revenue:

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Last Fiscal Year Revenue Sources: % of sales
Hardware sales:
Maintenance/Support sales:

Consulting services:
Training sales:
System Software sales:
Solution Software sales:

Custom programming
services:
Other:

Price range of sales

Employees:
Total:
Sales:
Marketing:
Support:
Training:
Consulting/Services:

Description of your company‟s main activities / strengths / expertise:

Description of your customer base and activities relevant to this product:

How would you market this sort of product?

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Please indicate the type of value your company provides to your customer base (Yes/No):
Custom Hardware Vertical Industry Software
Hardware Maintenance Software Support
Network Design & Consulting Custom Software
Systems Integration Training
Systems Design Systems Evaluation
Needs Analysis Consulting
Project Management Facilities Management

Total number of customers

What % of your sales in the past 12 months went to:

Small business (1-99 employees)
Medium Business (100-499 employees)
Large Business (500+ employees)
Government:

What vertical or horizontal markets does your company concentrate its selling
efforts on:
Market Segment % of Revenue
Agricultural
Automotive
Banking and Finance
Construction & Engineering
Education
Energy and Utilities
Government
Health Care
Hospitality, Travel & Tourism
Insurance
Manufacturing
Pharmaceutical
Retail
Technology
Telecommunications

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 Transportation and Logistics
Others

Please list all the major software products you currently sell:
Product and ISV Name Exclusive? (Yes or
No)

Please provide contact details for two (2) current ISVs that we may contact

Company Name
Contact Person
Telephone Number
E-mail Address

Company Name
Contact Person
Telephone Number
E-mail Address

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 Non-Disclosure Agreement

THIS NONDISCLOSURE AGREEMENT (this "Agreement") is made and entered into

as of between ABC Software, Inc. ("Company") and _______________________________
("Recipient").

1. Purpose. Company and Recipient wish to explore a business opportunity of

mutual interest and in connection with this opportunity, Company may disclose to Recipient
certain confidential technical and business information which Company desires Recipient to
treat as confidential.
2. "Confidential Information" means any information disclosed to Recipient by
Company, either directly or indirectly in writing, orally or by inspection of tangible objects,
including without limitation documents, prototypes, samples and the Company's plant and
equipment. Confidential Information may also include information disclosed to Company by
third parties. Confidential Information shall not, however, include any information which
Recipient can establish (i) was publicly known and made generally available in the public
domain prior to the time of disclosure to Recipient by Company; (ii) becomes publicly known
and made generally available after disclosure to Recipient by Company through no action or
inaction of Recipient; or (iii) is in the possession of Recipient, without confidentiality
restrictions, at the time of disclosure by Company as shown by Recipient's files and records
immediately prior to the time of disclosure.
3. Non-use and Non-disclosure. Recipient agrees not to use any Confidential
Information for any purpose except to evaluate and engage in discussions concerning a
potential business relationship between Recipient and Company. Recipient agrees not to
disclose any Confidential Information to third parties or to employees of Recipient, except to
those employees who are required to have the information in order to evaluate or engage in
discussions concerning the contemplated business relationship. Recipient shall not reverse
engineer, disassemble or decompile any prototypes, software or other tangible objects which
embody Company's Confidential Information and which are provided to Recipient hereunder.
4. Maintenance of Confidentiality. Recipient agrees that it shall take all
reasonable measures to protect the secrecy of and avoid disclosure and unauthorized use of
the Confidential Information. Without limiting the foregoing, Recipient shall take at least
those measures that Recipient takes to protect its own most highly confidential information
and shall have its employees who have access to Confidential Information sign a non-use
and non-disclosure agreement in content substantially similar to the provisions hereof, prior
to any disclosure of Confidential Information to such employees. Recipient shall not make
any copies of Confidential Information unless the same are previously approved in writing by
the Company. Recipient shall reproduce Company's proprietary rights notices on any such
approved copies, in the same manner in which such notices were set forth in or on the
original. Recipient shall immediately notify Company in the event of any unauthorized use or
disclosure of the Confidential Information.
5. No Obligation. Nothing herein shall obligate Company or Recipient to
proceed with any transaction between them, and each party reserves the right, in its sole

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discretion, to terminate the discussions contemplated by this Agreement concerning the
business opportunity.
6. No Warranty. ALL CONFIDENTIAL INFORMATION IS PROVIDED "AS IS."
COMPANY MAKES NO WARRANTIES, EXPRESS, IMPLIED OR OTHERWISE,
REGARDING ITS ACCURACY, COMPLETENESS OR PERFORMANCE.
7. Return of Materials. All documents and other tangible objects containing or
representing Confidential Information and all copies thereof which are in the possession of
Recipient shall be and remain the property of Company and shall be promptly returned to
Company upon Company's request.
8. No License. Nothing in this Agreement is intended to grant any rights to
Recipient under any patent, mask work right or copyright of Company, nor shall this
Agreement grant Recipient any rights in or to Confidential Information except as expressly
set forth herein.
9. Term. This Agreement shall survive until such time as all Confidential
Information disclosed hereunder becomes publicly known and made generally available
through no action or inaction of Recipient.
10. Remedies. Recipient agrees that any violation or threatened violation of this
Agreement will cause irreparable injury to the Company, entitling Company to obtain
injunctive relief in addition to all legal remedies.
11. Recipient Information. Company does not wish to receive any confidential
information from Recipient, and Company assumes no obligation, either express or implied,
with respect to any information disclosed by Recipient.
12. Miscellaneous. This Agreement shall bind and inure to the benefit of the
parties hereto and their successors and assigns. This Agreement shall be governed by the
laws of ___________________. This document contains the entire agreement between the
parties with respect to the subject matter hereof. Any failure to enforce any provision of this
Agreement shall not constitute a waiver thereof or of any other provision hereof.
This Agreement may not be amended, nor any obligation waived, except by a writing signed
by both parties hereto.

ABC Software, Inc. Recipient

_______________________________ _______________________________
By: By:
Title: Title:
Date: Date:

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 Letter of Intent: XYZ Company - ABC

1. Relationship. ABC Technology, Inc., a company incorporated under the laws of _____ ("ABC"),
proposes to grant a partner agreement to XYZ Company, a company organized under the laws of
______ ("XYZ"), to market and support ABC products in a defined territory.

2. Territory. Subject to meeting certain conditions as outlined in this Heads of Agreement, ABC will
grant XYZ the non-exclusive right to market ABC products (the "Products") in ______________ (the
"Territory").

3. Term. The initial term of the agreement will be one (1) years. The agreement will include renewal
options on terms and conditions to be agreed upon.

4. Marketing Plan. XYZ agrees to provide, as an addendum to the definitive agreement, a marketing
plan which will provide an outline of the specific steps XYZ intends to pursue in order to market and
support the Products. XYZ also agrees that it will assign an experienced sales and marketing
executive as the product manager, with overall responsibility for designing, implementing and
maintaining the marketing and support programs.

5. Sales Minimums. XYZ will sell a minimum of ____ (__) licenses during the ___ (_) month period
after completion of the training program, and a minimum of ____ (__) licenses during every six (6)
month period thereafter.

6. Training. ABC will initially train XYZ personnel for one week at its facilities in ________. XYZ will
send one marketing and one technical person to the training scheduled for the week commencing
______, 2007. XYZ will be responsible for the salaries, travel, accommodation and subsistence costs
of its personnel when attending the training.

7. Sales and Marketing Support. ABC will provide XYZ with samples, in the English language, of
materials, documentation, promotional material, sample letters, presentation diskettes, and such other
material as may be available in the English language, to enable XYZ to market the Products in the
Territory.

8. Product Pricing. The price to be paid by XYZ for licenses purchased from ABC shall be __% of
the list price (attached).

9. Technical Support. XYZ will be responsible for providing first and second level support to its
clients. ABC will be responsible for providing source code support and bug fixes.

10. Time is of the Essence. It is the intent of ABC and XYZ to enter into a definitive agreement on
or before ______, 2006, at which time this Heads of Agreement will expire, unless renewed by mutual
consent.

ABC Technology, Inc., XYZ Company,

a ________ corporation a _____________ corporation

Name:________________________ Name:________________________

Signature: _____________________ Signature: _____________________

Title: _________________________ Title: _________________________

Date: __________________________ Date: _________________________

Page 71
 Formal Contract

Term

The term may depend on the complexity of the technology, the size of the market
and the sales cycle. The standard term is one year, renewable for additional one
year terms as long as the terms of the contract are being met.

Renewal can occur in two different ways. The first is an automatic renewal unless
terminated in writing by one or both parties within a defined time frame, usually 30 or
60 days prior to the anniversary date of the agreement. This works well when there
is no reason to trigger a review of the agreement prior to renewal.

The second is renewal only if the renewal is agreed in writing by both parties 30 or 60
days prior to the expiration date. This is useful when there is some concern about
the relationship prior to getting started, or if there is a good reason to force a review
before renewing.

In some cases, especially with complex solutions that have a long sales cycle, some
channel partners insist on three or five year terms. In principle there is nothing wrong
with this, as long as there are established targets that have to be achieved in order to
maintain the agreement.

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Exclusivity

Whether or not to grant exclusivity is one of the most difficult decisions in establishing
the relationship. Most partners ask for exclusivity as a standard procedure, even if it
isn‟t important to them.

While it is rarely a good idea to provide formal exclusivity, there can be good reasons
for granting “control” for a defined geography and/or a vertical market:

 It simplifies the management process if there is only one primary business

partner in a given territory
 The partner has a real incentive to invest in marketing if he knows that he will not
be undercut in price by another partner in the same territory, someone who hasn‟t
made an investment in the product
 The installed base of users might be too small to support multiple partners. This
is often the case with mainframe products, or in smaller territories
 The product is expensive, and sold mainly to government agencies or large
companies that are required by law to put a purchase out to bid if there are
multiple suppliers. The bid process can add 3-6 months to the sales cycle

Things to consider:

 Exclusivity must be performance-based, with semi-annual or annual targets that

have to be met in order to maintain it, even if the term is for several years
 The primary business partner should have a program to develop an indirect
channel for the product, especially if there is an extensive user base
 Does the partner have exclusivity with other ISVs; check out the references and
find out if the partner is an above average producer
 Legal implications – in some countries terminating an exclusive distributor could
result in the ISV being liable for an indemnity payment to compensate the
distributor for lost revenues – it is better to refer to them as the “sole” partner as
opposed to “exclusive”.

For products that have a large market, here are some general guidelines for different
countries and regions that are often, and wrongly, treated as a single market:

Territory Subdivision - comments

UK and Ireland Separate partners for the Republic of Ireland, Scotland and England. The
English distributor should be located in the Southeast, which accounts for
60% of the business activity.
The Benelux Separate partners in Belgium and the Netherlands. Both countries are so
small, that it is difficult to subdivide further based on geography
France Partner based in the Paris area (60% of the business activity in France),
and perhaps one in the southwest (e.g., Bordeaux or Toulouse) and one

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 in the Southeast (e.g., Lyon). A French partner will usually market into
the French speaking parts of Belgium and Switzerland as well.
Iberian Peninsula Spain and Portugal should have separate partners. Companies will often
have a partner in Spain covering both countries (the “Iberian Peninsula”),
but old cultural animosities make it difficult for a Spanish company to sell
successfully in Portugal, unless they have a local subsidiary.
German-speaking German partners will often cover Switzerland and Austria as part of their
market territory, but it can be more productive to have separate partners for
Switzerland and Austria. Germany itself is a large country, and can be
subdivided into three (South, North, and the old East Germany) or more
regions quite easily.
Nordic market Norway, Sweden and Denmark share some language similarities, but
they are all quite large geographically, and for most products it would be
better to use different partners in those markets plus Finland. Partners or
distributors with local subsidiaries in each market would be an exception.
Middle East Israel can never be combined with other countries in the region for
obvious political and cultural reasons. The other markets are small
enough in terms of IT purchases that they can be covered by a single
good partner that is based in any of a number of countries. The United
Arab Emirates, Kuwait and Oman are more Westernized than Saudi
Arabia.
Indian sub-continent India, Pakistan, Bangladesh and Sri Lanka are often treated as a single
market, but they should have separate channels. India is large
geographically, and can support three or four partners (Mumbai, New
Delhi and Bangalore, for example). Piracy is a big problem in this region,
so software protection is a big advantage.
Australasia Australia and New Zealand can be split out. Within Australia, 90% of
business is done in the corridor between Sydney and Melbourne, which
are only an hour apart by plane.
Southeast Asia The ASEAN countries (Thailand, Malaysia, Singapore, Vietnam,
Indonesia, the Philippines and Brunei) are usually grouped together, but
Thailand, Malaysia, Singapore, Indonesia and the Philippines could
support separate partners for certain products. Outside Singapore
software piracy is rampant.
China, Hong Kong and Taiwan should be a separate territory, while it no longer makes sense to
Taiwan work through a company in Hong Kong to cover China. Software piracy
is rampant in China, but also a problem in Hong Kong and Taiwan

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Develop the Marketing Plan
Many partners come from a technical background, and do not understand the basics
of marketing. It is often a good idea to have a simple marketing outline that can be
used to assist a partner in defining the steps he needs to take to properly launch the
product, ideally something that is based on what works in the domestic market.
This has to be done prior to signing the partner agreement, or it is unlikely to get
done, and the product will not reach its potential with that particular partner.
Agreeing on a basic marketing plan also gives a company a tool for managing and
monitoring the partner during the first critical months of the relationship.
We have learned from experience that most partners are not motivated self-starters,
and if they do not produce results with a new product within 3-4 months, they will
forget about it. The initial results don‟t have to be actual sales. As long as the
partner is getting a response from prospects, and sees that people are interested in
the product, he will continue to invest in it. The problem is that some action is
required on their part to bring in those results, and by requiring a marketing plan that
can be monitored, you help them achieve the initial results they need.
There are a few standard marketing tools that the partner should be willing to use:

 Mailings and telemarketing

 Product seminars
 Webinars
 Trade shows
 Press releases/editorial coverage
 Advertising

The marketing plan is not intended to be an extensive document. All we need in the
marketing plan is a commitment to do at least one of the above every month during
the first six months. Mailings and telemarketing are the preferred tools because they
are relatively inexpensive and effective. But the important thing is to get a
commitment that they will do something each and every month during the first six
months, and then follow up to make sure they are doing what they promised.
The ideal marketing plan would show the actions to be taken during each of the first
six months, the people and resources that would be assigned to the product, and
budget numbers for the cost of marketing and resources to be used. Again, it would
be good to base some of the plan on what works in the domestic market, and then
provide sample materials that can be used directly or translated and modified for
each market.

Page 75
Sample Marketing Plan

Marketing Plan
for
ABC Software
Prepared by
Channel Partner

The Marketing Campaign

Since there is little or no name recognition of ABC SOFTWARE in California an

extensive marketing campaign is required. This will involve the following activities
over this first year:

Month Action Approx.

Cost
June *Product familiarization (2 people for 1 week) $2000+
*Identify the exact market for the product and acquire/develop $1500+
mailing lists accordingly e.g., pharmaceutical, banking, food.
*Prepare and send out mailer to prospects $600+
July *Follow up mailer to prospects (calls +additional information sent) $1200+
*Customer visits/presentations/demonstrations (assume 10 in the $2000+
month) $800+
*Prepare and send out mailers to the identified market sector,
first 200 of non-customer list (stage1). (late in month)
Aug *Follow up leads generated by stage 1 mailers (i.e., reply $1500+
coupons) and other major prospects who did not respond.
*Customer visits/presentations/demonstrations (assume 15 in the $3000+
month) $2000+
*Attend training course in Boston
Sep *Send out mailers to the identified market sector, second 200 of $800+
non-customer list (stage 2). $4000+
*Customer visits/presentations/demonstrations (assume 20 in the $2000+
month)
*Follow up leads generated by stage 2. mailers (i.e., reply $1000+
coupons) and other major prospects who did not respond also $500+
follow up any stage 1 leads.
*Ship out and manage 3 product trials
*Prepare and place an advertisement in a suitable publication
Oct *Send out mailers to the identified market sector, third 200 of $800+
non-customer list (stage 3) $5000+
*Customer visits/presentations/demonstrations (assume 25 in the $1500+
month) $2800+
*Ship out and manage 5 product trials
*Follow up leads generated by stage 3 mailer (i.e., reply $1,500+
coupons) and other major prospects who did not respond also
follow up any stage 1 and 2 leads.
* Approach 10 major Partner/SI‟s re partner arrangements and
meet with at least 2.
Nov *Customer visits/presentations/demonstrations (assume 25 in the $5000+
month) $2000+

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 *Ship out and manage 8 product trials $800+
*Send out mailers to the identified market sector, fourth 200 of $1000+
non-customer list (stage 4) $1000+
* Approach 10 major Partners/SI‟s re partner arrangements and
meet with at least 2.
* Follow up all outstanding leads
Dec *Follow up leads generated by stage 4 mailer (i.e., reply $2000+
coupons) and other major prospects who did not respond, also
follow up any stage 1,2 and 3 leads. $5000+
*Customer visits/presentations/demonstrations (assume 25 in the $2400+
month) $3000+
*Ship out and manage 10 product trials
*Sign up 2 partners to sell/promote ABC

Resource Allocation

The table on the previous page shows the cost in time and materials to implement
the marketing plan. The on-costs of staff are not shown (e.g. electricity, rent,
telephone etc). To meet the plan above we have allocated the following resources
over the 7-month period:

 Management tasks 20-30% allocation

 Sales 80-100% allocation
 Support 50-70% allocation
 Admin 20-40% allocation

Obviously these would be ramped up if sales exceeded expectations.

Sales Targets

Month Estimated Total Product Revenue

June $0
July $0
August $0
September $20,000
October $30,000
November $50,000
December $70,000

We think it is realistic to expect no sales for the first 3 months due to:

* The natural sales cycle

* Time to become familiar with the product and market

The payoff from the investment should become evident after February 2006 although
we may be lucky and find a large client who wants to move ahead quickly. In 2006
we will be in full flight.

The quotas for next year should be set in early December since we will have some
history to base the figures upon.

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Setting Realistic Revenue Targets

The purpose of having sales targets for a product is to make sure the partners are
making a minimum effort to sell the product. In some cases the product will not be a
strategic product, but an extension of an existing product line, so it is essential that
the progress be monitored on a regular basis. The combination of a simple, monthly
marketing plan and reasonable targets should accomplish this objective.

Factors that should be considered in setting objectives include:

Positive factors:

 The ISV has an established reference base that will make it easier to introduce
the product internationally.
 The ISV has proven marketing programs that might be transferable to other
markets.
 With the right support structure, the product can be introduced to multiple
markets

Negative factors:

 The product may be unknown outside its own market, so a company should
consider how long it took to establish its identity when they first started the
business.
 Partners will not be as dedicated to making a product a success as the ISV is,
and will invest limited resources until they can see that the product is going to
succeed
 The sales cycles tend to vary from market to market
 English-language products may have to be translated in order to get strong
penetration in certain markets
 Most markets will have home grown and imported competitors that are already
established

Dollars or Units?

Sales objectives can be established using absolute dollars, units (number of

licenses), or both. Setting objectives in dollars makes it easy to gauge the results in
the short term, but the risk is that the numbers are achieved through sales to one or
two companies.

Further, if an ISV will be recruiting a broad base of partners, it will not depend on one
partner for its success. This means that there should be a “bell curve” of results, with

Page 78
some partners selling lots of smaller licenses, and some closing large enterprise
sales. This will be part of the channel mix that is established for each market.

Recommendations:

 Keep it simple. If there will be a number of partners, the ISV won‟t want to
build an administrative headache when it comes to reviewing the results
 Enforce a minimum number of license sales per quarter, with no sales the first
quarter, and then an increasing number for the following three quarters,
leveling off in year two
 Incorporate an annual dollar minimum for automatic renewal
 If a partner is given some form of exclusivity, either for a geographic region or
a vertical market, minimums should be measured in dollars and units

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Default Provisions

Typical provisions that allow the ISV to terminate prior to expiration:

 Non-payment, but make sure there is a specified time limit after notice has
been received
 Partner filing for bankruptcy, but depending on the type of filing, this doesn‟t
necessarily prevent them from selling (but it might prevent them from paying if
they are under the control of the bankruptcy court)
 Not meeting sales targets
 Disclosing confidential information
 Improper use of the product, such as making unauthorized copies
 Change in control or sale/merger of the company. Even if the agreement has
been entered into with a corporate entity, it will be based on the relationship
with the owners/key executives; if that changes, you want to have the option
to terminate the agreement

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Governing Law

This is an issue that often generates a lot of discussion, and is often the last point
that is negotiated.

The ISV‟s home country should always be the governing law, because:

1. It‟s his product, and needs the protection of his own court system
2. The partner agreement will have been drafted according to the laws of the ISV‟s
country, and it is less expensive to have it reviewed by attorneys in other
countries than having new agreements drafted in each jurisdiction
3. As an ISV you will have agreements with companies in many different countries,
and it is not reasonable or practical to have to defend the contract in many
different jurisdictions

If the partner organization is a large one, and a very desirable partner that can
generate a lot of revenues, an ISV should not let the governing law stand in the way
of a profitable relationship. An alternative is to use the governing law of a third
country, e.g., the UK, and to include a provision for arbitration for dispute resolution.

Microsoft Resources

Through the International ISV Assistance portal (navigation path after signing in on
the partner portal is Program Membership/Competencies/ISV Software Solutions)
you can find law firms in all of the major markets to provide local advice, whether you
are setting up an office and hiring your own employees, or going through indirect
partners. From the International ISV Assistance portal, link to “Select the right
markets”, select the country that is of interest to you, and then click on “Establishing
a Business” which will provide the contact information for the local law firm.

Page 81
 Sales Training

Some of the features of a sales training include:

1. A basic overview of how the product is used, including target market and
competition.

2. Strategies for selling larger installations, such as multi-user systems vs.

single-user systems. This should include a discussion on the sales cycle.
For instance, does the sale typically start with a few seats, or is it more of an
enterprise sale?

3. Strategies for selling against specific competitors. No technology is unique,

and even if it has unique features it will often be classified as being in a larger
“space” that includes competitive products. A detailed competitive matrix will
be important to have.

4. Strategies for overcoming functionality objections and suggesting "work-

arounds" if the product "technically" doesn't offer the feature a customer
wants.

5. Strategies for bundling add-on modules into each sale.

6. Detailed description of the sales process the company itself has experienced
(see “Documenting the Sales Process”).

7. Client visits. It can be useful for a partner to see how clients are using the
product in a real-life environment. Users will often find, or focus on, features
and benefits the ISV did not think were important.

If at all possible the sales training should be at the ISV‟s facilities. This will give the
partners direct access to a wider range of resources within the company, and also
make client visits more practical.

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 Technical Training

1. A complete overview of the software, including any and all modules. This
would be the equivalent of a technical presentation to a prospective client.

2. An in-depth discussion of the key technical elements of the product,

including a drill-down on what makes the product technically superior to
competitors.

3. Product development plans – where is the product going? This should be

a general discussion, because partners have a bad habit of delaying
selling an existing version if they know or think that a new version will be
released in the near future.

4. Actual demonstration of a hands-on configuration of the product in a mock

company, including complete setup of all modules and add-ons. If this
can be combined with a customer visit, so much the better.

5. Answers to basic support issues and common problems with the use of
the product.

6. A basic understanding of common issues and problems relating to the

environment in which the product is installed.

7. Presentation of current technical support resources in the company; who

does what; how are tech support issues answered; escalation of trouble
tickets, etc.

This overview is generally intended for on-site training, but much of it can be
documented and either incorporated in a partner manual or made available on-line.

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 Typical Agenda for 3-Day Partner Training

DAY 1
10:00 Welcome and general company overview
Overview of the product‟s market

LUNCH Catered in

AFTERNOON Technical training

- Overview of product family
- Technical discussion of product components
- Installation issues
- Review of frequently asked questions
- Review of technical support materials that are/will be
available to them

EVENING An early dinner since travel could make some of the

participants tired

DAY 2
9:00 Sales and Marketing
- Overview of marketing methodology
- Review of different marketing materials
- Review the list selection criteria
- Review successful direct mail letters/campaigns
- Review product demo
- Listen in on customer/prospect calls

LUNCH Lunch out or catered in

AFTERNOON Review of marketing support materials that are/will be

available to them
Operations
- Review of Partner Manual
- Terms and conditions of purchasing, returns, shipping etc.

EVENING Social Event (dinner, local attraction)

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DAY 3
9:00 Visit to customer site or as an alternative:
- A visit to company site by a local user
- Conference call with a strong client
- Prepared case studies

LUNCH Lunch out or catered in

AFTERNOON Hands-on work with the product

EVENING Closing dinner at a fun, informal place that is conducive to

building personal bonds

Page 85
 Partner Manual

In order to establish the basic parameters for how partners will be managed, the ISV
should develop a partner manual that contains all of the information relevant to the
relationship. It will greatly reduce the likelihood of misunderstandings, and it will
reduce the number of calls and e-mails that come in to the channel manager. While
there will be some work involved in compiling and organizing the manual, most of the
elements will already be available in different parts of the organization. The
investment in time to prepare the manual will be more than recovered once a channel
is recruited.

The most common elements of a partner manual

 Company Profile – a short history of your company, (mission, values) your

product(s), key management, types of clients, market focus etc.

 Key Contact Information – for the people who will be working with the
resellers provide (at a minimum) phone, fax and e-mail addresses
information; a short description of their responsibilities as it relates to the
resellers.

 Product Descriptions – A summary of each of the products that are being sold
through the reseller channel, including important technical information and
key selling points.

 Pricing Information

 Availability Charts – Version numbers and languages available for each

product, especially if there area a lot of modules or individual products.

 Training Programs – This should include the initial (mandatory) training plus a
description of any scheduled training programs that are available to partners.
Many companies have regularly scheduled classes for clients…and these
should be made available free to resellers.

 Ordering Information – Information on how payments can be made and a

detailed description of the ordering process, including order forms or screen
shots of on-line systems and any other documentation that you might require.

 Technical Support – Description of your technical support process including:

methods of contact, response times, how trouble tickets are processed,
access to any data bases etc.

 Marketing Materials – Copies of, or on-line links to, or descriptions of

available marketing resources along with any associated costs etc. Materials
could include sample advertisements, brochures, data sheets, telemarketing
scripts, direct mail pieces, on-line marketing, website pages etc.

Page 86
  Marketing Support Programs – Any terms and conditions surrounding any
market develop funds that are earned from sales, how those funds can be
applied and the process for claiming and receiving used funds.

 Shipping Policies and/or process for obtaining products.

 Maintenance Policies

 Upgrade Policies – What levels of upgrades are included as part of the

maintenance fee, what constitutes a chargeable upgrade etc.

 Frequently Asked Questions – This can be in two different forms: Potential

reseller questions to help cover any issues not addresses elsewhere in the
manual and/or the typical questions that you receive from your customers that
are not addressed elsewhere in the manual

 Incentive Programs – This may depend on what type of programs (if any) that
you would consider having. Many times, the reseller principal wants to be in
control of incentive programs and may or may not want the organization as a
whole being aware of program details.

 Reporting requirements and reporting formats

Note: This is an essential document, because it makes managing a large number of

partners much easier. 90% of the questions that come up in a channel relationship
can be answered in the partner manual, thereby minimizing the need for human
interaction. The manual should be made available as a written document as well as
in an electronic format. If it is only sent by e-mail, many partners won‟t bother to print
it out.
Even after they have been furnished with a partner manual they will call or e-mail,
because it is the path of least resistance. These questions should be answered, but
with each answer there should be a comment made that “this information can be
found in the partner manual on page __.” It is important that they get into the habit of
being self-sufficient.

Page 87
 Site Visits

There is no substitute for personal visits. ISVs are asking their partners to make a
substantial investment on their behalf, often on faith. Spending the time and money
to visit partners at their place of business at least twice a year (more often if they are
in a major market, or if the product is complex and expensive, where the ISV can
have a big impact on presentations to key accounts) pays big dividends. These visits
are an opportunity to give more of the partner's employees exposure to the product,
provide more sales and/or technical training, meet with key accounts, and solidify the
personal relationship with important business partners.

When the cost of a trip is measured against the additional sales that can be
generated, the return on investment should be exceptional.

Page 88
 Partner Conferences

Once a company has established a reasonably well-developed network of channel

partners, an annual conference is the best way to share ideas and build a sense of
community. Keep in mind that channel partners are selling a number of products,
and you want them to spend more time thinking about your products.

Why should you have one?

 Build rapport with and among the partners

 Present and discuss product development plans and new marketing
programs
 Gives partners an opportunity to blow off steam if there are issues that
bother them
 Give partners a chance to exchange war stories, and see what works and
what doesn‟t in different markets

When should you organize the first one?

Once there are 10-15 active partners. Not everyone will attend, and it‟s no fun with
five or six people showing up.

How often should they be held?

At least annually. When the channel starts to become quite substantial, it sometimes
makes sense to have separate conferences for certain geographic regions, technical
training, new product introductions, or for sales and marketing, but these should be in
addition to the annual conference where all of the business partners get together.

Should it be mandatory?

Yes, with the exception of sub-partners, or small partners in secondary markets. All
of the primary business partners should be required to attend.

How long should it be?

The first conference should be 1 ½ to 2 days. This will give you enough time to
cover the key points, but unless you have a compelling reason to expand the
conference, there is no need to schedule three or more days, just for the sake of
having a longer program. Later conferences might grow in duration as the partner
population grows, the number of products increases, and the conferences take on
more of a social aspect.

Page 89
Where should it be?

It depends on what is most convenient to the majority of active partners. It is usually

a good idea to hold the conference in a location that will be appealing, and relatively
easy to reach, so that partners don‟t have to take several flights to get there.

It can also be an idea to hold it close to the ISV's site every once in a while, so that
channel partners can have a chance to see the ISV's facilities, and to give more of
the company employees exposure to the international activity. It can have a positive
impact on the whole company when people get the feeling that this is an organization
that is going places.

Who pays for what?

That depends on whether you see the conference as a work session, or as a

marketing tool. In either case the participants normally pay for their air fare and
hotel. Some companies charge a conference fee to cover the cost of meals and
drinks. What does not work very well is expecting the participants to be on their own
for dinner and drinks, because they invariably end up following the host wherever he
is going, and it is both awkward and rude to ask for separate checks.

Conferences can also be used as a sales incentive, where the top three or five
partners get all or part of their expenses covered, or where any partner that achieves
a certain sales level is granted an additional discount until their conference costs
have been recouped. This last method has the added advantage of giving the
partner a reason to keep his sales going at a strong level.

Page 90
Are they hard to organize?

Organization is the key word, because there are a lot of details that have to be taken
care of. The exact location and a preliminary agenda should be ready and mailed
out to the partners 4-6 months before the conference, to give them enough time to
schedule the trip, and to give the company enough time to "sell" the partners on the
importance of attending. In order to be ready 4-6 months ahead of time, a location
and hotel have to be selected, a block of rooms has to be booked, and some thought
has to be given to the contents.

How many company employees should attend?

It is better to have too many than too few. This is an opportunity for you to "press the
flesh" with your partners, and build personal relationships that can help grow sales.
If there are 20 partners, there should be five or six employees, including the key
senior managers. Make sure that employees are instructed to spend time with the
partners, to take an interest in their business and their families, and to find out what
can be done to improve the business. Partners are the key to success, so their input
is important. Spend some time before the conference to prepare the company
attendees properly.

Page 91
 Checklist – International Channel Program

In progress

Required
Section Question

Done
Organization
Who is responsible for defining International Sales &
Marketing Strategy?
Who is responsible for managing and implementing this
strategy?
Are objectives clearly defined in writing?

Does a project plan exist?

What are key milestones? How do you measure

whether they have been reached?
What are the financial goals?
For what timeframe?
What is the budget to reach those goals?
How is progress against financial goals and budget
measured?
- What is the process for review?
- How frequently are they reviewed?
- Who is responsible for review?
Are compensation plans consistent with goals?
Support
Is there a channel support plan?
Resources
Responsibility
Is there a support agreement for:
- End user?
- Partners? OEMs?
Is there a training plan for partners?
Is there a 24 hr. support plan?

Implementation
Do license activation codes get generated in the channel
or by the client? Is the process 24hr or will channel be
subjected to time delay on fulfillment?
Are order fulfillment plans in place?

- Is there communication with Sales on lead times for

delivery?

Page 92
 In progress

Required
Section Question

Done
Sales/
Channel
Development
Is there a written sales plan? Does it cover:
 lead generation and partner referral programs
 prospect database, responsibilities, channel
access
 qualification criteria
 qualification & sales process
Are there sales forecasts by region & channel?
Are channel quotas in place?
Are resource requirements documented:
- collateral
- presentations
- sales toolkits
Are there partner plans in place?
Description of opportunity
Partner manual
Training plan
Is there a plan for hiring, compensation & management
of staff?
Account/reseller management process:
 pipeline tracking
 management to quota
 marketing program results
 push programs
 visits & communication: who, when, how?
End user demand generation: pull programs
 User groups
 Conferences,
 Seminars
 Programs
Marketing
Is there a written statement covering
Product
Pricing
Packaging
Positioning
Is there a profile of the target end-users and target
partners?

Page 93
 In progress

Required
Section Question

Done
Agreements
Letter of Intent
For: End-user, partner, OEM:
- License agreement
- Support agreement
Reseller Agreement
What is termination process? (reviewed by legal)
Are termination consequences understood by sales?
Retail price maintenance/differential pricing controls ?
Revenue recognition policy internally for channel sales?
Sales order process in place?
How to control all revenue is captured/invoiced?
license keys (lockouts legal?)
Maintenance
Is there a credit control process in place?
- How is risk managed?
Development
Schedule agreed for updates & revisions?

Escalated support process?

Responsibilities defined
Resources planned

Page 94
SECTION II - PARTNER RECRUITMENT

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This page left intentionally blank.

Page 96
 Define the Partner Profile

Most ISVs that start to build an indirect channel start by trying to sell prospective partners on
the technology, “Our product is the only …”; “We have a terrific product that sells itself and
installs out of the box”; etc. The truth is that prospective resellers are not focusing on the
technology, their main concern is how they are going to make money. Of course, the product
has to perform as promised, but when channel partners are expected to invest in sales and
marketing for a new product, there needs to be an ROI (Return on Investment) that they can
calculate. For this reason, building the partner profile actually consists of two steps, building
the business model from a partner perspective, and from that defining the partner profile.

1. Building the Business Model

The discount on the software license is rarely the only source of revenues for a channel
partner. There will usually be many elements involved in a sale and the installation of the
product, so it is important to identify how your product can drive margin opportunities for your
partner. Margin contributions can come from many sources, including:

 The discount on your product. Depending on the market and the related “pull-through
revenues from your software, the discounts will normally range from 35-50% of the
list price. While the size of transactions will vary greatly for most products, you
should identify the “typical” transaction size and what this will produce in discounts for
your partner;

 Services. Identify the types of services, and the number of billable days for each,
such as:
o Proof of Concept – are revenues generated prior to closing the sale?
o Installation and integration – how much billable work is involved during the
installation and roll-out of the product?
o Training – will the partner be providing chargeable training to the users?

 Additional users – is the product typically sold with a small, initial installation, with an
increase in the number of users during the first 12 months? What is the lifetime value
of a client versus the initial sale?

 Third-party software – will the channel partner normally be selling other products as
part of the transaction, such as a database? How much does this add to the sale,
and what is the likely margin for the partner?

 Hardware – will the partner be selling significant amounts of hardware, and what is
the margin? For example, will there be additional servers required? With document
management systems, expensive, high-speed scanners are often required.

Building out the business model not only makes it easier to demonstrate to a potential
partner the overall revenue opportunity created by your product, but it also makes it clear

Page 97
what skills and complementary technologies make them an attractive partner. By going
through this exercise you will know what level of services they should be capable of
providing, the type of sales cycle that they should be comfortable with, complementary
products they should be selling, etc.

2. Defining the Partner Profile

The next step is to decide and define the qualities a good prospective reseller should
possess. Some of the elements that can be included are:

 Target market and clients they sell to (large accounts, SME, etc.)
 The type of technologies they currently sell
 Technical skills they should have for pre-sales, installation and tech support
 Length of time in the market
 Vertical market specialization
 Geographic location
 Minimum annual revenues

Based on the technology and its positioning, we can develop a profile of the "ideal" reseller.
The actual number of initial targets in a market will vary depending on the size of the market,
whether the technology is horizontal, the perceived appeal of the product (in other words, is it
likely that a high percentage of targeted resellers will respond?), etc.

Some of the factors that influence the profile of the prospective partner as well as the number
of partners an ISV will need are:

i) Product sale or service sale? Products often fall into one of two broad categories.
The first is a pure product sale, where there is little or no consulting or services
required to install and run the product. With this type of product you would be
looking for good marketing organizations with strong direct mail and telemarketing
skills. Their installed base is less important, because they can build a business
base through their marketing.

At the other end of the scale are products which are extremely technical, and where
the reseller‟s technical strength is an important part of the selling process. An end
user is not going to buy the product from an organization in which they do not have
a lot of confidence. The reseller‟s installed base becomes an important factor,
because the initial sales will be based on personal relationships that are already in
place.

ii) Vertical or horizontal market? If it is a vertical market, it is almost a requirement

that prospective resellers currently represent a complementary technology, so that
they have clients that they can go to with the new solution. Without an existing
customer base it would be difficult to identify prospective end users and then

Page 98
 market to them with any real credibility.

iii) Cost of the product. The product cost will have a direct bearing on how the product
is marketed. A product with a low entry-level price cannot be marketed through a
direct sales force, so the best resellers will be using direct mail, telemarketing and
other low cost marketing tools. Expensive products are more difficult to sell via
mail or phone. Companies may use these methods to generate interest, but the
real selling will have to be done face-to-face, so the prospective reseller should
have a good sales staff and a proven ability to deal directly with end users.

iv) Geographic location. If the product is quite technical, you will want to make sure
the reseller is located close to major business concentrations, because the sale will
require on-site visits for the initial demo, and perhaps the installation and
evaluation. If it is more of a pure product sale, then geographic location is less
important.

v) Current product portfolio. How many other products is the reseller currently
handling? How important is the new product to him strategically? If a small
company has 50 or 100 products, all of which generate relatively small sales, then
it is unlikely they will devote a lot of attention to a new product. Some resellers
maintain a large portfolio of products, so that they have a big “bag of tricks”, while
others have a focused product strategy and put a lot of resources into each new
opportunity.

Page 99
Is there an “ideal” size for a reseller organization?

The success of a product is not necessarily tied to the size of an organization, because it will
be the commitment of the individual(s) responsible for marketing and supporting the product
that will be the key factor. Some things to consider are:

 Very large companies will, in many cases, not spend a lot of resources on a
“small” product. They tend to look for major product opportunities that can justify
establishing a separate business unit. In order to justify this level of investment
they typically want to take on products that have a minimum of $10-20M in
revenues in the ISV‟s domestic market, to ensure that the product and the
company have staying power

 Large companies can be good partners if they operate smaller divisions, within
which a given product could be an important part of the mix. The key is to work
with a business unit, whether it is a division of a large company or an independent
company, that is small enough to see the product as an interesting opportunity,
and to give it good visibility and support. A business unit with a maximum of 30
employees seems to be a good rule of thumb for most products

 If the product is technically complex, the reseller must have a large enough staff
to support it properly, even if one or two people leave; the learning curve for a
new person could make it impossible for the company to continue marketing the
product effectively

 If the product is expensive and difficult to install and maintain, the longevity and
reputation of the reseller will be an important part of the selling process - large
corporate customers will only deal with companies that they are confident will be
there to support them, and the reseller‟s relationship with its installed base
becomes a key part of the buying decision

 If the product is multi-platform, the tech support staff must be large enough to
provide support across the board

 If the sales cycle is long, say 9-12 months, the company must be large enough to
have other sources of revenues to cover the costs of launching the new product.
If the reseller is struggling financially, they will not be able to invest sufficient
resources to make the product a success

 Small organizations can be winners if the product is relatively straightforward and

can be marketed “anonymously” via direct mail, telemarketing, etc. There are
many examples of one and two man operations being successful with a product
when it is their primary source of revenues

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Build a Scorecard

When the parameters have been established it is easy to build a scorecard that lets you rank
the prospects:

Prospect Name:
Region
Criteria Rating (1-5, 5 being best)
Complementary products
Number of employees
Geographic location
Revenues
Technical skills
Length of time in business
Vertical markets
Number of products sold
Total Points

The primary purpose of the scorecard is to make sure that you are comparing the prospective
partners objectively. When speaking with a company on the phone it is easy to be carried away
by their enthusiasm, instead of focusing on the key criteria that you feel are necessary for them to
succeed over the long term. By expanding the scorecard above into an Excel spreadsheet, with
all of the prospects listed side by side, it becomes quite clear which company or companies it is
worthwhile pursuing.

Page 101
 Develop a Database of Prospective Partners

When the profile has been completed, you will be able to start the process of compiling a list
of prospective partners that should be contacted.

Sources of potential partners

Web sites of companies with complementary technologies

Most software companies have Web sites that provide a list of their distributors and partners,
both domestically and internationally. Since partners often specialize according to platforms,
market segments (e.g., banking & finance, manufacturing, government) or technology
(database management, ERP, network management, etc.), good prospects can be found by
looking for vendors of other products that are sold into the same customer groups. A good
source of software companies, searchable by applications and functionality, is
www.capterra.com.

Search engines can help in identifying prospects. By entering different key words, e.g.,
AS/400, enterprise management systems, help desks, network management systems,
etc., you can get links to companies and organizations that can lead you to more options.

Newsgroups on the Internet

There are Usenet newsgroups for most technologies, and they can be a resource in a
couple of different ways. The first would be to post a description of the product and the
company‟s interest in recruiting partners . The second is to try and identify partners from the
messages that have been posted. If a particularly good newsgroup is found, older messages
can be researched using Déja News (http://groups.google.com/).

Internet sites and consultants that specialize in matching ISVs and partners.
There are a number of companies that maintain a database of ISVs and products. For a fee
they will either list the product opportunity, charge a commission on actual sales, or actively
try and match products and partners. Others specialize in localizing a product and helping to
bring it to market.

Mailing lists
There are companies that maintain databases of partners, distributors and VARs. Some
examples are:

 Dun & Bradstreet (http://www.dunandbradstreet.com/us/)

 ZapData (http://www.zapdata.com/)
 Info-USA (http://list.infousa.com)
 CompuBase (http://www.compubase.net)
 Pro Biz (http://www.customerleads.ca/)
 The List Company (http://www.tlclists.com)

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Hardware Vendors
Hardware vendors need successful software products in order to sell their products, or to
convince customers to upgrade. They are often willing to provide market information, and
perhaps introductions to key distributors, if the software product is sold to a complementary
user base, especially corporations, and runs on their platform(s).

Trade shows
International partners visit a surprising number of trade shows, because many of them are
looking for new technologies that have not yet reached their local market. If you have a
stand, make sure you have special signage stating that you are looking for international
partners.

Word of caution: Be extra careful in qualifying companies that contact you, either through
trade shows or your Web site. Partners are often looking for a solution for one client, and
may not have any intention of establishing a wider marketing effort. Partners are notorious
for signing up products just to expand their portfolio, so their interest in your product may not
be sincere.

Commercial attachés
Embassies generally have a commercial attaché whose job it is to help companies increase
their exports. In most countries they have a list of companies that are looking for products to
sell, and this can be a useful starting point. Again, make sure you carefully screen
companies that respond to your mailshot.

Chambers of commerce
Many countries have a chamber of commerce that maintains foreign offices, and their job is
to help companies from their home country expand their business overseas. They will also
very likely have lists of partners and distributors looking for products to sell.

Advertising in trade publications

If you are advertising your product in publications that have international readership, always
include your Web site, and if room allows, a mention that you are accepting international
partner applications. There are also a number of specialty publications focused on partners
and VARs.

Government trade missions

In many countries government offices at the regional and federal level organize international
trade missions. These trips are usually focused, e.g., software companies only, and as part
of the program they arrange seminars and appointments with interested companies. While
there is some expense involved these trips can be successful, especially when the person
responsible for organizing it has some experience.

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Colleges and universities
A number of business schools have international programs that require students to research
overseas markets, complete field work, or find assignments with companies to get practical
experience. In some cases there may be a nominal charge to cover expenses, but this can
often be a good way to research a market at little cost.

Resources for Partner and ISV Searches

Microsoft

Microsoft‟s Channel Builder site (https://partner.microsoft.com/global/40010230) is an

exclusive networking and resource-sharing community for Microsoft Partner Program
members that can help you expand your business opportunities. Whether online or through
structured events in selected cities, you can create partnerships with complementary solution
providers across industries, geographies, or competencies. Through this site you can:

 Register your company as a Solution Provider, an essential first step because this
profile links to a number of databases that are accessible to potential partners
through other Microsoft sites and portals (Dynamics, Midsize Business Center,
Solution Finder website, SQL Server, Windows Marketplace). The Solution Profiler
can be accessed on https://partner.microsoft.com/global/40020720

 Search for prospective partners in other markets using the Microsoft Partner Directory
(http://directory.microsoft.com/mprd/)

 Post specific opportunities, for example if you have a client that wants your solution
implemented in a market where you are not physically present, or if you are looking
for partners in specific markets, you can post your opportunity on
https://channelbuilder.partners.extranet.microsoft.com/CB/Default.aspx

Another excellent resource is the World Partner Conference

(https://partner.microsoft.com/global/40018508), which is the best forum to meet prospective
partners from around the world.

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Links to other ISVs

BEA: http://partners.bea.com/search.portal

BMC:
http://www.bmc.com/BMC/Partners/CDA/hou_Partner_Find/0,3316,5377102_5379132,00.ht
ml

CA: http://www3.ca.com/Reseller/Default.aspx

Cisco: http://tools.cisco.com/WWChannels/LOCATR/jsp/partner_locator.jsp

Compuware: http://www.compuware.com/corporate/alliances/directory/default.asp

EMC: http://www.emc.com/partnersalliances/partners/index.jsp

HP: http://hp.via.infonow.net/locator/us_partner/index.jsp

IBM: http://www-1.ibm.com/partnerworld/pwhome.nsf/weblook/index.html (requires free

registration for access to the site)

Oracle: http://www.oracle.com/webapps/opus/initadvancedsearch.do

SAP: www.sap.com/partners/directories/SearchPartner.epx

SAS Institute: http://www.sas.com/apps/partners/index.jsp

Sun: http://solutions.sun.com/iforce/pd/advance.jsp?reset_search=t

Page 105
 Sample Outreach Letter 1

ABC Software is an ITIL-certified solution for the key processes of IT Service Management
that is fully integrated with .Net, SQLServer and Sharepoint. We are currently seeking a
limited number of qualified business partners to represent this software product. If your
company is interested in taking on a new product with proven success in other markets,
please read on.

The product: ABC ITSM offers a robust set of service management tools that support the
main IT processes described in the Information Technology Infrastructure Library (ITIL)
(incident management, problem management, change management, configuration
management and service level management). The product is currently available in English,
Dutch, French and German and can be easily translated into other languages. ABC ITSM
has a number of strong points:
 Entirely based on the Microsoft .NET platform
 100% web-based
 Fully customizable
 ABC ITSM has no modules, all the options are integral to the package
 Easy to install and implement, with an average of 5-10 days, including training
 Technical issues seldom arise.

The market: There are three primary markets for ABC:

1. Mid-sized to large companies with 10 or more people in the IT department

2. Systems integrators, for internal and external use
3. ISVs with internal help desks.

The ISV: ABC Software is a well-established software company with more than 180
installations around the world. ABC is offering a high level of support to its business
partners, including good margins, training, and joint sales calls to major accounts.

Are you interested? More detailed information can be found at www.abcsoftware.com.

Please contact John Smith (john.smith@abcsoftware.com) to discuss how a mutually
productive relationship can be established.

Page 106
 Sample Outreach Letter 2

We are currently seeking a primary business partner to represent a software product in the
American market. If your company is interested in taking on a new product with proven
success in other markets, please read on.

The product: A market leading MES product, XFP, which covers all aspects of
manufacturing security and traceability for regulated industries. It has been widely deployed
in pharmaceutical companies ensuring compliance with the highest level of quality and
functional requirements, including FDA and GMP. XFP is a complete solution comprising
complementary modules which correspond to the various process stages, from
warehousing, weighing, controlling and standardizing manufacturing, optimizing packaging,
to dispatching. An R&D module completes the solution. XFP runs on an industry standard
client/server platform in either stand-alone mode or connected to host systems. It is fully
integratable with ERP systems, such as SAP R/3, BPCS, PRISM, JD-EDWARDS and
MAPICS. More information can be found at: www.abcsoftware.com.

Reference accounts: 14 of the top 20 pharmaceutical companies worldwide, including

Aventis, Johnson & Johnson, Glaxowellcome, Merck, Novartis, Pfizer-Parke Davis, Sanofi-
Synthelabo, Schering, Smithkline, Elida Faberge, Givenchy, Shiseido and Yves Rocher

The opportunity: Exclusive rights for a specified period of time with the assurance that
they have no plans to sell directly into the US market. They also offer a complete and
comprehensive package of initial marketing, sales and technical support in English, with
support coming from their subsidiary in London, England. The average sale is $150,000,
generating an equal amount in service revenues.

Qualifications required: We are looking for a company that is successfully providing

solutions to pharmaceutical companies or related regulated industries. Strong sales and
marketing capabilities coupled with excellent integration and technical skills are essential.
ABC Software‟s US partner should share their strong commitment to customer satisfaction,
technical leadership and product excellence.

Page 107
 Get a Contact Name

After compiling the initial contact list, it is important to get a good product summary
out to the prospects. The first contact with a prospective partner is critical, because it
will determine your likely success. The prospect has to be given a good reason to
respond.

To the extent it is possible, get a specific name. Most partner organizations are
small, so it will be the owner or Managing Director that makes the decision on new
products. Inquiries that are simply sent to a company address, or to "President"
rarely get opened and read. If the source that was used to find the partners didn't list
names, take the time to call the switchboard and get the name of the appropriate
person. But be prepared to present the product if you call, because the person
answering the phone will often pass the call along to the Managing Director, even if
you are only calling to get the name.

Page 108
 Using LinkedIn

LinkedIn (www.linkedin.com) has become a very effective way to reach individuals

that do not respond to e-mails or voice mails. It is a social networking tool that
focuses on business professionals, and as of mid-year 2008 they had 22 million
members worldwide. The principle behind LinkedIn is to work through trusted
contacts – you invite business contacts that you know and trust to become part of
your network. Once you are connected to them, you have access to their network of
contacts, and their contacts‟ network. The process works as follows:

1. Identify a company or individual that you want to access

2. Search for the name in LinkedIn
3. LinkedIn will show whether they are members of LinkedIn, and if you can
reach them through your contact network – it will also show whether you have
to go through one or two links to reach that person (the target person is
usually the third link, meaning that you have to go through two levels of
contacts to reach them)
4. You compose a message to the person you want to reach, explaining why
you are contacting them
5. You compose a second message to the person in your contact network that
needs to pass the message on, either directly if they are linked to the target,
or to one of their contacts who then passes it along to the target
6. Both messages are sent by LinkedIn to your contact, who can then decide
whether or not they want to pass it along
7. When the system works, your message will reach the contact (you can track
the progress on LinkedIn to see where in the chain your message is, so you
will know when it has reach the target).

It is surprising how effective it is, and it works because your inquiry reaches the
target through someone they know. In essence you are getting a “warm”
introduction. We ran a campaign where we reached out to C-level executives at 151
companies through LinkedIn, and we had a 36% response rate. Some of the
responses were “thanks, but no thanks”, or “not now, call us back in 6 months”, but
17% of the people we contacted agreed to a meeting or an introductory phone call.

For more information on how to make the most of LinkedIn, check out
http://www.linkedintelligence.com/smart-ways-to-use-linkedin/.

Page 109
 Initial Prospect Contact and Qualification Script

INTRO Hello XXXXXXX, my name is John Smith from ABC Software.

………..How are you?

That‟s good……………We are an American software company

that has been very successful in the U.S. (and other international
markets if that is the case), and we are now introducing our
solution into the UK. The plan is to select a limited number of
UK-based resellers who have the capability to sell and support
the software there. I am calling today to see if there is any
interest from your company and to provide an introduction to the
solution.

CREDIBILITY
Our company is ABC Software, and our client list includes large
organizations such as AA, BB, CC and DD. We are positive that
this proven solution will be attractive to similar organizations in
the UK.

GAP
The software bridges the gap between back-end mainframe
systems and modern front-end applications, such as CRM, ERP
and any web-based application. This is achieved through
sophisticated software integration systems.

BENEFIT
The benefit to the end user (your client) is that their investment in
existing mainframe applications can co-exist with modern
applications without the need to re-write programs or replace
systems.

HOOK
So, I‟ve briefly explained what we are about…..now I would like to
ask you “is this an area that interests you or your company?”

IF YES
OK, what I want to accomplish now is to discuss this a bit more,
as well as ask a few questions, and find out whether we both
want to pursue this further.…………Can I take a few moments of
your time now?

IF YES
Can I first ask whether you would be interested in looking at the
benefits of becoming an early reseller for ABC Software?

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 Or, who handles the appointment and management of reselling
complementary software solutions.

LEAD ON
Depends on conversation, but:

 This could be a broad description covering the major

highlights of the ABC Software system

 Or it could be answering questions

 Or qualifying the prospect, asking questions about:

o other ISVs they represent

o the type of clients they have
o the vertical markets they are strongest in
o what they do to market their other products
o would they be willing to allocate a marketing
budget for this product

IF NO  Establish why
o No budget?
o Not a good fit?
o Too much competition?
 Ask for suggestions of other resellers that might be a good fit

Page 111
 Send Out One-Pager

Remember that an ISV is going through a two-phase selling job when he is setting up
an indirect channel. He has to convince the partner that he should represent the
product, but he also has to show that the end user will be getting a product he can
use, and a good level of support once the product has been purchased.

There are three ways of sending the initial information out to prospective partners:

1. Letter sent as snail mail. This is best if there is a printed glossy or flier that
does a good job of describing the product. Should not be used if you are only
sending a text letter.
2. Faxing. Faxing is convenient and cost-effective. And since e-mail has taken
over the communications process, people get fewer faxes. Faxes work best
when they are addressed to a specific individual, and when you have
approval to send the fax (unsolicited faxes are illegal in many countries).
3. E-mail. E-mail is cheap and easy, but with all of the spamming that is going
on, it is difficult to get anyone's attention. E-mails have to be sent to an
individual, you should have approval to send it, and the subject line needs to
get their attention. The first e-mail that is sent out should not contain an
attachment, because with so many viruses circulating, many people simply
delete e-mails with attachments coming from an unknown source.

Page 112
 Getting Past Voice Mail

Doing business in the age of voice mail can be extremely frustrating. Estimates are
that 70% of calls go straight into a voice mail system, but there are markets where
the percentage is higher, especially the East and West coasts of the U.S., and the
percentage is likely to be higher for senior management.

While it is true that some people leave their voice mail on all the time, you can
sometimes get through by calling off hours, for example by calling before 8:30 or
after 5:30. You may also find people at their desks during the lunch hour. So should
you keep calling or leave a message? Actually, you should do both. Assume that
most people won't call you back, so just keep trying until you get through.

Make good use of the screener or gate keeper

These are the people who are supposed to keep you from speaking with your
intended contact, but treated properly they can be a good ally as well as a source of
information. Most voice mail systems give you the option of dialing "0" if you want to
speak with an operator. Sometimes, but rarely, this actually is an
operator/receptionist, but it is more likely to be an Executive Assistant, or just a warm
body in the marketing department. In either case you can benefit from having a live
person on the phone to:

 Confirm that you are targeting the right person ("Hi, this is John Doe, and I am
trying to reach Mr. Bigg. Is he the senior executive responsible for selecting
new products?")
 Get an e-mail address ("I have been unable to reach Mr. Bigg by phone, so
could you please provide me with his e-mail address?")
 Get useful information ("I see from your website that you represent products
from ABC Software. Are you expanding your product portfolio?")
 Leave a message by proxy for Mr. Bigg ("Would you mind letting Mr. Bigg
know that I called, and that I will send him an e-mail to follow up?") If you
have made a favorable impression on the gatekeeper, there is a possibility he
or she will put in a good word for you.

DOs and DON'Ts of using Voice Mail

DO use voice mail as an advertising medium. In other words, leave a voice mail
commercial which is no more than 30 seconds or the "delete" button will be used.

DON'T try to make them feel guilty. Whether you reach your prospects or not, never
make them wrong for not returning your calls. Rather than saying, "I have called
several times but haven't heard back from you," let them know you are eager to
speak with them, and wanted to try again while you were in your office. As a rule, try

Page 113
not to leave any more than three voice mail messages over a 10-day period of time
and then lay off for a month.

DO send an e-mail if you have called, left messages, and still can't get through to the
person you want. Many people will quickly respond to e-mail because it is easy. If
you can interest them in what you have to offer, they may be willing to set up a phone
appointment with you to find out more. When you don't have the person's e-mail
address, try finding it on the company's web site or asking the receptionist.

Microsoft Resources

Microsoft offers an ISV Telesales Service that:

1. Offers access to experienced telesales professionals, hand-picked, tested, and

trained on the Microsoft Solution-Selling Process (MSSP) and business decision
maker (BDM) selling.
2. Helps speed your sales cycle by identifying organizations' key decision-
makers.
3. Helps empower your sales team to close more deals, faster.
4. Finds highly qualified sales opportunities through identifying prospects' budgets
and specific needs.

More information can be found on the partner page: Program

Membership/Competencies/ISV Software Solutions.

Page 114
 Follow-up

The first step in following up is generally through a phone call. The mail/fax/e-mail
will usually generate a number of responses, depending on the technology and the
market, all of which should be followed up by e-mail and telephone for further
qualification. This can be time-consuming because people are often not in, they
don't return phone calls, they have "misplaced" the information they received, etc.
This process will often require a fair amount of correspondence before the suspects
are qualified and you have narrowed the list down to a few real prospects.

During this phase your marketing person will be responding to questions, providing
more detailed information and interacting with other departments within your
company to get answers to questions that come up. Your responsiveness during this
phase will give the prospective partner an indication of what support he can expect
after he has signed up.

It is important to emphasize the point made earlier regarding good communications.

Partners are used to being treated as orphans by many of their ISVs, and their efforts
will reciprocate the support they feel they will get. If the ISV doesn‟t really care about
them, they might still sign an agreement to represent the product, but they probably
won‟t give it their full attention.

At this point there should be a number of good prospects that you can move to the
next stage in the process.

Send initial information package – The partners who respond on their own or show
interest through the prompting of follow-up calls should be sent an initial, brief
marketing package. This package could include (possible e-mail of .pdf file or Word
files):

 Company background information

 Data Sheets
 Brief description of the target market
 Pricing (partner buy prices)

Send second information package - Based on a favorable response from this

additional information, a full package of information should be sent. This package of
information could include:

 Full set of company marketing materials

 Product demo
 Partner application

Page 115
 Deadline for Response

Wherever possible in this process, try and establish a deadline for a response. If
someone has promised to review the information you send, ask them if you can call
back in a week to discuss it. If they promise to install and test a product, find out how
much time they think they will need, and set a date for follow-up. If you are issuing a
Letter of Intent, make sure that there is a deadline by which a formal agreement is
supposed to be signed.

Agreeing to deadlines and timelines is good business practice, and it makes it easier
to keep the process on track. Keeping to deadlines, or not, as the case may be, is
also a good indication of how professional a company is, and how seriously they are
evaluating the opportunity.

Page 116
 Check Vendor References

Checking with other vendors is one of the best ways to determine how good the
prospective channel partner is going to be. Unlike the HR department, which often
avoids sharing information about a candidate for fear of being sued, international
channel managers tend to be quite open about the partners they have. Some of the
questions you should ask include:

 How long have they been a partner?

 Are they exclusive or non-exclusive?
 What percentage of sales are for new licenses versus maintenance or
upgrades?
 What level of technical support are they expected to provide, and do they
meet the requirements?
 Have their sales been increasing or decreasing over the past 2-3 years?
 Do they have credit terms?
 Do they pay their invoices in accordance with the terms?
 Is their salesforce stable, or do they experience a lot of turnover?

Page 117
 Call Client References

This is easier said than done. Most prospective partners will not share client
information with a new ISV because they are concerned that the ISV will try to sell
direct to his clients in the event they do not sign the partner agreement. If you are
able to get some references, questions should include:

 How long have they been providing you with products and services?
 How many different products or services do they provide?
 Are they on a list of qualified or approved ISVs?
 What level of technical support do they provide? Telephone? On-site?
 Have there been any problems with their installations?

Note: This will be more applicable with partners that are designated as large
account specialists, where the quality of the relationship with their clients can be
important.

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 Financial and Credit Information

This information can be useful, but it is often unreliable. Outside the U.S. it is rare for
banks to require quarterly financial statements - they are more likely to be annual,
and of dubious quality. Since most channel organizations tend to be small, with 10-
20 employees, their financial situation can change dramatically in a short period of
time. If they have just lost one of their strategic products representing 30-50% of
their revenues, they could be bankrupt while their financial statements reflect profits
from a year or two earlier.

One of the easiest and best indicators of a company‟s financial health is the ratio of
sales per employee. In most markets a software reseller (with no internally
developed products), should have minimum revenues of $250K per employee, and
preferably more, since at 40-60% of their revenues are being paid back to their ISVs.
The figure would be lower in low cost markets such as Turkey, India Indonesia and
the Philippines.

Conclusion: Financial information could be an element in evaluating companies

that are positioned to be preferred partners for specific markets or verticals, but it is
not something that needs to be emphasized. Ordering a report from Dun &
Bradstreet would be sufficient.

Page 119
 Completion of the Product Evaluation.

At this point there will have been several exchanges of correspondence, the partner
will have submitted his application form, and references will have been checked. The
company will now want to confirm the partner‟s level of interest in the product, as well
as determine if they are competent to market and support the product.
This would involve the prospect installing and evaluating a demo version of the
product, processing the questions that are generated during the evaluation, providing
additional technical information that might be required, etc. Ideally there would be a
mechanism to provide a remote demo, whereby an ISV calls the prospective partner
and dials in using a program such as LiveMeeting, Web-EX, PC Anywhere, etc. This
would allow an in-depth presentation of the technology.
The product evaluation represents another investment in time by the prospective
partner, which is a good indication of how serious they are. It is also an opportunity
for the ISV to get on the phone with the prospect‟s technical people and marketing
people, which is an important step in developing a relationship. It is important to
determine whether the organization has a good understanding of the technology, as
well as the market opportunities.

Page 120
 Conference Call Agenda

1. Introduction by the person originating the call, setting the objectives

2. Presentation of Partner Prospect
a. The company (history, size, customer base, technical support, etc.)
b. The main activities (product sales, professional services, etc.)
c. Products already sold
d. How the products are sold
e. Success stories.
3. Presentation of ABC Software
a. The company (history, size, customer base, etc.).
b. The products
i. Product overview
ii. Development history
iii. Installation requirements (customization, integration, etc.)
iv. After-sales technical support
c. The market / clients.
d. How the products are sold
i. Lead generation
ii. Sales cycle – duration, key decision-makers
iii. When and why deals are lost
iv. Typical transaction structure
4. ABC Software‟s International Ambitions
5. The Relationship
a. The role of ABC Software
b. The role of Partner Prospect
c. Marketing
6. Next Steps (should be to schedule a meeting at the prospect‟s facilities)

Page 121
 Reseller Meeting - When to Schedule

Since these trips will normally involve travel, in some cases over long distances, it is
best to schedule the trip when it is possible to aggregate all or most of the best
prospects during a single trip. However, visits with prospects should not be
scheduled before they have gone through the full qualification process, including at
least one telephone conversation with a technical and a marketing person, in order to
ensure that there is a solid basis for discussion. The discussions should be far
enough along that both you and the prospect have decided that you want to do
business together if the chemistry is good and the business terms are acceptable.

Meetings should be scheduled for at least half a day, a full day if possible, since they
will usually include company presentations, product discussions, market-related
issues as well as a discussion of the overall business terms if both parties decide to
move forward.

Page 122
 Prospect Meeting Objectives

On-site visits to resellers can be expensive and time-consuming, so it is important

for both the ISV and the prospects to have clearly established objectives. Some
of the things that should be accomplished are:

 Company presentations. Both companies will have some familiarity with

each other from the exchange of information that has taken place, but a
face-to-face meeting will be an opportunity for the company executives to
present their companies and their plans for the future
 Qualification. The ISV will want to qualify the company to determine
whether they meet the standards they have set for marketing skills, tech
support, management skills, etc.
 Chemistry. Do the main people involved like each other? Is it likely that
they will get along as partners?
 Main business points. If this has not been discussed previously, the ISV
should provide an overview of how they see the relationship working, and
what the key business issues are.
 Decide on the next steps. There should be an agreement as to where
we go from here. If it is obvious during the meeting that the relationship is
not a good fit, it could be no more than a "we'll be in touch", but if the
results of the discussion were more substantive, then action items and
timelines should be documented
 Outcome. The outcome of the meeting should be a framework for the
Letter of Intent, including the marketing plan that the prospective partner
is willing to implement

Page 123
 Suggested Agenda for Meetings

9.00 - 9.15 Introductions

9.15 - 9.45 Detailed overview of prospective partner company
9.45 - 10.15 Detailed overview of the ISV
10.15-11.00 Demonstration of the product and detailed discussions
11.00-12.00 Tour of company premises
12.00-13.00 Break for lunch
13.00 - 16.00 Potential partnership - details and structure

 Terms
 Territory
 Marketing plan
 Training
 Support
 Joint marketing activities, if any
 Commercial terms
 Next steps

16.00 - 16.30 Open discussion

16.30 - 17.00 Wrap up and next steps

Note: Even if the first prospect meeting seems to go very well, you will not know
which prospect is the best suited until you have met with all of them, so avoid the
temptation to make a commitment too early. You will want the prospects to know
that you are meeting with other companies, so there is nothing wrong with discussing
specific business terms without getting locked in until you are ready to make a
commitment.

Page 124
 Reseller Meeting - Who Should Attend?

From the ISV: It will depend on the size of the organization, the management
structure, and, to a certain extent, the size of the market and whether or not the
relationship is expected to be exclusive. If the company is going to meet with
prospective exclusive or primary partners for the region, then the managing director
will want to join, because the relationship could have a significant impact on the
development of the company. Some companies will have a person responsible for
establishing or managing indirect partners, but they should only go by themselves if
they have real decision-making authority since one of the main objectives of the visit
is to reach agreement on key business terms.

From the reseller: Again, you want to have people attend who can make decisions.
In a large organization this could mean the Director of Sales, if he is responsible for
selecting products, but in most cases it should be the Managing Director who sets
the product strategy and who makes the financial commitment to support a new ISV.
The reseller should also make marketing and technical people available to explain
their operations, so that you can see the level of support your product will get.

Page 125
 Follow-up to reseller visits

Once the visits are completed, there will be two levels of follow-up required:

1. Internally. After the visits it will be important to sit down with the management
team to determine:

 Which companies did they like best?

 Were there any companies you do not want to pursue, and why?
 Based on the discussions, what is your understanding of the next steps?

2. With the prospects. The Channel Manager should contact each of the
prospective resellers:

 If they did not make the short list, thank them for their interest and make sure
they understand what why the decision was made, and try and keep the door
open for other product opportunities in the future
 If they made the list, try and get their honest feedback on the ISV and the
product:
o Are they more or less interested in the product after the meeting?
o Is there anything they had hoped to learn that they didn't?
o Do they need any more information before making a final decision?
 If the meeting went so far as to start discussing business issues, what did the
reseller feel was discussed, what were the conclusions, and what are the next
steps?

Page 126
 Mandatory Partner Training

For most products, partner training should be mandatory, and at the ISV‟s place of
business rather than the reseller, for many reasons:

 This guarantees that the partner will have the product and marketing
knowledge he will need to successfully market and support the product in his
market. The product knowledge that he will achieve by installing it on his own
machine and playing with it is limited compared to what he will learn by
spending time with the developers. He will discover different features and
functions that will make it easier to sell the product, and he will be in a better
position to provide the right level of technical support. He will go home being
much more enthusiastic about the product's potential, because the ISV's
enthusiasm will rub off on him;

 It is a good screening process to ensure that the partner is serious about

marketing the product. The cost of the trip and the opportunity cost of the
time he is spending away from the office represents an investment by the
partner, and he will want to recover those costs by selling the product;

 Better communications. The partner will know the contact people in the
company he can call or e-mail to resolve specific problems and it should
result in a stronger personal relationship between the ISV and the partner.
Now, when a phone call or e-mail comes in from a partner, there is a real
person attached to the name, and the level of support tends to improve;

 Motivating a company's own employees. It helps the whole organization

when a foreign partner comes to visit, because it creates a buzz and some
excitement internally when people realize that the business is going places.

Some products may not be complex enough to justify making the training mandatory,
at least not for all partners. One possibility would be to have two categories of
partners, one that has attended training and one that has not, and offer a larger
discount to those that come in for training and certification. Another factor will be the
pricing of the product and the expected transaction value of individual sales, since
this will have an impact on a partner‟s willingness to make the investment in training.

Page 127
 Partner Recruitment Checklist
No. Stage Activity Who?1

1.1 Strategy Develop a sales strategy for the target market. S

1.2 Profile Create profiles of the likely types of partner that will be S
successful in promoting the products in the target market
(e.g., size, sector, skills, approach, complementary products,
affiliations)
1.3 Plan Develop the schedule of activities to be undertaken S
1.4 Materials  Call script TM/S
 Identify places to build the long-list of prospects
 Documents that will first outline the business proposition
(teaser)
 Collect other information on products, the client and the
relationship offered, responses to questions, competitor
analysis, etc
 Prepare demonstrations and presentations.
2.1 Research  Who is selling products like these? TM/S
 How are they selling them?
 What price?
 Who is buying them?
 More sources for building long-list
2.2 Build long- Put company contact details in spreadsheet – usually from TM
list website
Triage: A (prime), B (possible), C (reject)
(against profile, record salient characteristics & reason for
choice)
2.3 „Ping‟ Get name of office-holder most likely to be involved in TM
evaluating partnership approach and CEO. May ask for
information to help triage. Ask if we can send introductory
email, get email address.
2.4 1st Telemarketing call to decision maker TM
Approach  We are a software company doing _____________
 Currently recruiting strategic partners in the target market
 Contacting you to see if this may be of mutual interest
 Is he/she the right person?
 Describe the product/service
 Confirm fit with profile (why this is of particular relevance
to prospect)
 Outline business proposition
 Would he/she like further details
 Agree when to send, when to call back
 Who else likely to be involved in decision/evaluation
 Explain likely order of steps
2.5 Send Send Teaser, URL, in some cases a demo TM
Materials
3.1 Qualify Call back: TM/S
 Qualify interest
 Reconfirm dealing with appropriate person
 Field questions/objections
 Reconfirm profile makes them particularly suitable

Page 128
 Partner Recruitment Checklist
No. Stage Activity Who?1
 Describe our preferred next steps, get agreement
 Before conference call require completion of application
form
 If not interested go through „failed‟ routine (reason, do you
know of others it may better suit, etc)
3.2 Reclassify Based on responses classify prospect either as “Shortlist” or TM/S
“Rejected”
3.3 Application Send TM/S
Form
3.4 Follow-up Ensure receipt of completed application form TM/S
3.5 Reference Call vendor references TM/S
s
3.6 Set-up Set up conference call TM/S
conference
4.1 Conferenc Participate in teleconference S
e Call
4.2 Qualify Re-contact and further qualify S
4.3 Answer List of actions arising from teleconference S
Questions
4.4 Set Arrange road-show (if possible)
Meeting
5.1 Meet Attend meetings with prospects S
Prospects
5.2 Qualify List of actions from meeting S
5.3 Heads of Offer made with Letter of Intent S
Agreement
5.4 Marketing Develop marketing plan S
Plan
5.5 Contract Signed contract S
1
TM = Proposed activity for telemarketing
TM/S = Could be either sales or telemarketing
S = Activity performed by sales (Channel Manager)

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SECTION III - PARTNER MANAGEMENT

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Page 132
 Lead Registration

Deal registration is an important channel management tool, especially in markets

where the vendor has multiple partners, and/or sells direct. One of the fastest ways
to discourage partners from investing in marketing is to let situations develop where
they lose a deal that they have been working in good faith, either to a direct
salesperson or to another partner that is able to sell the product at a lower price
because they have not made an investment in the sales process.

Deal registration programs have to be well-designed, transparent and applied

consistently. It will not be successful if the channel partners do not feel that they can
trust the vendor to protect their interests. Some of the key considerations are:

 Keep it simple. Channel partners don‟t like to spend time on paperwork and
administrative tasks. They are being asked to provide pipeline reports,
marketing feedback, reporting for MDF programs, etc., and lead registration
becomes another obligation. In order to be effective the work required should
be kept to a minimum, so that it captures only the necessary information ;
 Ensure confidentiality. Until a relationship of trust has been established,
partners are always going to be concerned that the information will be used
for other purposes, such as feeding leads to the direct sales force. Access to
the registered accounts should be limited to the partner and the channel
manager responsible for that partner;
 Make it specific. Many sales opportunities will be with departments,
divisions or subsidiaries of large corporations. A partner in Florida, selling to
a small, local operation of General Electric, for example, should not be able to
register the lead as “General Electric”. The registration should be for the
specific opportunity they are working on;
 Limit the duration. Partners should only be registering legitimate leads,
which means that they should be engaged in a sales process. A vendor
should know what the typical stages of their sales process is, and how much
time it takes to move from one stage to the next. The registration process
should track these stages. As an example, the initial lead might be protected
for 90 days, and will drop off unless it moves to the next stage in the sales
process, in which case the lead is protected for another 90 days.
 Establish and publish the rules. The policy for lead registration should be
made clear to every partner. Explain the type of information that will be
required, what type of leads that should be registered, how long they will be
protected, etc.

Page 133
 Market Segmentation

Market segmentation has been discussed earlier in deciding how many partners to
have in a territory, but it plays such a big role in limiting channel conflict that it should
be explored further.

Companies should start by segmenting a target market, and then build their channel
strategy based on that segmentation. There are several benefits to having
segmentation as a central part of a distribution channel:

 Market coverage. This will really be determined by the technology and the
size of the potential market. Products that are sold into a mainframe
environment, or that will only be purchased by companies with more than $1
billion in revenues, will normally not require or justify having more than one
partner in markets outside the United States. However, horizontal solutions
that can be sold to a wide range of companies will typically require multiple
partners in most markets, because one partner will not have the resources to
reach the entire market.
 Channel expertise. Even channel partners that specialize in horizontal
solutions, such as network management or security, will often have a majority
of their clients in one or two vertical markets. The industry is moving towards
Verticalization, because it is becoming increasingly important for resellers of
enterprise software to understand the business processes of their clients.
These processes will be different for banks than they are for retail
organizations or manufacturers.
 Partner compensation. One of the biggest challenges for resellers today is
margin preservation. When dealing with large vendors that have multiple
partners in a territory, the nominal reseller discount that is in their contract is
meaningless, because they will have to reduce their price to get a sale in a
competitive situation. One of the best things an emerging ISV can do is to
make it possible for their partners to maintain their margin by giving them
control of a certain market segment. This will give them more reason to
invest in a focused marketing program.
 More effective marketing. Sales are also becoming more verticalized, and
prospects are expecting to see the value proposition as it relates to their
specific situation. By segmenting the market, and ISV can develop marketing
messages that target companies based on their size and the industry
segment they operate in.

Page 134
Markets can be segmented according to a number of criteria:

 Geography. Most resellers will get the majority of their sales from clients that
are within a certain radius of their office. In the enterprise space, where
repeated on-site visits might be necessary to close a sale, it is not cost-
effective to chase opportunities that are far from their location. If we look at
the UK as an example, a channel partner based in the London area is unlikely
to have a large client base in the Manchester to Leeds corridor, so an ISV
might need a partner to cover that market. Germany has three main
geographic markets, the north, the south and what used to be East Germany.
 Industry verticals. This is becoming an increasingly necessary
segmentation, since the business processes and computer environments will
vary by industry segments. End users will expect resellers to “speak their
language” and have an in-depth understanding of the challenges that are
specific to them.
 Client size. It is also possible to carve up the market based on the size of
the end user. Some channel partners will be very good at selling into the
SMB market, but do not have the sales skills required to sell into large
enterprises at a more strategic level. Additionally, the length of the sales
cycle will often be much longer in the Fortune 500 space, and partners will
need the financial resources to support a 6-12 month sales cycle.
 Product portfolio. Some ISVs have a range for products, from relatively
simple and inexpensive products to more comprehensive enterprise solutions.
Resellers qualified to sell the enterprise solutions would normally be capable
of selling the simpler products, but the opposite is not true.

Some important notes:

1. Don‟t over-segment. While it might be possible to segment the UK into two

major geographies and several vertical markets, each individual segment has
to be large enough to provide the channel partner with enough revenue
opportunities to make it worthwhile. A primary objective is to make an ISV‟s
product a “strategic” product for the reseller, which means that the reseller
has to have a meaningful market to go after;
2. Communicate your segmentation policy to the channel partners, and expect
them to play by the rules. There will always be a temptation to “poach” a deal
from someone else‟s segment, and legally a vendor cannot prevent this from
happening.
3. Use a lead registration process to monitor the market. If partners are
registering their opportunities an ISV will be able deny registrations that are
not in the “right” segment.

Page 135
 Compensation Neutrality

One of the biggest challenges for an ISV is managing direct salespeople and indirect
channels in the same market. This is usually the most common source of channel
conflict, and there are few things that are more discouraging to a channel partner
than to spend several months working on a deal, only to watch a salesperson jump in
at the last minute and close the transaction as a direct sale because it will help him
hit his numbers.

In theory, sales reps should be motivated to work through, and support, channel
partners because they can leverage their time by having more “feet on the street”
generating deals. However, no matter how many rules are in place, if a vendor
salesperson gets paid more to take a sale direct vs. selling through a partner, that
sale will go direct, even if the partner initiates the deal. This normally occurs when a
sales rep receives a commission on the sales he is responsible for, whether the sales
are direct or through a partner, because after a reseller receives a discount the net
receipts are lower. The following example shows the impact:

List price 100

Street price 80
Reseller cost (40% discount from list) 60

In this example, the vendor would receive 60 if the sale goes through a partner, and
80 if it is a direct sale, so if the sales rep is getting a commission on the revenues
produced, he would get 33% more if he closes the sale himself.

Compensation neutral (“comp-neutral”) plans, which pay direct salespeople the same
margin whether a sale flows direct or through partners, go a long way toward
eliminating channel conflict that can cripple an indirect channel program.
Compensation neutrality is accomplished by applying an “uplift” to channel sales, so
that the amount on which the commission is paid is the same. In the above example,
an uplift of 33% would be added to the 60 received from the partner, so that the sales
rep is compensated is if it had been a direct sale. This offsets the negative
commission credit impact of selling through a
business partner and decreases conflict in the selling environment.

Page 136
 Cross-Border Sales and Margin Splits

Most large companies (end users) are active in multiple markets, so it is not unusual
to have sales take place that will involve installing and possibly supporting the
product in several markets. Since an ISV is likely to have different partners in
different markets, there are going to be complaints from a partner who feels that
another partner is stealing accounts from his territory. There are several ways in
which multinational sales are structured:

1. The company is highly centralized. Amway, for example, purchases everything

centrally, configures the technology so that it is a standard installation, and then
sends the product out to subsidiaries in more than 40 countries. The ISV (or
partner) in the U.S. is responsible for the sale and all technical support to Amway,
which in turn provides all the technical support to its subsidiaries. No other
partners are involved.

Recommendation: The entire sale, installation and maintenance go through the

partner that initiated the sale. There is no reason to split the proceeds with other
partners, even if their territory is indirectly impacted.

2. The company is highly decentralized. In its day, RJR Nabisco would evaluate a
product centrally, negotiate a standard, worldwide price or discount that applied
to its operating companies, and recommended it to its subsidiaries, but there was
no requirement to purchase it. The local partner in each market where RJR
Nabisco was based had to visit with the local subsidiary, go through a product
evaluation, close the sale and provide support.

Recommendation: The originating partner would get a 10% marketing fee from
each sale, and this should be managed by the ISV. The selling partners would
receive a discount that is 10% lower than normal (e.g., 30% instead of 40%), and
the ISV would either pay this marketing fee to the originating partner, or apply it
against his next product purchase. The local partner would keep his normal
share of the maintenance.

3. The company is loosely centralized. In many cases companies make the

decision to standardize on a certain product, and dictate that its subsidiaries
purchase and install the product. They negotiate standard pricing and terms, but
each purchase is made locally.

Page 137
 Recommendation: A higher marketing fee is paid to the originating partner,
since the local partner does not have to do anything to market or close the sale.
All he needs to do is contact the local subsidiary, install the product, and invoice
for the purchase. The standard formula is to split the margin on the sale between
the two partners, and allow the local partner to keep the maintenance.

4. The company has centralized purchasing, but local installation. The product is
evaluated centrally, and worldwide purchases are made through the originating
partner. However, the product is installed and supported by a local partner.

Recommendation: The local partner gets a participation of 10% in the discount

for handling the local installation, but keeps the maintenance fees. For example,
if the total partner discount is 40%, the originating partner would get 30% and
10% would be passed on to the local partner.

Page 138
 Market Development Funds (MDF)

MDF can be a good way of supporting the efforts of a channel partner without
subsidizing marketing expenses up-front. MDF is usually done on a co-op basis, i.e.,
both parties participate in the cost of approved marketing initiatives. The percentage
is generally 3-5% of purchases, so that if the partner purchases $10,000 of product,
the ISV would “place” $300-500 in the MDF. As this builds up the partner can use
the money to cover 50% of the cost of running an ad, participating in a trade show,
putting on a product seminar, etc. Some points to keep in mind are:

 Make it easy to use. The purpose is to encourage a partner to spend money

promoting your product, and if the requirements are too restrictive they won‟t
bother;

 Describe the approved marketing initiatives, but keep the door open for the
partner suggesting something he would like to try that you may not have
thought of;

 Make it easy for them to access the approved marketing materials they can
use, such as logos, fonts, text, trademarks, layouts, etc.

 Push training. Allow the partner to use the funds for sales and technical
training, and communicate the training programs and resources that are
available;

 Require receipts. If they have run a display ad, get a copy of the ad and the
invoice, to make sure they actually spent the money;

 Measure the results. Over time some initiatives will be more successful than
others, and this might vary by market, so use the program as a way to fine-
tune your marketing program;

 The partner can be reimbursed in cash or as an extra discount against future

purchases. Extra discounts are easier than sending money, but some
partners like the idea of getting “cash”.

Page 139
 Sales Contests

Sales contest differ from quota clubs in that they are more specific, and are usually
short term in nature, whereas quota clubs are normally for annual results. Sales
contests can be tailored to meet the needs of an ISV, for instance:

 focusing on a specific platform if the product is multi-platform

 introducing a new product (e.g., first three sales)
 moving into a new vertical market
 up-sizing the average sale (prize for the largest sale)
 expanding the market (sales to new customers as opposed to repeat
sales)
 reaching year-end objectives

Sales contests can be creative and flexible, but work best when the reward is tied
directly to the desired result, and paid out quickly.

It is often a good idea to base a sales contest around activities rather than sales.
The sales cycle for many complex technologies can be 6-12 months, which means
that there is little a reseller can do to impact the outcome in the short term. The
sales that close in a given quarter were actually “made” one or two quarters earlier.

In order to close sales there has to be a pipeline, so an effective sales contest can be
structured around activities that generate prospects. For example, if installing and
evaluating a demo early in the sales process is a key step in getting commitment
from a prospect, then getting more prospects to evaluate the product in a given
quarter could be the measurement.

One way to structure the contest is to have a quarterly “lottery”, with one “lottery
ticket” issued to a reseller or a salesperson for every documented evaluation during
the quarter. The person with the highest number of evaluations has the greatest
chance of winning, but everyone who produces at least one evaluation gets to
participate. The prize should be something other than money, and could range from
a nice dinner for two to something more substantial, such as a plasma TV or a cruise,
depending on the value of each sale, and the importance of building the pipeline.

Page 140
 Quota Clubs

Quota clubs are a way to reward the actual salespeople, rather than the partner's
company as a whole. While it can be difficult to monitor, try to set targets for the
salespeople (or a product group), and make sure that the targets are set high enough
to cover the prizes offered. Prizes are usually all-expense paid trips, for three days
to one week, with all of the winners going to the same place at the same time. Some
companies like to combine their domestic and international rewards so that a larger
group travels together, and can benefit from sharing a wider range of experiences.

When setting the targets, the numbers should be based on the relative market sizes,
so that partners in smaller markets have an opportunity to win as well.

Page 141
 Spiffs

Spiffs are commonly used in the U.S., and it means giving cash or merchandise
directly to the salespeople responsible for your product.

Spiffs are a good way to influence the individual salespeople in a partner

organization, especially if the product is sold by multiple salespeople, and if the
salespeople are responsible for selling multiple products. Spiffs can be used for
short term goals, such as $100 for each license sold by the end of the month/quarter,
or to focus on a specific product within a product line.

Make sure that the partner's management agrees to this, because they may object if
they feel that spiffs are not consistent with their internal objectives or compensation
plans.

Page 142
 Initial Marketing Reports

This refers to the report that the partner should be submitting on a monthly basis.
Since there may not be a pipeline to report in the first few months, the focus would be
on what they are doing to market the product.

This could be a narrative report describing the marketing actions that were completed
during the month, the result, and what they plan to do the following month. After the
first month, for example, the partner might report that he sent a mailshot to 1000
companies, of which 35 responded with a request for additional information, and that
he plans to call each of the 35 prospects, combined with a second mail shot to a
different group of targets.

This report is important because it confirms that the partner is doing his job. It gives
the channel manager a basis for evaluating his performance, and it gives him/her a
reason to call the partner every month. If, at the end of the first month, the partner
says that he didn‟t send out the mailing he was supposed to do, the manager should
make a note of it, and make sure that the partner understands that he is expected to
execute the marketing plan that had been agreed upon. If the partner hasn‟t done
anything by the end of the second month, the ISV will have a basis for terminating
the partner, rather than having to wait six or twelve months to confirm that the sales
targets aren‟t going to be met.

The report also gives you a chance to work with the partner to modify the marketing
program if it isn‟t working. It may well be that the partner sent out a direct mail piece
that generated little or no response. You can then try and suggest changes to
improve the quality of the mail piece, or perhaps suggest other marketing techniques
that might be more effective.

Page 143
 Pipeline Report

Registering prospects that are generated. We recommend using a standard Excel

spreadsheet format for this. The purpose of this report is to show the overall level of activity
in a market. It will list the companies that are evaluating the product, how far they are in the
process, the expected dollar amount of the sale, and what the likelihood of closing is. In
addition to showing what the pipeline is, it will give you an idea of what the sales cycle is in
different markets, and perhaps give you an opportunity to make recommendations on how to
shorten the cycle if it seems to be unusually long. However, be aware that some partners
will resist registering their prospective clients, partly out of mistrust (concern that their ISV
will try to sell direct and cut them out), and because they dislike unnecessary paper work.

It is important that the reporting not be complicated or time-consuming. The objective is to

give you some positive feedback, and to keep the partner focused on selling the product. If
the partner has to submit a monthly report, he will not want to send a report that shows no
progress.

Page 144
 Sample Pipeline Report

XYZ Sales & Marketing Report for the Month of _______, 2008

List Final Estimated Total

Company Product(s) Quantity Price Discount Price Status Month Sale Comments
(U.S.$) (U.S.$) to Close (U.S.$)

STATUS

$ = Payment has been received

A = 100% - Sale (Documents signed; PO issued)
B = 90% - Approved (Verbal approval received; contract negotiation in process)
C = 70% - Proposal (Evaluation completed and successful; proposal issued; decision pending)

Page 145
 Partner Portal – Main Elements

Partner portals, also called Extranets, can vary in complexity and functionality. At
their core is a partner profile database (usually SQL Server) with an interactive
communications capability that can be used by resellers, channel managers, reseller
sales people, and even customers to link everyone together in an extranet-centered
communications web.

The partner database becomes the repository of all reseller information, and the
portal uses this data to improve communications, marketing programs, lead
distribution, literature fulfillment, and dynamic partnering processes within the
extended sales enterprise. Vendors define which information goes to what classes of
partners and then use the extranet capabilities to automatically put this intelligence
into the hands of specific partners.

Some of the features that are often found on partner portals include:

Marketing

The portal can be used for a wide range of marketing-related functions. At its
simplest level it is a repository of marketing materials that can be downloaded by
partners. As it evolves, it can be used to track leads generated by specific marketing
initiatives as a way of measuring effectiveness, and the partners‟ follow-up. The
portal can also be used to implement and track marketing programs that are tailored
to individual channel partners.

Lead and Sales Management

This can be both in-bound and out-bound lead management. In-bound leads are
generated by the reseller, and they register the leads with their vendor in order to
ensure their exclusive right to purse that prospect. Information about a prospect that
is captured in the lead management module can be fed into the pipeline report, the
order processing system and accounting as it moves through the sales cycle.

Out-bound leads are inquiries received by the vendor and that are sent back out to
the most appropriate channel partners. Targeted lead can be routed based on
partner profiles including geography, vertical market expertise, complementary
services, product certifications, authorizations, test scores, close rates, etc.

The portal is an ideal tool to follow the progress of sales, including sale cycle
analysis, forecasting and pipeline tracking.

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MDF and Co-op Marketing Program Management

MDF and Co-op marketing programs can be automated using the portal. Once the
basic components of the programs have been established, each partner should be
able to access their specific program on the portal. Both the vendor and the partner
will be able to view allocated and under-utilized activities; payment requests can be
submitted and approved electronically; the ROI of each initiative can be calculated if
they are linked to the lead generation module.

Training and Technical Support

While the initial training will normally be in-person, on-going supplemental training
can be provided more effectively on the portal, using e-learning technology. It can be
the source of course information, scheduled webinars, certification requirements,
new product information, etc.

The portal should also be used for automated tech support. At the very least it
should contain an FAQ that covers most basic issues that are likely to come up.
More sophisticated functionality would include automated trouble ticket tracking, and
a searchable database of resolved issues.

Order Processing and Payments

The system can be integrated with the accounting system, allowing partners to:

 Manage keys on-line. If the products have soft keys that can be renewed for
extended evaluations, and/or temporary keys that are issued to correspond
with the payment terms, channel partners should be able to manage this
within the agreed parameters (e.g., no more than one 60 day renewal for an
extended evaluation)
 Process orders
 Submit payments when credit cards are accepted

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 Regular Newsletters

Short, but regular, newsletters can play an important role in keeping partners
informed, and to make them feel part of a larger community. Keep in mind that they
are working isolated from the ISV, so they will not always be aware of the exciting
developments that the company is going through.

Possible topics:

 New product developments

 Sales successes, both domestically and internationally. This lets a partner know
that there are things happening and keeps him motivated, especially if he is
having a tough time getting started
 Describe new marketing programs that have worked, either domestically or
internationally
 Incentive programs
 Scheduled training programs that are open to international partners
 Monthly or quarterly list of the top five or ten partners. People love recognition!
 Partner profiles. Announce and describe new partners as they are recruited.
Welcome them aboard, and give them some visibility in the network. Spotlight
partners that have done particularly well, provide some background information
on the company and the salesman
 Management profiles. Have you hired new people? Have any of your managers
(in particular, any managers that were introduced to partners during the training)
done something interesting lately?

Suggestions:

 Keep it short, preferably to one page, and keep it simple, with a minimum of fancy
formatting and graphics. It is important that it not be a burden to write, or the
international manager won‟t find the time to do it
 Don‟t worry about keeping a regular schedule, such as every two weeks, or every
month at the same time
 The person writing it should keep it as an active file, adding items as they go
along, and then send it out once they have filled up a page
 Fax it, and e-mail it. Companies are getting overwhelmed with e-mail, so e-mails
and attachments that are not urgent either stay in the in-box (and quickly drop off
the screen) or are filed away, never to be seen again. A fax will always be
printed out and put on someone‟s desk, and in many cases partners keep a file of
the newsletters they have receive

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 Annual Partner Review

An extensive annual partner review would be limited to partners that have a significant, and
preferential, relationship with the ISV, particularly those that have been granted some level
of exclusivity. The review is actually a re-qualification of the partner, to determine whether
they deserve to be renewed on the same terms. It is a good way to summarize the status of
their efforts, and where they want to go from here. This review should ideally be done at the
partner‟s facilities, but can be done by phone or video conference if travel is impractical.

BASE DATA

1. Name of partner:
2. Territory:
3. Name of Relationship Manager:
4. Product & services offering:

 Products/solutions (in relation to market positioning)

 First level hardware support, warranty, spare parts
 Software support
 Training
 System and/or network integration
 Facility management
 Service bureau
 Other

5. Marketing Strategy and objectives: differentiation from competition, sales

penetration, volumes, image.
6. Current contractual status with ISV (VAR, SI, OEM, ...), expiration date of
agreement

MARKET POSITIONING

1. Market positioning: which horizontal, vertical or geographic markets were targeted?

2. Size of the market (total market value & growth, breakdown by addressable products &
industry)
3. Main characteristics of the market: well funded, price sensitive, innovative? Type of
purchase cycle, procurement process, political influence? Custom or off-the-shelf
applications, few large sales or volume sales?
4. Target list: who were the major prospects?
5. Economic, social, technological or regulatory trends that affected the market

SALES PERFORMANCE

1. Successes and reasons:

2. Counter performance and reasons:

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Actual vs. projections

2003 2004 2005

Projected Actual Projected Actual Projected Actual
SW Licenses
Upgrades
Maintenance
New clients
Win-backs

Installed Base

Industry 1 Product/Application Revenues

Customer 1
Customer n
Industry 2
Customer 1
Customer n

Clients (last year and estimate for this FY)

Last FY This FY (est)

Total Number of Clients
Active Clients
Long term clients (active more than 12 months)
Average transaction value in US$

Analysis of Revenues

Total Group Of Which ISV

Category Last FY This FY Next FY Last FY This FY Next FY
(budget) (estimate) (budget) (estimate)
SW Licenses
Upgrades
Maintenance
Services
Other
TOTAL

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TECHNICAL SUPPORT (may be reviewed separately from marketing review)

1. ISV support:

 Training
 Software support
 Programs for staff training

2. Partner support:

 Education
 Software support
 Staff training & skill sets

Discussion on issues affecting support and maintenance of installed base, customer

satisfaction

MARKET TRENDS

1. Strong segments (application/product)

2. Declining segments
3. Emerging application/markets
4. Future large bids
5. Customer buying behavior

PRODUCTS & PRICING

1. Pricing competitiveness:
2. Training offering available in country:
3. Technical support coverage and pricing competitiveness:
4. Product performance issues:

COMPETITION

1. Overall sales performance

2. Pricing strategy
3. Strength by market segments
4. Losers/winners
5. Future strategies
6. Partnership/alliance

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ACTION PLAN

CURRENT & FUTURE MARKET POSITIONING & SALES OUTLOOK

1. Market positioning and potential: which horizontal, vertical or geographic markets will be
addressed?
2. Size of the market and trend:
3. Main characteristics of the market: well funded, price sensitive, innovative? Type of
purchase cycle, procurement process, political influence? Custom or off-the-shelf
applications, few large sales or volume sales?
4. Target list: who are the major prospects? Strategy to win?
5. Economic, social, technological or regulatory trends that can affect the market
6. Sales projections (most likely and best case) by product line, application and industry
with assumptions for the next two years (note: the spreadsheet on the following page
provides a guide for the estimation of the sales activity for the period):

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Partner's Name : Prospect List & Sales Outlook (2007-2008)

US$ Probability Est'd Qtr Probability % in Amount % in Amount

Contract
CUSTOMER APPLICATION COMMENT Value of Win % Close Slippage 2007 in 2007 2008 in 2008

FINANCE & BANKING 25

100,000 50 50,000 50 50,000

0 0

Sub-Total 100,000 50,000 25,000

TELCO
100,000 50 50,000 25 25,000

0 0

Sub-Total 100,000 50,000 25,000

GOVT
100,000 50 50,000 25 25,000

0 0

Sub-Total 100,000 50,000 25,000

OTHER
10,000 50 5,000 25 2,500

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OTHER MARKETING MIX & SUPPORT

1. Pricing strategy
2. Promotion and Marketing Communication plan and budget
3. Lead generation and qualification program
4. Field service and support personnel number and training schedule.
5. Structure of other services: professional services, system integration, application
support.

KEY SUCCESS FACTORS

1. List areas of ISV assistance sales & support:

2. List other:

INTERNAL ONLY – Not to distribute to partner

INTERNAL ASSESSMENT OF THE PARTNER

1. Base data

- Name of partner:

- Territory:

- Partner type:

- Partner since:

- Revenue Goal current year:

- Exclusivity:

- Vertical markets targeted

- Horizontal markets targeted

- Date expiration of agreement:

- Average discount from US List:

- List ISVs represented - Complementary with ISV:

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 - List ISVs represented - Competitive with ISV:

- Main competitors:

- Largest installation in $, type:

- Current customer base in $: overall

- Current customer base in $: ISV

2. Comments:

- ISV fit (culture, product offering, market strategy):

- Biggest strength:

- Reason for success:

- Biggest weakness:

- Reason for non-performance

- Recommendation of action plan:

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INTERNAL ASSESSMENT OF THE PARTNER (can be use for ranking)

1 = poor 5 = excellent

1 2 3 4 5
Overall expertise in ISV Products
Expertise in application SW support
Quality of sales organization
Quality of indirect channels & partners
Sales volume and growth since last review: overall
Sales volume and growth since last review: ISV
Experience in efficient promotion techniques: overall
(advertising, trade shows, industry seminar, ...)

Implementation of efficient promotion techniques :

ISV
Partner's cost structure and gross margin
Discount/concessions practices : overall
Pricing strategy for ISV products
Geographical coverage of territory
Vertical market coverage for targeted markets
Horizontal market coverage for targeted markets
Overall business experience
Quality of Management
Known litigation (No = 5, Yes = 1)
Reputation with suppliers, banks and customers
Export control and protection of intellectual property
Physical facilities (size, location, warehouses, etc...)
Financial strength
Knowledge of business methods and measurement
standards
Qualification of the management team & dedication
to ISV versus other ISVs represented
Communication with ISV
Customer satisfaction
TOTAL

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 Terminating Partners

Regardless of how carefully prospective partners are screened and qualified, or how
well they are managed after they have signed, a company will find it necessary to
review their performance on a regular basis, and in some cases terminate them. The
most common reason for termination is a partner not meeting specified performance
goals, be it implementation of the marketing plan or sales targets.

If the relationship does not get off the ground, and the partner‟s performance is
dismal from the start, then termination should take place sooner rather than later. It
is not as clear-cut, however, if the partner has met his targets, but is showing a drop
in sales, or an inability to increase sales while other markets are growing.

In this case an ISV should make an effort to determine what the cause of the slump
is, rather than summarily terminating the agreement. If a partner has had some level
of success with a product, it can be difficult and time consuming to replace him with
someone that can do better. And in the meantime sales will drop further, and the
product‟s reputation in that market could be damaged, making it even more of a
challenge to find a replacement partner.

There are a number of things that can impact product sales in a market. Some of
them are temporary, while some of them could be long term and justify termination:

 The product manager/lead salesman left the company.

 check with the owner to find out why they left and if he/she is being
replaced
 if possible, contact the person who left, and find out why
 if it is a woman, is she on maternity leave, and will she come back?
Maternity leaves, especially in Europe, can last six months to three
years
 What was in the pipeline when they left, and what is being done to
follow up?

If the success of the product was based on the efforts of one salesperson who
has now left, and the company has no intention of hiring or appointing a
replacement, termination should be considered.

 A competitor has taken over the market

 Is it a local competitor, or another foreign product?
 What are the key factors to its success? Better technology? Better
price? Local language?
 What does the partner need from you to become more competitive?

 The market has become saturated. Market conditions will vary from country to

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 country, and since many markets are fairly small to begin with, it is possible that
they will reach saturation sooner than others. If this is the reason given by the
partner, try and confirm the trend with other ISVs who are in the same market.

 The market is in an economic slump. In the past, economic problems in Asia and
Brazil have made it impossible for partners to meet their targets, and replacing
them is not always the right answer.

 The exchange rate has made the product much more expensive in the local
currency, and the partner is having a difficult time closing sales. Again, this is
something that happened throughout Asia and Brazil. Many ISVs responded by
dramatically cutting their prices in those markets, so that the price to the end user
stayed in the same range as before.

 Political uncertainty has made companies nervous about spending money.

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 Importance of Notices

Most good agreements will have notice periods before termination can take place.
While there are certain provisions that can result in immediate termination, most
require that the partner be notified of the default, and be given a certain period of
time to rectify (“cure”) the default. For instance, non-payment is a reason to
terminate, but first the non-payment has to be documented. This means that the ISV
has to send a notice by registered mail or an express delivery service that generates
a signed receipt, telling the partner that the payment is past due and that it has to be
made with x days. This is to eliminate “the check is in the mail”, or “we didn‟t get the
invoice” as an excuse.

It is important to comply with the notice requirements to avoid the possibility of being
sued for unjustified termination. If the relationship with the partner has been of a long
duration, and/or there has been a significant investment by the partner, it is best to
handle the termination by the book.

Page 159
 Master Checklist – 12 Month Activity Plan

In progress

Due Date
Person responsible for
Activity
the activity

Done
Strategic & Policy Decisions
Initial target markets
Channel strategy (VARs? OEMs?)
Revenue objectives for each market
Pricing and payment policies
Order form
Discount structure
Maintenance fee policy
Credit policy
Internal Support
Develop profile of channel manager
Hire channel manager
Marketing support
Company & product profile
Competitive matrix
ROI analysis
Documented sales process
Pre-designed web pages
GIM and/or white papers
Hi-level PPT presentation
Technical Issues
Document the integration issues
Identify complementary technologies
Establish tech support procedures
Develop soft keys and policies
Legal Issues
Trademark registration
Patent search
Partner application
Non-disclosure agreement
Letter of Intent
Formal Contract
Partner Support Programs
Sales training program
Technical training program
Partner manual
Program for partner conference

Page 160
 In progress

Due Date
Person responsible for
Activity
the activity

Done
Partner Recruitment
Define partner profile
Build long list of prospects
One-page outreach letter
Telemarketing script
Process for remote evaluation
Agenda for prospect meetings

Partner Management
Format for pipeline report
Sales programs and incentives
Quota clubs
Spiffs
MDF program
Sales contests
Newsletter template
Policy for cross-border sales
Annual review process

Page 161
 12 Month Activity Plan Worksheet

Time
Process Who
Frame
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8
Month 9
Months
10-12

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