Evolving ICT Alliances – Evolving Resale   1 comment

As late as ten years ago, which is now *after* the dot com bubble, ICT alliances used to be a welcome, flexible, value added variation of the indirect sales channel. This is now changing.

 

Then as now, ICT market players would carefully manage their indirect sales channel, and many of them would have direct sales, leveraging internet more and more in the wake of pioneers such as Dell.

 

Alliances are the third leg, if you will, of a sales tripod. We can define them as: managed joint sales cooperation with independent market players that have complementary offerings to one’s own.

 

How do alliances differentiate from direct sales and indirect channel sales? By using special added value to buy ourselves greater flexibility.

 

The special added value of alliances arises when an alliance partner can sell and deliver our product together with theirs in a combination that appeals customers better than either product alone.

Greater flexibility, compared to the indirect sales channel, comes from an alliance being a much looser agreement, if still a managed one. Each side manages what of their own resources they choose to assign to joint effort. Often, each organization determines and changes quite freely as they go what resources to put in.

So, it makes sense for both parties to reward success when it comes and focus on other options otherwise: this makes intents almost as valuable as commitments, and exclusivity just a possible option, limited and uncommon at that.

 

Crucially, alliances have evolved to allow, and grow, ad-hoc, one-off resale even as resale puts them squarely in competition with the indirect channel.

 

Compare this with the indirect channel model: there, each partner commits a known amount of resources to specific targets, and both plan carefully for managing failure as well and success – think of penalties, over and above having to put in the resources you formally committed to.

Hence exclusivity is more common, and is always explicit as it has a clear price tag, Even more common is explicit unbalance, where one smaller partner commits more tangible resources more clearly than the other, in exchange for the little tangible, still painstakingly managed, endorsement of the other party’s and use of its brand.

 

Has this mechanism worked? Famously, and it still does.

 

What is driving it to change? The same factor that drives evolution of the direct and indirect sales channels: differentiation between channels, and competition between them.

As each market player drives efficiency into their sales, including the indirect channel, margins for the channel decrease and, even more importantly, margins are transferred to the channel from other areas to cushion the impact. Alliances are a prominent area from which to take margin away to focus on the channel.

 

Crucially again, ad-hoc, one-off resales by alliance partners gets under pressure as resale becomes more of an exclusive feature of the indirect channel.

 

How are alliances keeping up, and how will they?

What alternatives shall we seek?

Shall we forget the third leg of the sales tripod and just dig in deeper with the other two?

 

One fact points to alliances having a strong value in ICT sales today, and in the future, at the very least for large global ICT market players.

 

Consider Microsoft, with its long history of pure-bred indirect sales only. Microsoft recently introduced “alliances” even as they grow their direct sales for both traditional licenses and cloud-based services. This discussion above very much applies to Microsoft “alliances” today, and will likely become even more relevant in the future.

 

I believe the key to keep alliances differentiated from the indirect sales channel is, and will be more and more, evolving and enriching their own specific form of resale, building on today’s special, ad-hoc resale.

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Posted March 16, 2010 by Gianluca Marcellino in Alliances

One response to “Evolving ICT Alliances – Evolving Resale

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