Channel Partners Train Their Sights on CRM

Channel partners serving U.S. small and medium-sized businesses can expect their sales to this group to rise by 17 percent to US$154 billion over the next year, according to AMI Partners.

SMBs can expect to see a greater selection of customer relationship management (CRM), enterprise resource planning (ERP) managed security, and IP telephony applications from these companies.

The number of channel partners offering CRM applications rose to 31 percent this year from 25 percent in 2005, Avinash Arun, New York-based research analyst for AMI, told CRM Buyer.

The main driver behind this growing supply is the demand for such products -- as well as the fact that they provide higher revenues than traditional packaged software and services offered by channel partners, Arun said.

Cultivating the Channel

These developments -- the expected rise in sales and a growing sensitivity to marketplace demands -- reflect the growing importance vendors have been placing on channel cultivation as margins in the tech industry have slipped.

"There has been a little more aggressiveness from the vendor side ... to give incentives to sell products," Arun explained. A vendor might offer a discount for software if hardware -- increasingly a commoditized product -- is sold as part of the package, for instance.

IBM (NYSE: IBM) provides another example. Earlier this year, it offered its business partners new sales and marketing incentives to heavily promote its Software as a Service delivery initiative. Channel partners now receive a 10 percent referral fee for each lead that turns into a sale. IBM has also made its sales force available to partners to help them close opportunities faster.

Realigning Services

At the same time, channel partners themselves are responding to new dynamics in the marketplace. They are repositioning themselves as providers of IT and Internet-related services, instead of as providers of traditional -- and now low margin -- hardware and packaged software.

The number of value added resellers (VARs) in the U.S. market slipped slightly, AMI Partners found. However, this is not an indication of firms leaving the market, according to Arun. Rather, the decline can be attributed to a revamping of services offered by these companies as they strive to capture higher revenues.

Service providers anticipate the highest revenue growth at 19 percent, according to AMI Partners, followed by systems/network integrators at 18 percent.

The drive to grow revenues is also pushing more channel partners to focus on medium-sized businesses at the expense of smaller firms, AMI Partners found.