The largest dictionary that we could find, Webster’s 3,194 page, 600,000+ word New International Dictionary, contains the following definition for “crisis”: The point in time when it is decided whether any affair or course of action must go on, or be modified or terminate; decisive
moment; turning point; also, a state of things in which a decisive change one way or the other is imminent. This definition pretty well sums up the channel management situation in the IT industry (computer hardware, computer software, telecommunications products, services and solutions).
The current state of channel management
Channel management, and the practice of channel management, appears to be broken in a large number of IT organizations. Hundreds of millions of dollars have been spent on relationship management software (CRM, PRM, RRM, . . .) and “process related” channel management training, but still productivity at the individual channel/partner/reseller/relationship manager level disappoints.
Something is clearly missing out there.
ChannelCorp has been researching the art and science of channel management for over 15 years. We have learned a great deal about success and failure in the field. It is safe to say that the IT industry is in the midst of a crisis in channel management. The objective of this section of ChannelCorp Intelligence is to outline the current state of channel management in the IT field. Specifically:
what channel management challenges IT vendors and distributors currently face;
what specific financial acumen challenges exist;
what competencies do individual IT vendor channel management currently require to do their jobs; and
what gaps currently exist between the channel strategies of IT vendors and the level of channel management competency currently in place; and
what number of channel management professionals are currently engaged in “level 3” channel management.
Current channel management challenges
To continuously update our workshop Channel Management: the business dynamic, we are constantly working with our clients to identify critical challenges in the channel management field. At this point in time, the “big 5” channel management challenges in the IT industry are as follows:
1. Vendor’s partners are not making large enough investments in the technical, marketing and sales programs being offered by the vendor to their partner community. As a result, sales targets are being missed all over the place.
2. Partner investments in the vendor channel programs drive results.
3. Large numbers of IT vendors’ field-based channel management personnel are not having discussions about making money with CEOs and CEO direct reports of their partners.
4. Many of the IT vendors’ field-based channel management personnel are calling too low in their accounts to find people who they can have productive business discussion with.
5. Too many of the IT vendors’ field-based channel management personnel do not have the financial skills or business acumen to have productive investment, or return on investment, discussions with senior managers in their partners (should they be able to get in front of the CEO or their direct reports). To test the efficacy of Challenge #5, we present a Financial Acumen Quiz.
Financial Acumen Quiz
ChannelCorp research indicates that financial skills are one of the key competencies of the best channel management professionals in the IT business. It turns out that resellers can actually “smell” channel professionals who “can’t count” or do not understand the language and basic concepts of finance.
The following thirty (30) True/False questions are presented to help you test your own financial acumen and help you decide as to whether or not you should invest the time and money to review the ChannelCorp Reseller Management Handbook or seek education.
Use the following guide to score yourself:
30—27 correct You know your stuff
24—26 correct Still pretty good. If errors are systematic, review the material that gave you trouble
21—23 correct This is the range that you should review the entire Reseller Management Handbook and attend Channel Management: the business dynamic
18—21 correct This is the range where your partners probably know that you struggle with financial language and concepts but they are too polite to say anything. Read the entire Reseller Management Handbook and attend Channel Management: the business dynamic
17 or fewer correct Your accounts know you can’t count. This perception that they have about your financial skills likely impacts how they see investments in the channel programs that you present to them. Read the entire Reseller Management Handbook thoroughly. Plan to increase your Financial Acumen soon by attending Channel
Management: the business dynamic
The answers are presented after Question 30.
True False Correct?
1 Financial information or accounting systems consist of three separate actions: recording, reporting, analysis.
2 Accrual-based accounting is a better system for small business. Cash-based accounting is a better system for large business.
3 Accounting records allow a business person to prepare three documents: Profit and Loss, Balance Sheet, Statement of Changes in Financial Position.
4 Profit and Loss Statements tell you how much you owe and how much you own. It is also called a Cash Flow Statement.
5 On a Balance Sheet, Assets equal Liabilities plus Owner’s Equity or Capital.
6 The Statement of Changes in Financial Condition integrates the data in the Profit and Loss Statement and Balance Sheet.
7 An expense is different than a capital expenditure because it is incurred to directly generate/obtain revenue.
8 Expense planning is done to eliminate expenses not to find out which expenses are worth what you pay.
9 Forecasts of revenue and expenses are the foundations on which a business’s total financial plan is based.
10 A decrease in inventory investment by a business reduces the amount of cash available.
11 Just-in-time or quick ship inventory stocking schemes help businesses conserve cash.
12 Most resellers get paid within 45 days by their customers.
13 Offering a customer the option to lease reduces reseller accounts receivable investments.
14 It is not possible for a business to be profitable and short of cash.
15 The essence of cash flow planning is working out the timing differences between cash in and cash out.
16 Working Capital is the same as Cash Flow.
17 Working Capital is the difference between Total Assets and Total Liabilities.
18 Liquidity Ratios and Profitability Ratios are the same.
19 Efficiency Ratios and Leverage Ratios are the same.
20 Resellers that need cash usually get it from the bank or from private capital providers.
21 More than 50 per cent of resellers can’t meet their current liabilities as they come due.
22 Most banks will loan money to a business on the basis of forecast cash flow and projected profits.
23 Income Statement and Operating Statement are different terms for the Profit and Loss Statement.
24 Breakeven occurs when all of the costs of a business have been met.
25 The lower the level of fixed costs in a business (as a percentage of total costs), the lower the breakeven level.
26 It is not possible for a business to have negative Equity.
27 People are an asset, therefore they are accounted for in the Balance Statement.
28 The Current Ratio is calculated by dividing Total Assets by Total Liabilities.
29 The “Acid Test” Ratio is a less conservative ratio than the Current Ratio.
30 ROI and ROA are the same.
Total number correct
30—27 correct Excellent/relax
24—26 correct Good/review systematic errors
21—23 correct Early concern — read Reseller Management Handbook and attend Channel Management: the business dynamic
18—21 correct Real concern — your partners likely know — read the entire
Reseller Management Handbook and attend Channel Management: the business dynamic
17 or fewer correct Take action now — your Financial Acumen is probably affecting your earnings. Attend Channel Management: the business dynamic.
Financial Acumen Quiz — answer
1. True. 2. False. 3. True. 4. False. 5. True. 6. True. 7. True. 8. False. 9. True. 10. False. 11. True. 12. False. 13. True. 14. False. 15. True. 16. False. 17. False. 18. False. 19. False. 20. False. 21. True. 22. False. 23. Ture. 24. False. 25. True. 26. False. 27. False. 28. False. 29. False. 30. False.
Bruce Stuart, is the President of ChannelCorp Management Consultants Inc.
ChannelCorp is a global management consulting firm that specializes in increasing the productivity of vendors’ channels, and the value of the businesses of IT vendors’ channel partners. Visit ChannelCorp’s Web site at www.channelcorp.com.<