Prime Time for PRM

Posted: July 27, 2006 in CRM

After a long period in which there seemed to be little to report, PRM or partner relationship management, appears to be enjoying an upswing.  PRM was an unfortunate fellow traveler with all the other ‘RM’ permutations that came about in the dot.com bubble.  There was also eCRM which was a distinction without a difference and ERM in which the ‘e’ stood for employees and that idea has suffered much the same fate as PRM—not totally forgotten but decidedly a backwater compared to CRM. 

It may simply be that once a lot of people figured out how much work it took to implement and use CRM many enterprises figured one ‘RM’ (real mess?) was enough to have on the plate at a time.  At any rate, as CRM has settled into a more predictable business PRM is again bubbling to the surface, but that explanation is too simple to account for all things PRM these days.

A better set of explanations can be found in supply and demand.  For, example, for some time, the amount of technology products sold through the channel and channel partners has been steadily increasing to the point that people at BlueRoads, for example, tell me that more technology products gets sold through the channel today than through the direct sales force. 

What’s happening?  Well, to a degree this is a predictable part of the technology life cycle.  As product categories mature, much of the mystery goes out of them because the consumer becomes acquainted with a product type’s purpose, performance, and features so there is less need for sales forces to perform missionary selling.  At that point, producers or OEM’s become obsessed with lowering costs to effectively compete with other vendors doing the same and one of the major sources of cost in any product is labor.  By selling product through a channel, a vendor may give up some margin to make room for the reseller, but to a great degree, the vendor effectively gets out of the variable compensation business and pays only for successful conclusion of a deal.

Another approach, which is largely driven by the type of product and its complexity, is to simply go retail.  The retail approach is appropriate for consumer goods like personal electronics and routers for the home, but often as products are down shifted from a captive and highly trained sales force it is difficult to make a direct transition to the store shelf, hence the need for the partner channel.  This wisdom is reflected in the indirect channels strategies that companies like CISCO use and is confronted by the recent announcement by NetSuite to offer its product on the shelves of CompUSA. 

I am betting on NetSuite to succeed in this effort, by the way, but for different reasons.  The path has largely been paved already for NetSuite by many generations of business software sold at retail that do some of the same things, such as accounting, that NetSuite does, but it’s still a wait-and-see situation.

To net out the last few paragraphs, there is more structural need in the market for PRM today than in previous years and the vendor community is responding by supplying more product to meet the demand.  The demand and supply was most recently reflected by Salesforce.com’s entry into the category with its usual twist on things by offering its solution on-demand.  It’s hard to argue with the logic of on-demand PRM especially when it comes from a vendor of on-demand CRM. 

On-demand CRM has been a grass roots phenomenon in which small companies bought a few seats of CRM to manage their small businesses.  What may not have been apparent to many people is that a lot of small companies are resellers of OEM products.  With a large deployment in small companies, introducing an on-demand way for the OEM’s to manage their resellers was a no-brainer.

Nevertheless, PRM is more than simply CRM on steroids managing partners instead of end customers.  A good PRM package must be able to work in both directions—from the OEM to the partner and, just as important, from the partner back.  Where it gets tricky is that the pipelines going in each direction carry different things. 

The most important thing an OEM can get back from a partner, aside from a signed contract, is information.  That information can include how long it takes to work a lead, results of marketing programs that the OEM at least partially bankrolls, or accurate forecasts of the book of business.  On the other hand, partners like to get leads and marketing funds and they are reluctant to share deal information for fear of having the information fall into the hands of another reseller in the same market. 

Conventional PRM did a great job for some of the needs at the interface between the parties, such as lead sharing, and less well at providing visibility into the things individual sales representatives are working on.  Part of the reason for the resurgence of PRM lies in the fact that companies like BlueRoads and now Salesforce.com have identified ways to enable OEMs to gain more visibility into the activities of the sales representatives thus improving the information flow back to the OEM.  Considering the fact that PRM is usually paid for by the OEM, visibility has given OEMs a reason to care about PRM again.

So, to net it all out, the resurgence of PRM appears to me to be a sign of the times.  Markets and customers are changing and vendors are adjusting the way they sell to accommodate shifting demand.  Smart vendors of PRM solutions saw this shift coming several years ago and began adjusting their products or started developing from scratch.  As usual, it is the forward looking front office vendors that are reaping the biggest rewards.  The laggards will have no choice but to spend money to catch up and it is doubtful that all of them will recoup their investments.

Comments
  1. It is great to see that even now the economy is suffering from the credit crunch most businesses understand that it is important to keep investing in their Channel Partners.

    Partner Relationship Management is definitely here to stay!

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