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By Josh Krist, Content Contributor, SalesLobby.com.
Partner Relationship Management software, PRM, promises to change the way business is done. Businesses who use it say that finally, there’s a way to track their partnerships, which are increasingly the preferred modes of indirect channel selling.
This is good news for businesses that are increasing their channel portfolio, which is to say, good news for most businesses. Nowadays, between the Internet, automated phone systems, and the proliferation of call centers, almost every company has been forced to extend their reach through strategic partnerships.
"The best of the PRM companies and the most visionary have the opportunity to become the next generation CRM providers," said Jason Watkins, Senior Manager at the Austin, Tex.-based office of The Alexander Group, Inc., said.
Watkins said that in his opinion, there are four main players on the “pure” PRM field: Partnerware, ChannelWave, Allegis and Webridge.
Charles Chu, Director of Business Development at Cambridge, Mass.-based ChannelWave, agrees that PRM will be to business in the future what CRM is now.
“Indirect business is the reality of how business is now being driven,” Chu said.
Why PRM Exists
Chu said he and his teammates at ChannelWave believe that PRM came about because there is a need for businesses that deal with complex business-to-business relationships outside of the enterprise.
“It has become one of the core processes of driving revenue to the end customer,” he said.
Sham Sao, Vice President of Marketing at Austin, Tex.-based PartnerWare, said the primary economic driver of PRM is the need to achieve maximum market coverage and penetration in minimum time.
“Partners can increase coverage while reducing the cost of coverage. However, to most effectively work with partners, companies need tools to manage those relationships. The same forces that are driving the growth of e-business across other business processes are driving the automation of partner relationship management – e.g., greater efficiency, greater effectiveness,” he said.
Kevin McKelvey, ChannelWave’s Senior Alliance Manager, explained that since the beginning of buying and selling, vendors have recruited vast networks of partners. But, he said, as the sheer volume of partners and complexity of the business world have accelerated, a business is now left aching for something like PRM.
“There are layers of complexity with their partner channels. In addition, there are layers of complexity within those relationships,” he said. “The tremendous volume of business being driven through channels is itself a driver.”
Gary Whitney, Vice President of Marketing for Portland-based Webridge, said that many of his clients are looking for a solution that for most companies, it’s important to be able to find, cultivate, and change partners quickly.
Ken Rosen, Vice President of Marketing for San Francisco-based Allegis, explained that technology and the desires of the business world have fueled the rise of PRM.
"I think people are really just learning the importance of adopting PRM," he said, citing a survey that found 69 percent of Internet commerce last year happened through partners.
The PRM market is expected to reach $1 billion in sales by 2002, a tenfold increase from last year's $100 million, according to Stamford, Conn.-based research firm The Meta Group, Inc.
"The biggest thing that is driving the creation of PRM came from two things: One, the rise of the Internet, having a universal network that allowed multiple companies to work together without having to coordinate all their technical infrastructure … Number two, it was the re-rise of the value-added in the channel,” he said.
Ironically, he said, three or four years ago, popular wisdom held that the Internet would kill channels, but at the same time, Allegis was founding a company based on channel optimization.
This seems to hold to with other PRM companies, as well.
Is PRM a fad?
Often in booming economies, blossoming companies spread their tendrils, so to speak, in a complex web of partnerships and resellers. But, like in the gold and silver towns of yore, alliances dry up and shrivel away when business goes.
Jason Watkins, Austin Manager for AGI, noted that PRM “gets everyone looking at the world in the same way,” something that’s not likely to fall out of favor anytime soon.
Sham Sao from PartnerWare agrees.
“Partnerships and indirect channels are a permanent part of numerous markets,” he said.
“The roll that partners play varies depending on the type of market – in some markets, the partner may play a sales role; in others, a lead generation and referral role; and yet in others, a post-sales support role. Partners can assist in extending geographic coverage, offering complementary services, growing sales, and driving marketing,” Sao said.
“Partnerships are going to be with us permanently, and in fact they are going to accelerate," Ken Rosen from Allegis said.
He said that companies vertically integrate to increase visibility, efficiency and communication down the supply chain all the way to the end buyer.
"Companies can focus on their core competencies but have smooth connections to their selling partners. Partnerships are the way people are going to sell," he said.
ChannelWave’s Charles Chu noted that the “New Economy” is not as new as it seems.
“This really isn’t the new economy, this is the old economy with technical enhancements, and a platform,” he said.
“We actually pretend that they’re new concepts, when in fact, they’re not. Look at the insurance business, how long have they had independent agents? With our high-tech lens we would call them business partners,” Chu said.
“We don’t believe it’s a fad. We don’t believe it’s going away. We just believe that the time has come and that people are realizing there are things that can make doing business easier,” he said.
Kevin McKelvey noted that 4-5 years ago, the “myth of disintermediation” sprung up, and the middleman was supposed to go the way of the dinosaurs.
When the Web first became a mass medium, commentators envisioned everyone buying their products directly from the manufacturer, in the publishing world, it was envisioned that people would buy direct from the publisher.
“Now Random House is selling to Amazon,” he said.
As a matter of fact, if a Web surfer goes to randomhouse.com and tries to buy a book, he or she is referred to a list of partner online bookstores.
Webridge’s Gary Whitney referenced Digital Capital by Don Tapscott while talking about the future of PRM.
"His whole assertion is that even in the past and going forward in the future, the way people will sell is by forming these alliances to effect sell their services. So, if that’s not in danger of changing PRM will only become more valuable as the business world becomes more complicated,” he said.
All of this isn’t to say that PRM, the term, might be subsumed by the umbrella term of CRM.
Everyone interviewed seemed to agree that you can put wings on a car, but it won’t necessarily fly. McKelvey noted that it’s very possible that what’s known as PRM will eventually be known as CRM, but as of yet, no CRM company has learned the lessons of PRM: Partners aren’t like a sales force in that they can’t be coerced, and if they’re unhappy it’s all too easy for them to switch to your competitor.
While there is some common data that is shared by PRM and CRM, there are some fundamental differences, PartnerWare’s Sham Sao noted.
“A good analogy is to look at the CRM and ERP markets. CRM evolved from SFA, and in the early stages of SFA, companies that are leaders in the ERP market such as SAP and Baan talked of consuming the SFA market. The argument was that they possessed the key account data and revenue information, so it made sense for them to extend to this area,” Sao said.
“What we have seen is that 5-10 years later, the ERP companies still do not have robust CRM solutions and are looking to make acquisitions in the area,” he said.
Allegis’s Rosen said that if you talk to analysts about who the players are in the CRM space, what you'll mostly get is companies that are concerned with SFA.
“You're going to have people who tell you that it's one giant demand chain. And we respectfully say they're dead wrong," Rosen said.
PRM companies seem to agree that PRM is about aligning the goals of disparate companies and making this so financially attractive to partners in the form of leads and other incentives that they never want to leave your company’s sphere of influence.
What kind of companies use PRM?
Although it may belabor the obvious, two kind of companies use PRM. One, they have a large amount of partners. Two, it’s in their economic best interest to spend money on PRM to potentially make more money by harnessing their affiliate web.
In the early days, it was mainly the high-tech companies who were already using the Internet who first signed up for PRM, Webridge’s Gary Whitney said. Now, the insurance industry is manufacturing companies are very enthusiastic about installing PRM.
“Any industry that uses some kind of partnership to help them sell their products is a good candidate for a PRM solution," he said.
According to ChannelWave’s Kevin McKelvey, businesses often come to him asking why 80 percent of their business is done by 20 percent of their partners. Businesses often want to know what the signs are of a good partner, and lack standard, constantly updated “report cards” on organizational progress toward business objectives.
“What is the profile of a successful partner versus and unsuccessful partner, how can I identify them early on in the cycle to give them what they need to succeed?” he said.
Allegis’s Ken Rosen said that his company usually caters to two sorts of businesses, hypergrowth and very large-scale multibillion-dollar operation.
“The hypergrowth companies have systems that they know will break, the magical number is about 400 million dollars," when they need a new system, he said, explaining that companies usually approach him when they hit the $150 million to $200 million mark.
According to Rosen, the typical cost of a subscription-based PRM solution is $25,000-$30,000 per month.
What to think about before you purchase CRM
"I think that PRM is one of the most complex pieces of business solution software,” said the Alexander Group’s Jason Watkins.
He recommends that companies thinking of implementing PRM use Web-based, not just Web-enabled solutions. He said he also looks kindly on companies that use flexible, open programming code like XML or Java.
“Right now a lot of what’s out there is primarily lead management which will allow you to design partner score cards, and centralizes your partner’s database,” he said, but recommends applications with as much functionality as possible, including real-time reporting with hourly database back-ups, real-time discussion threads, an integrated content management system, a closed-loop lead management system, and a VAR locator.
PartnerWare’s Sham Sao said that just as a PRM needs to deliver a certain type of product to help with a company’s success, he advises clients to do certain things to help themselves.
“They need to commit to rolling out the PRM system with a solid program for partners that includes clear messages and incentives, both carrots and sticks. In order for the system to be successful, partners must be properly trained and motivated to use the system,” he said.
ChannelWave’s Kevin McKelvey said that if the partners find the system helpful, they’ll be happy to use it.
“This is the place you can live as a business partner: it gives you a snapshot into the leads, into the revenue that you’re generating, it give you a snapshot into things like certification and testing,” and can link revenue with co-marketing funds to track the success of different marketing campaigns, he said.
“There are also levels of personalization which drive use. If you’re a platinum member (of the partnership affiliation) you might get extra leads, and special product announcements before anyone else,” he said.
Rosen explained that the first step in successful rollout is database population, which itself can be used as an incentive: "If you don't tell me anything, then you won't get the leads, because you don't fit my target.”
At first glance, data population would appear to be the biggest crunch, but between the ease of import from popular data management programs (Excel spreadsheets are the most common files imported into PRM) and the incentives for partners to enrich their profiles, this isn’t as big a hurdle as it would first appear.
Besides incentives to partners, companies need to be honest about their own business processes to be successful.
"One of the biggest things is a commitment to really understanding and defining your business processes. You need a commitment to actually modeling your business so you can automate your right processes instead of your wrong processes," he said.
Allegis advises companies to rollout their PRM system in small pieces.
“They should decide what parts of the package give the highest value-add to the company, and which give explicit value to the partner that encourages them to use the system,” Rosen said.
Another thing to think about, as everyone agrees, is how long it’s going to take to implement the PRM solution.
“If it's going to be your competitive advantage, you want to get going fast," Rosen said.
Besides all of the above, a company should also ask their potential PRM provider the depth of their products; the amount of customers who successfully use their products; and the type of customers who use their products.
If possible, find a company similar to yours that has used a provider’s PRM solution and find out, directly from the company, how it's working out.
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