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Seeding Partnerships in the Cloud

Frederic Kerrest

Signing up partners is easy.  Building effective partnerships is another story.  I have spent the last 20 years working on different software partnering structures.  Between HP, BroadVision, Salesforce.com and SuccessFactors, I have learned a lot about what it takes to create a great partnership.  I am now working on a new startup with some old cronies from Salesforce.com, called Okta.  Okta is chartered to help companies that are using multiple SaaS applications to better adopt, access, and manage their cloud environments.  Given Okta’s ability to automate both single sign-on and user management across all of these applications, it sits smack in the middle of Cloud and on premise applications.  For Okta, partnering is not only important to our success, it is an imperative. As we build out our partner programs, I am reminded about some lessons that I have learned specific to SaaS partnering that I want to share:

1)Model Matters

It is very hard to get a company that doesn’t live in the subscription based service world to line up behaviorally.  Many traditional partners are used to working in the licensed software world where you sign your license, collect the check, and move on.  There are few things worse for a SaaS company than to have a partner that is short sighted.  For the most part, SaaS customers are only really profitable for you after the first year.  That is the purity of the model.  Many perpetual license partners or resellers don’t get this. They are used to getting higher margins up front and are really not set up to make sure your solution gets adopted.  SaaS vendors live and die based on renewals.  Understand your partner’s economics and how they make money from their customers.  Understand what their account management strategy is.  You can’t have a partner that doesn’t have a stake in the long term success of the customer as well.  Pick partners with similar subscription or service oriented folks that are built around long term relationships with their customers.

2) Invest in Partner Enablement

When working with a partner, you are lucky to get 5-10% of their mind share.  You need to keep this in mind and build tools for them to easily integrate you into their every day work lives.  Train them every chance you get.  Any minute they are willing to spend learning about you should be capitalized on.  Build sales materials that can be rebranded into their presentation and tools. Build a resource page or partner portal and make it easy for them to find info and get help when they need it.  Many companies sign up partners but never spend the time to enable the partner to be successful.  It is hard enough to onboard your own employees where you have 100% of their attention.  Make it easy for your partners.  Think through how you can build out enablement to ensure your partner’s are effective and have a great experience working with you.  If you build it, deals will come.

3)Deal with Channel Conflict Up Front

A good percentage of deals die after the first wrestling match for a deal.  Many companies do not think through channel conflict and sign up partners without understanding how they will work or compete with their own direct channels and with other partners.  This is the kiss of death.  As soon as a partner rep feels like they got “screwed” by your company, word will spread like wild fire and it will be hard to turn momentum around.  I am not saying that it is always necessary to double comp your reps, but think through lead registration and rules on how to quickly escalate and deal with any conflict.  Do it at the beginning of the sales cycle as well.  Don’t wait until it becomes a jump ball between your reps and the partner.  And certainly, never let it get to the point where the customer gets sucked in as referee.  There should be clear registration rules, split rules, communication back and forth as to who is taking the lead on which deals.  Make sure your company is aligned internally as well.  I can’t tell you how many times I heard “well the customer said they wanted to buy from us direct”.  Make sure your executives back the partnership and everyone plays nice.  It only takes a few infractions around channel conflict and you can kiss off all the hard work spent on nurturing the partnership.

4)Be Selective

Many companies compensate their alliance people based on signing up contracts with partners.  You end up with a ton of relationships that use up your resources and add little value to you or to the partner themselves.  When I was at BroadVision, I took the number of partners down from over 400 to about 100 and we still had way too many.  It is much better to have targeted, highly productive partners then a gaggle of folks you signed up to beef up your web site partner page.  You don’t need a million partners, especially when you are starting out.  Just pick a few good ones and work hard to make them successful.  Over time, build programs and tier them so you are rewarding your best partners and can focus on them.

Partnerships are very important, especially in the SaaS model.  If done right, they can help exponentially grow your business and can help you get into customers that would take you years to win on your own.  But, like any meaningful relationship, they take work.  I have seen many companies add partnerships as an afterthought or treat them as a side bet.  If you are going to partner, put some thought into who you want to be in bed with and map out how the relationship will work.  Working through some of the items above can save you, your company, and your partners a lot of aggravation.  Okta understands this and will be the best and easiest partner to work with.