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How to build a VAR channel.

HOW TO BUILD A VAR CHANNEL "Most of what is written about the VAR channel pertains to hardware companies only, and VARs themselves tend to be very hardware-oriented," says Angie Deacon, a consultant who helps software companies set up programs for value-added resellers. "That's ironic, because VARs make most of their profits off software and services."

Nevertheless, says Deacon, who formerly managed Hewlett-Packard's VAR channel, it's possible for software companies to overcome this hardware bias and build productive VAR relationships. As a result of work with Sybase, Software Publishing Corp., WordStar, and several vertical market companies, she offers these guidelines for building a VAR channel:

* Emerging markets are good VAR turf: VARs shouldn't be asked to compete against a company's own direct sales force or in markets where there's already a strong dealer presence, says Deacon. VARs are best cracking new markets, where their "expertise and contacts" play a more important role, and where buyers often expect a high level of service and customization.

* More isn't better: "It may seem attractive to sign up as many resellers as possible," says Deacon, "but software companies dramatically underestimate the cost of supporting unproductive VARs." (One technique she sometimes recommends is to ask would-be VARs to pay an up-front licensing fee, which helps offset the cost of technical consulting and training.) At the same time, Deacon warns against giving a VAR an exclusive franchise for a market or territory. "So many VARs fizzle out in the first year that an exclusie is just too risky."

* Fat margins aren't enough: VAR generally receive reseller discounts that range from 35% to 50% off list price, says Deacon, "but there is more to the equation than product discounts." The real way to boost a VAR's bottom line by providing strong technical and marketing tools that help VARs "add value to your software, allowing them to sell it at above list price."

* Keep the VAR's sales reps happy: "It doesn't matter how many times you take the president out to lunch," Deacon points out. "You'll get much better results when you structure programs to benefit individual sales reps." For example, she suggests joint sales calls, lead generation programs, seminars, and video and slide presentations.

* Team up with hardware vendors: A good way to leverage a VAR program is to find a larger hardware partner and co-promote a "total industry solution," Deacon says. "It's easier than you think to build these relationships," she adds. "Go for a big win at the local level with a VAR you and the hardware company have in common. If the local sales people are excited, the word will get out very quickly to headquarters."

* Cut through the red tape: "It usually isn't the company that throws the most money into the channel that has the best VAR relations," says Deacon. "Instead, it is often the company with limited resources and simple programs." Her advice: Put a dedicated account manager in charge of VAR relations, and don't frustrate VARs with complicated application procedures, credit policies, order processing, and shipment tracking systems. "VAR programs fall apart when companies lose sight of the importance of being easy to do business with," she says.
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Title Annotation:Paragon Management Group Pres Angie Deacon provides guidelines to enable software publishers to create a viable value-added reseller program
Date:Nov 30, 1990
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