Keep Your Customers Close and Your Channels Closer


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5 Essential Strategies for Customer Intimacy and Channel Revenue Growth

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Keep Your Customers Close and Your Channels Closer

  1. 1. W H I T E PA P E R Keep Your Customers Close and Your Channels Closer: 5 Essential Strategies for Customer Intimacy and Channel Revenue Growth
  2. 2. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h Keep Your Customers Close and Your Channels Closer: 5 Essential Strategies for Customer Intimacy and Channel Revenue Growth Executive Summary customers can flexibly adjust capacity or capability without Software producers and intelligent device manufacturers having to swap out hardware. While these innovations drive 40 percent to 67 percent of their revenues from their provide a competitive advantage against commoditization, channel partners. Yet, channel processes are often costly the role of channel partners will have to evolve in order for and inefficient. Most vendors also complain about their them to thrive. lack of visibility into channel partners and end customers. Intelligent device manufacturers also lose 4 percent of gross In this whitepaper, we demonstrate how vendors and their profits to the “grey market”- sales by unauthorized brokers channel partners can grow revenues by streamlining channel that undercut the vendor’s pricing. Both software producers processes, plugging grey market revenue leaks and learning and intelligent device manufacturers are beginning to evolve more about their customer base, while transforming their their revenue models. For example, many intelligent device business models. Our research shows that vendors can manufacturers are developing ways for customers to field- grow revenues by 20 percent-30 percent through these upgrade their products, resulting in business models where approaches. Component C Ent it lements Manufacturer Component or Software Producer Supplier Product A (embeds Component C) Product B 100 units 50 units Distributor D1 Distributor D2 Product A Product A Product B 40 units 50 units 40 units Reseller R1 Reseller R2 Product B Bundle (A + B) Product A 40 units 10 units 30 units End Customer E1 End Customer E2 Usage 40 units of A Product A Product B 10 units of B Business Unit B1 Business Unit B2 30 units of A 30 units of B Figure 1: A realistic and complex channel ecosystem2 Flexera Software: FlexNet Operat ions White Paper Series
  3. 3. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt hComplexities of Channel Ecosystems Make (Configure)-to-Order and Make-to-StockThe channel ecosystem for software producers and intelligent inventory modelsdevice manufacturers is a complex network of company-to- Make (or Configure)-to-Order models are common forcompany interactions and hand-offs. computers and networking equipment. In these scenarios, a final product is assembled using components. Some of theseEnd customers use channel partners for a variety of reasons1 components may originate from the manufacturer; othersincluding their: might be sourced from upstream suppliers. As an example, a storage solution could be assembled by a manufacturer • Geography in many markets: channel partners are the like HP using components from HP and interface cards from only way customers can buy a vendor’s products as the one or more compatible card manufacturers. In a Make vendor may have no sales coverage (Configure)-to-Order model, the vendor does not build or assemble the product until an order is placed by a channel • Technology expertise partner. Typically, as a result, the vendor knows who the • High level of customer interaction and service end customer is, and the various channel touchpoints • Understanding of end customer needs involved in the order. • Exceptional technical support Make-to-Stock models, where a finished product is placed • Fast turnaround and delivery with channels, are becoming increasingly rare in some high- • Relationships with many vendors and complementary tech markets. In a Make-to-Stock scenario, a product might partners spend months on a reseller shelf before being fulfilled to an end customer. • Reputation of vendors or brands they sell/recommend • Aggressive pricing Many manufacturers are also overlaying postponement strategies on these inventory models. Postponement strategiesThe various flavors of channel partners (e.g., distributors, refer to a manufacturing approach where product variationsvalue added resellers, systems integrators–refer to the are pushed as close to the end customer as possible. Asglossary for an overview of terms used in this article.) offer an example, a printer manufacturer might have a duplexvarying levels of value along the above dimensions. printing capability (the ability to print on both sides of the paper). There are two ways to deliver this capability. First,In our experience, channel interactions become complex a manufacturer could create two distinct products, onebased on the following factors: without duplex printing and one with it. Second, using a postponement approach, a manufacturer might build aNumber of tiers between a vendor and their end customer single base product without duplex printing and offer duplexThe number of intermediaries in the demand chain has a printing as an add-on option for channel partners and enddirect impact on how difficult it is to track your installed customers. The postponement approach frees the manufacturebase as a vendor. For example, in Figure 1, we depict a from having to predict how many duplex-printing-capablerealistically complex demand chain consisting of a vendor printers might be sold; they can simply build the base productwhose product is sold through two tiers: a distributor tier and and let customers and channel partners order the duplexa value-added reseller (VAR) tier. In this example, the VARs printing add-on as the need arises.own the customer relationship. More often than not, vendorsdo not have any idea about who their end customer is. These models complicate many aspects of doing business in the channel ecosystem, including:“Vanilla” products versus highly configurable product bundlesA “vanilla” product applies to situations where all end • Revenue recognition: many vendors cannot recognizecustomers receive the same product. In contrast, in Figure revenue for units shipped to channel partners until1, some distributors carry one product while others carry those units are actually purchased and delivered toa different product set (Product A versus Product B). Some end customersresellers like Reseller R2 assemble a product bundle • Entitlement splits, transfers and mergers: As an example,using Product A (from Distributor D1) and Product B (from Distributor D1 in Figure 1 might purchase 100 units ofDistributor D2). End customer E2 orders the bundle from Product Ac. They might then ship 40 units to Reseller R1the reseller. The experience for end customer E2 can be and 60 units to Reseller R2. Reseller R2 might in turn sellsignificantly more complex for the initial purchase and 30 units to End Customer E2. Keeping track of all theseongoing activities than end customer E1. For example, ownership changes can be a daunting task.E2 has to keep track and activate two products (if productactivation is required) and if required, keep track and return • Channels also require more physical deliveries of softwarethe bundle to the reseller, when needed. and updates, which increases costs and reduces margins, in addition to impacting customer service.1. Driving Channel Growth in the Global Market: Global State of the Market Research, Institute for Partner Education & Development, April 2008Flexera Software: FlexNet Operat ions White Paper Series 3
  4. 4. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h Size of the end customer organization: consumer versus small, Percent Revenues from Channel Partners medium or large business Selling into a large businesses poses challenges as these 67% customers would like to manage their entitlements. For example, in Figure 1, End Customer E2 might want to ship 40% Product A from their bundle purchase (Product A + Product B) to Business Unit B1 and Product B to Business Unit B2. Again, allowing these types of ownership transfers and keeping track of them can be a huge challenge for channel partners, vendors and end customers. Size of vendor organization Software Producers Intelligent Device Manufacturers Many manufacturers are themselves large global organizations with a complex internal supply chain. A final product can contain components sourced from various business units and might go through several more Percent of Channel Revenues by Software Category touchpoints such as a regional distribution center (e.g., in Asia) to a country sales organization (e.g., the vendor’s All Software 40% Australian sales organization) and then to one or more Consumer Applicat ions 91% levels of channel partners. Many complexities result, including keeping track of products and the components they contain for transfer pricing purposes, lower margins, System Software 77% pricing issues and lengthy fulfillment lead times. Content Applicat ions 71% Royalty Management and Usage of Embedded Components Vendors who embed software or hardware components Security Software 58% from other vendors into their products have an added challenge of keeping track of the usage of these embedded CRM Applicat ions 29% components to allocate revenue splits. In Figure 1, Product A embeds a component from a component supplier. The $% business arrangement might call for the vendor to pay the Figure 2: Average revenues from channel partners component supplier 10 percent of their product revenues. In other cases, the component might be trialware (e.g., a 30-day trial to a piece of software on a laptop; the vendor sells the laptop in this example) and the component supplier 5% More t han 500 might owe the vendor 10 percent of component revenues (e.g., as consumers convert trialware into a paid license) delivered by the vendor. Such royalty arrangements might result in one party or the other leaving money on the table. In the first example, the vendor owes royalty payments to 15% the supplier for each unit of a final product sold, whether 101-500 or not the royalty-bearing component is activated by a customer, clearly to the vendor’s disadvantage. In either 58% 22% case, both parties would be keen to know the usage of Less t han 50 51-100 components to accurately track revenue splits. Figure 3: 42% of software producers use more than 50 channel partners4 Flexera Software: FlexNet Operat ions White Paper Series
  5. 5. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h Challenges reported by Software Producers and Channel Partners Software Producers Channel Partners Channels are becoming more important to revenues but... Have to rely more on channels to make sales targets 52% 56% Reluctant to put money into joint marketing 80% Channel Partners with very little sales; 86% Channels are not optimized Too many partners 85% based on performance Less leads coming from software producers 55% Increased competition between channel partners 50% and with vendor’s online channels 70% Lack of/little communications between partners 38% and software producers 50% Periodic sales reports difficult to collect 46% and aggregate 55% Lots of manual processes Cut channel costs 44% for channels Margins decreased for channel partners 22% 80% Difficult to manage international partners 50% Partners demanding faster product delivery 22% and fulfillment 60% No visibility into customer base Lack of/little visibility over final customers 60% Lack of interest from channel partners to push 60% your productsFigure 4: Top Channel Challenges for Software ProducersBusiness Challenges: Software Producers, Intelligent • Competition between channel partners of a givenDevice Manufacturers and their Channel Partners vendorChannel partners, on average, account for 40 percent2 ofrevenues of software producers and 67 percent3 of revenues Inefficient and manual channel-facing processesfor intelligent device manufacturers. 42 percent of software Both vendors and channel partners agree that channel-producers use more than 50 channel partners (see Figures facing processes have a long way to go with respect to2 and 3). While 52 percent of respondents (see Figure 4) efficiency. Some of the symptoms of inefficiencies theywould admit that channel partners will play an increasingly report include (see Figure 4):important role in growing revenues, many hurdles remain.4Specifically: • Lack of or little communications between vendors and channel partners with respect to leads, opportunities,Channel tiers are top-heavy with lots of product catalog and pricing changes, promotions andunderperforming partners sales informationThe usual approach to growing channel revenues isto recruit more partners. But, the channel structure for “Due to order errors, duplicate efforts within the salesmany large software producers and intelligent device channels and the inability to track shipments in real-time,manufacturers is already top-heavy with non-performing Seagate realized its need for a consistent process and achannel partners. In part, this is the result of recent years of single system through which their distributors and OEMsmergers and acquisitions by vendors, with channel partners worldwide would be able to quickly and accuratelyof acquired companies being tacked on to existing tiers. conduct business transactions…”5The symptoms of this lop-sided structure include (see Figure – P. Bose and R. Dey, Infosys4 for details): • Periodic sales reports are difficult to collect and • Lots of channel partners with very little revenue aggregate contribution • Vendors want to cut channel costs while channel • Vendors reducing partner marketing funds partners complain about declining margins • Channel partners complaining that they get fewer leads • Vendors are finding it difficult to manage international from vendors partners2. Worldwide and North America Software Channel 2008, IDC, August 20093. Positive Growth and New Market Perspective Paint Healthy Outlook for Pervasive Technology Channel, Dan Neel, Everything Channel (, May 20074. Software Channel Survey 2009, Avangate5. Channel Stewardship: Driving Profitable Revenue Growth in High-Tech with Multi-Channel Management, P. Bose and R. Dey, Infosys, August 2007Flexera Software: FlexNet Operat ions White Paper Series 5
  6. 6. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h • Channel partners are demanding faster product delivery at steeply discounted prices and target end customers by and fulfillment undercutting the vendor’s prices. On average, grey market prices are 27 percent lower than the vendor’s pricing, • Recruiting new channel partners is hampered if the which eats into profits for both vendors and their legitimate vendor is perceived as difficult to do business with channel partners. “A recent IPED study has proven that 50 percent of channel “The grey market has many sources, i.e., unauthorized partners are dissatisfied with the relationship with their dealers obtain products from a variety of sources normally vendors...this is due to a multitude of reasons, including at a discounted price either due to price arbitrage, abuse the need for: better training, product customization, better of incentive programs, or simply because the products are communication, simplified MDFs and partner programs, not what they seem. For example, an OEM may choose to more shared leads and better deal registration. The bottom discount products for a particular end customer to increase line: Vendors spend much time and money securing sales, especially if there is a stiff competition for that partners to market their products; however, they must customer. To obtain deeply discounted products for open- enhance their ability to address many of these issues in market speculation, a channel partner may deceive the OEM order to retain existing partners.”6 into deep-discounting products for non-existent customers and – Institute for Partner Education & Development then divert those products to the grey market for possibly greater gain. Some brokers may misrepresent themselves in “We have to invest in providing self-service processes for the authorization process and use the resulting relationship our channel partners. Until now, we have been focusing on to obtain discounted goods that are then diverted into the making better “widgets”. Now we also have to compete grey market.” 7 at making the ordering/renewal process better for the channel partners so partners will continue doing business “Our products are available at 90 percent discounts to with us.” regular prices in the Chinese grey market” – Director of Licensing for a prominent network equipment – Large Software Producer manufacturer Software and hardware business models are converging Lack of visibility into end customers Virtual appliances are emerging for delivering complex When you think of channel partners, think of customer on-premise software. A virtual appliance “provides a usage and demand information. Ideally, information about turnkey experience similar to today’s hardware appliances. your customer’s usage of your products should flow back to Deploying an appliance can be as simple as a few clicks, vendors, with physical goods and entitlements flowing from with only configuration tweaks that need to be made. And the vendor to customers in response, as shown in Figure 1. since the appliance pre-integrates an entire software stack Most software producers and intelligent device manufacturers into a composite package, it should only receive one stream we talk to say they know very little about their customers of patches, most likely from the ISV, which nearly eliminates when channel partners make the sale and nurture the complex regression testing. No longer will the channel be relationship with customers. able to rely on installation and maintenance services as an entryway to the end user.”8 “Information is everything. Knowing your customer is the #1 goal” Software as a Service (SaaS) is expected to grow faster than – Intelligent Device Manufacturer selling portable computing on-premise software, with some analysts estimating that 25 devices to educational institutions percent of software revenues will be delivered as SaaS by 20119. Hardware products are becoming more software-like Grey market revenue leakage is growing for intelligent device as intelligent device manufacturers enable customers to order manufacturers capability and capacity on demand. In short, software and Intelligent device manufacturers lose, on average, $10B of hardware revenue models will be more similar than different their gross profits to grey market sales, which translates into in future. The role of channel partners is indeed murky under 4 percent of high-tech industry profits6. The value of grey these transformations. market goods grew to about $58B in 2007, up 80 percent cumulatively since 2002 (equates to 12.5 percent year over year growth). Five Strategies for Customer Intimacy and Revenue Growth Given the challenges that vendors and their channel The grey market is driven by unauthorized brokers who partners face, we have found that five strategies can purchase the vendor’s products from legitimate channels 6. Driving Channel Growth in the Global Market: Global State of the Market Research, Institute for Partner Education & Development, April 2008 7. Effective Channel Management is Critical in Combating the Grey Market and Increasing Technology Companies Bottom Line, KPMG Grey Market Study Update, 2008 8. Software Appliances Are Changing Channel Dynamics, J. Waxman and B. Waldman, IDC, November 2008 9. Gartner Market Trends: Software as a Service, Worldwide, 2008-2013, Sharon A. Mertz, Chad Eschinger, Tom Eid, Hai Hong Huang, Chris Pang, Ben Pring, Gartner, 5 May 20096 Flexera Software: FlexNet Operat ions White Paper Series
  7. 7. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt hhelp vendors learn more about their end customers while assistance, and marketing can be effectively made with theallowing both channel partners and vendors to grow best partners. Those vendors that are able to combine goodrevenues. These are discussed below. data with good analysis won’t care about flat-out partner recruiting alone. They will beat the competition becauseStrategy 1: Know your best partners by analyzing they’re doing more with the right partners.”performanceTo get a handle on lop-sided channel tiers and the resulting Strategy 2: Enable self-service for channel partnerslackluster channel performance, vendors must invest in Given the complexities of the channel ecosystem, insystems that help them assess how much each channel particular, business scenarios related to “Make-to-Stock”partner is actually contributing to the top line. To do this, inventory models and delivery of complex product bundles, itevery order and its associated entitlements should capture is essential to enable self-service for channel partners to serveall touchpoints starting from the vendor through a complex customers and channel partners in the best possible manner.demand chain (as in Figure 1) to the end customer. Self-service should include capabilities for a channelTo be sure, many vendors do have manual processes in partner to:place by which partners could submit gross revenues theyhave delivered in a given period. While this is valuable, • View what they orderedit is not at the level of product families. As a result, it is • Understand what their customers orderednot possible for vendors to rationalize channel partnersand incentives based on product family, geography or • Add/modify customer records as agreed to betweenother criteria. the vendor and the partner • Understand what products and associated services theirTracking and analyzing order-level partner performance will customers are usingenable you to: • Administer transfers, mergers and splits of entitlements • Measure the effectiveness of joint marketing programs between end customers with partners, at the level of products being promoted • Allow electronic fulfillment of software and updates • Set up performance based sales incentives for individual products These capabilities could reside within a Partner Portal, a key • Assign leads to best partners for a given product based initiative that many vendors are thinking about to increase on past performance channel visibility and improve communication. These capabilities should also integrate to Partner RelationshipStudies show that revenues from channel partners can grow Management systems for automating order processing,their revenues by 40 percent10 when vendors identify and payments and invoicing.nurture the best performing channel partners. This wouldtranslate to about 20 percent higher revenues for a typical “Seagate has dramatically reduced order errors andintelligent device manufacturer and about 11 percent higher duplicate effort, decreased their costs per order by 60revenues for a typical software producer. percent on average and capitalized on new and enhanced revenue opportunities. The company has also gained direct,IDC11 sums it up as follows: real-time visibility into distributors’ and OEMs’ sales and order processes”12 “Vendors will not be able to get ahead by simply adding more partners than the competition. 2009 will be the Studies show that streamlined processes and deeper year that the best vendors use “partner analytics,” or the adoption of customer-facing systems can grow revenues by intelligent analysis of partner data, to make better informed 5 percent13. decisions about which partners to invest in, and which partners to demote or even drop. With lower partner Strategy 3: Establish a direct connection with end users program budgets, getting smarter about allocating resources The easiest way to learn more about your customers is to to partners will be critical. Vendors should be leveraging ask them to register their product prior to usage. There their partner data to understand which partners are the are several ways to do this. Many software producers high potentials, which are the influencers, which ones do we work with gather basic customer information (e.g. great cross-sell, and which ones are missing opportunities. company name, contact email) as part of a product With that knowledge, investments in training, support, sales activation experience. Other vendors that do not use10. High-Tech Channel Evolution: Solutions for Sustainable Growth and Success, The JS Group, 200711. IDC Worldwide Software Business Solutions 2009: Top 10 Predictions, M. Fauscette, D. Bibby, M. Wardley, M. Levitt, M. Webster, A. Pang, S. White, M. Perry, B. Lykkegaard, A. Konary, R. Mahowald12. Channel Stewardship: Driving Profitable Revenue Growth in High-Tech with Multi-Channel Management, P. Bose and R. Dey, Infosys, August 200713.,14. Maintenance Revenue Protection 2.0: The Urgent Threat and What Software Vendors Can Do About It, Chris Dowse and Ben Galison, Neochange, 2009Flexera Software: FlexNet Operat ions White Paper Series 7
  8. 8. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h product activation still gather non-personally identifiable “Upsell / Cross Sell Incentives - Most vendor programs put a information on their end user’s usage of their software disproportionate amount of emphasis on Solution Providers products after opt-in by end users to gather this information. bringing in net-new customers. New customers are valuable, but they take longer to win and cost more to persuade. Don’t In-product messaging is also an effective way to engage eliminate incentives for winning new customers, but to add a with end users on an ongoing basis to inform them of component that pays partners an incentive for winning more possible updates, new product announcements and other business by penetrating existing accounts more effectively.” promotions. In addition, establishing a direct connection to end customers increases the value of software maintenance “Most vendors allow partners to profit from the sale of the by using entitlement-based updating to ensure customers initial warranty and support services - whether the partner only receive the patches and updates their support contracts will deliver those services or not. But more vendors than ever entitle them to. are allowing partners to participate in the renewal of these service packages as a way to provide partners with future Revenues can be enhanced by 5 percent14 by knowing earning potential.” 16 more about your installed based and driving upgrades and upsells of your products. Offering these opportunities will make vendors more compelling for channel partners: Strategy 4: Tie channel incentives to product activation by end customers “From a channel partner perspective, the big problem is to The source of the grey market for your products can often get us to actually use a vendor’s system. One reason we be tied back to abuse of channel incentives by partners, would use a vendor system is if it helps us with maintenance such as misrepresenting or faking end customer information. renewals. The big problem we face today is that when a Tracking entitlements (e.g., sold-to customer name) as they customer comes to us for a renewal, we don’t know fully move through the demand chain (in Figure 1 for example) what the customer owns to give them a complete quote. along with enforcing product activation is the only sure way We only know what the customer bought through us, not to know who the end customer is, who they purchased their the complete list of products they own from the vendor in products from and under what incentive program. question, which limits the value of maintenance renewal we can sell the customer.” While 51 percent15 of manufacturers collect device serial – Director Sales, Mid-market Reseller17 numbers from channel partners as part of their claims submissions for incentive programs, it is cumbersome Proactive maintenance renewals, upgrades and upsells can or impossible to correlate serial numbers to incentive- contribute to 5 percent revenue growth. eligible end customers until end customers call the vendor for technical support. As an example, suppose a Conclusions manufacturer offers distributors a 10 percent rebate for Table 1 summarizes these five strategies and their economic units for Product A sold during the month of September. It impact on vendors and channel partners. Taken together, is difficult to accurately determine actual sales of Product these strategies can grow vendor revenues by 20-30 percent A by the distributor during September, in addition the and channel partner revenues by 40 percent. system being open to abuse (e.g., claiming rebates on serial numbers sitting on the shelf). However, if the vendor tracked entitlements sold to the distributor and the product activations during September from customers who bought from the distributor, such verification would be easy. Strategy 5: Empower channel partners to grow revenues via cross-sells, upsells and maintenance renewals With the impending shift in revenues to Software as a Service (SaaS) and virtual appliances, traditional revenue streams for channel partners (e.g., installation and configuration services) are under threat. One response that vendors can offer is to delegate technical and customer support to resellers. They could also empower channel partners to cross-sell and upsell products to existing customers and renew maintenance. 15. Effective Channel Management is Critical in Combating the Grey Market and Increasing Technology Companies Bottom Line, KPMG Grey Market Study Update, 2008 16. Engage Your Partner in the Total Business Opportunity, Institute for Partner Education & Development, April 2008 17. Maintenance Revenue Protection 2.0: The Urgent Threat and What Software Vendors Can Do About It, Chris Dowse and Ben Galison, Neochange, 20098 Flexera Software: FlexNet Operat ions White Paper Series
  9. 9. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt hTable 1. Summary of the Five Strategies and their Economic Impact Business Challenge Strategies Estimated Economic Impact Channel tiers are top-heavy with Know your best partners by analyzing channel 40% revenue growth for channel lots of underperforming partners performance at the level of individual product revenues which translates to: families. Invest in and nurture the best performing • 20% revenue growth for partners a typical intelligent device manufacturer • 11% revenue growth for a typical software producer Inefficient channel facing Enable channel self-service for orders, entitlements, 60% lower costs per order processes renewals 5% higher revenues Lack of visibility into installed Establish direct connection with customers. 5% higher revenues through effective base when channel partners • Cross-sell and upsell products based on your cross-sell and upsells make the sale understanding of products used • Protect maintenance revenues by updating or upgrading only entitled customers Grey market revenue leakage is Tie channel incentives to product activation by end 1.5% of revenue growth for a typical growing customers intelligent device manufacturer Software and hardware Empower channel partners to cross-sell and upsell 5% revenue growth business models are converging, products and renew maintenance threatening traditional revenue streams for channel partners Total Impact About 20%-30% higher revenues for vendors. Note that the above benefits may or may not be additive.Flexera Software: FlexNet Operat ions White Paper Series 9
  10. 10. Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h Glossary Term Definition Vendor A software producer or a intelligent device manufacturer Software Producer A company that is primarily in the business of selling software products Intelligent Device Manufacturer A company that is primarily in the business of selling hardware devices. Examples include: computer and networking equipment, medical equipment, test and measurement equipment, imaging products etc. Original Equipment Manufacturer A company that supplies components to other companies to incorporate into an (OEM) supplier end-customer facing product. Example: Flexera Software FlexNet Operations incorporates Cognos reporting. In this example, Cognos is the OEM supplier to Flexera Software. Distributor A channel partner that primarily fulfills orders from downstream VARs and SIs. Value Added Reseller (VAR) A channel partner that performs a number of specialized tasks to enable a solution for an end customer. Specialized tasks might include product installation, training, configuration and bundling with other software/hardware provided by the VAR. Systems Integrator (SI) A channel partner that assembles a complex solution using components sourced from many vendors. End Customer A consumer or business that uses a software or hardware product Entitlement What the customer purchased. Example: 10 copies of Adobe Acrobat; 100 ports of a LAN switching capability in a LAN switch. Product Activation The process by which a customer fulfills the rights to use a software or hardware product. Transfer pricing Transfer pricing refers to the pricing of contributions (assets, tangible and intangible, services, and funds) transferred within an organization. For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be sold to a foreign subsidiary. The choice of the transfer price will affect the allocation of the total profit among the parts of the company. This is a major concern for fiscal authorities who worry that multi-national entities may set transfer prices on cross-border transactions to reduce taxable profits in their jurisdiction. This has led to the rise of transfer pricing regulations and enforcement, making transfer pricing a major tax compliance issue for multi-national companies. Source: Wikipedia About Flexera Software Flexera Software is the leading provider of strategic solutions for Application Usage Management; solutions delivering continuous compliance, optimized usage and maximized value to application producers and their customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive solutions- from installation and licensing, entitlement and compliance management to application readiness and enterprise license optimization - to strategically manage application usage and achieve breakthrough results realized only through the systems-level approach we provide. For more information, please go to: www.flexerasoftware.com10 Flexera Software: FlexNet Operat ions White Paper Series
  11. 11. Flexera Software LLC Schaumburg United Kingdom (Europe, Japan (Asia, For more office locations visit:1000 East Woodfield Road, (Global Headquarters): Middle East Headquarters): Pacific Headquarters): www.flexerasoftware.comSuite 400 +1 800-809-5659 +44 870-871-1111 +81 3-4360-8291Schaumburg, IL 60173 USA +44 870-873-6300Copyright © 2011 Flexera Software LLC. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners. FNO_WP_Channel_Oct11