In May 2014, Accenture published a report entitled “Improving the ROI of Indirect Channel Incentives”. In the report, Accenture identifies some critical factors that impact channel management, including:
- “As much as 10 percent of the typical high-tech company’s indirect channel partner incentives are overspent, or are generating an insufficient return on investment.”
- “… on average about 70 percent of the typical high-tech company’s revenue comes from the indirect channel” and is growing to 80 percent or more by 2015.
- “… incentives typically are a high-tech company’s largest marketing expenditure, with high-tech companies investing on average 3 percent to 5 percent of revenues…”
Accenture further points out that cloud models have introduced new purchasing behaviors that fundamentally impact indirect sales – and as a result, the interests of channel partners. In order to keep VARs (value-add resellers) engaged and productive, high-tech firms must develop new incentive strategies that will address the evolving needs of partners. In fact, Accenture believes that “several new technology and macro-economic trends will further heighten the importance of engaged and motivated partners in the coming years and, in turn, likely will require fundamental changes in how one structures, manages and allocates spending on channel partner incentives.”
How Does Your Organization Measure Up?
Accenture’s report focuses on high-tech channel management. High-tech is under stress from the paradigm shift associated with the adoption of cloud models. The urgency to support channel management in high-tech with better automation systems just makes sense.
However, the challenges of managing a complex, multi-level channel model is not unique to high-tech: organizations in many verticals share similar challenges, including those in oil and gas, manufacturing, pharma, among others. In fact, in a recent analysis, Revitas identified more than 35 different vertical industries represented by the organizations it is currently working with to determine how to improve their revenue and contract management automation.
Revitas’s systems offer a unique view of the likely sources of overspend cited by Accenture, shown in the figure below.
Clearly, tracking and monitoring channel activity is a necessary step in providing manufacturers in many industries with the ability to increase the ROI from their incentive investments.