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Keep Your Customers Close and Your Channels Closer: 5 Essential Strategies for

Customer Intimacy and Channel Revenue Growth

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
Software producers and intelligent device manufacturers drive 40 percent to 67 percent of their revenues from their channel partners. Yet, channel processes are often costly and inefficient. Most vendors also complain about their lack of visibility into channel partners and end customers. Intelligent device manufacturers also lose 4 percent of gross profits to the “grey market”- sales by unauthorized brokers that undercut the vendor’s pricing. Both software producers and intelligent device manufacturers are beginning to evolve their revenue models. For example, many intelligent device manufacturers are developing ways for customers to fieldupgrade their products, resulting in business models where customers can flexibly adjust capacity or capability without having to swap out hardware. While these innovations provide a competitive advantage against commoditization, the role of channel partners will have to evolve in order for them to thrive. In this whitepaper, we demonstrate how vendors and their channel partners can grow revenues by streamlining channel processes, plugging grey market revenue leaks and learning more about their customer base, while transforming their business models. Our research shows that vendors can grow revenues by 20 percent-30 percent through these approaches.
Component C

Ent it lements

Manufacturer or Software Producer
Product B

Component Supplier
50 units

Product A (embeds Component C)

100 units

Distributor D1
Product A Product A

Distributor D2
50 units 40 units
Product B

40 units

Reseller R1
Product A Product B

Reseller R2
Bundle (A + B)

40 units

10 units
Product A

30 units

End Customer E1
40 units of A 10 units of B

End Customer E2 Business Unit B1
30 units of A

Product B

Business Unit B2
30 units of B

Figure 1: A realistic and complex channel ecosystem


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Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h

Complexities of Channel Ecosystems

The channel ecosystem for software producers and intelligent device manufacturers is a complex network of company-tocompany interactions and hand-offs. End customers use channel partners for a variety of reasons1 including their: • Geography in many markets: channel partners are the only way customers can buy a vendor’s products as the vendor may have no sales coverage • Technology expertise • High level of customer interaction and service • Understanding of end customer needs • Exceptional technical support • Fast turnaround and delivery • Relationships with many vendors and complementary partners • Reputation of vendors or brands they sell/recommend • Aggressive pricing The various flavors of channel partners (e.g., distributors, value added resellers, systems integrators–refer to the glossary for an overview of terms used in this article.) offer varying levels of value along the above dimensions. In our experience, channel interactions become complex based on the following factors: Number of tiers between a vendor and their end customer The number of intermediaries in the demand chain has a direct impact on how difficult it is to track your installed base as a vendor. For example, in Figure 1, we depict a realistically complex demand chain consisting of a vendor whose product is sold through two tiers: a distributor tier and a value-added reseller (VAR) tier. In this example, the VARs own the customer relationship. More often than not, vendors do not have any idea about who their end customer is. “Vanilla” products versus highly configurable product bundles A “vanilla” product applies to situations where all end customers receive the same product. In contrast, in Figure 1, some distributors carry one product while others carry a different product set (Product A versus Product B). Some resellers like Reseller R2 assemble a product bundle using Product A (from Distributor D1) and Product B (from Distributor D2). End customer E2 orders the bundle from the reseller. The experience for end customer E2 can be significantly more complex for the initial purchase and ongoing activities than end customer E1. For example, E2 has to keep track and activate two products (if product activation is required) and if required, keep track and return the bundle to the reseller, when needed.

Make (Configure)-to-Order and Make-to-Stock inventory models Make (or Configure)-to-Order models are common for computers and networking equipment. In these scenarios, a final product is assembled using components. Some of these components may originate from the manufacturer; others might be sourced from upstream suppliers. As an example, a storage solution could be assembled by a manufacturer like HP using components from HP and interface cards from one or more compatible card manufacturers. In a Make (Configure)-to-Order model, the vendor does not build or assemble the product until an order is placed by a channel partner. Typically, as a result, the vendor knows who the end customer is, and the various channel touchpoints involved in the order. Make-to-Stock models, where a finished product is placed with channels, are becoming increasingly rare in some hightech markets. In a Make-to-Stock scenario, a product might spend months on a reseller shelf before being fulfilled to an end customer. Many manufacturers are also overlaying postponement strategies on these inventory models. Postponement strategies refer to a manufacturing approach where product variations are pushed as close to the end customer as possible. As an example, a printer manufacturer might have a duplex printing capability (the ability to print on both sides of the paper). There are two ways to deliver this capability. First, a manufacturer could create two distinct products, one without duplex printing and one with it. Second, using a postponement approach, a manufacturer might build a single base product without duplex printing and offer duplex printing as an add-on option for channel partners and end customers. The postponement approach frees the manufacture from having to predict how many duplex-printing-capable printers might be sold; they can simply build the base product and let customers and channel partners order the duplex printing add-on as the need arises. These models complicate many aspects of doing business in the channel ecosystem, including: • Revenue recognition: many vendors cannot recognize revenue for units shipped to channel partners until those units are actually purchased and delivered to end customers • Entitlement splits, transfers and mergers: As an example, Distributor D1 in Figure 1 might purchase 100 units of Product Ac. They might then ship 40 units to Reseller R1 and 60 units to Reseller R2. Reseller R2 might in turn sell 30 units to End Customer E2. Keeping track of all these ownership changes can be a daunting task. • Channels also require more physical deliveries of software 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 2008

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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, medium or large business Selling into a large businesses poses challenges as these customers would like to manage their entitlements. For example, in Figure 1, End Customer E2 might want to ship 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 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 touchpoints such as a regional distribution center (e.g., in Asia) to a country sales organization (e.g., the vendor’s Australian sales organization) and then to one or more levels of channel partners. Many complexities result, including keeping track of products and the components they contain for transfer pricing purposes, lower margins, pricing issues and lengthy fulfillment lead times. Royalty Management and Usage of Embedded Components Vendors who embed software or hardware components from other vendors into their products have an added challenge of keeping track of the usage of these embedded 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 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 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 the supplier for each unit of a final product sold, whether or not the royalty-bearing component is activated by a customer, clearly to the vendor’s disadvantage. In either case, both parties would be keen to know the usage of components to accurately track revenue splits.

Percent Revenues from Channel Partners


Software Producers

Intelligent Device Manufacturers

Percent of Channel Revenues by Software Category
All Software 40% Consumer Applicat ions System Software Content Applicat ions Security Software CRM Applicat ions 29% 58% 77% 71% 91% $%

Figure 2: Average revenues from channel partners


More t han 500



Less t han 50




Figure 3: 42% of software producers use more than 50 channel partners


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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

Channels are becoming more important to revenues but... Channels are not optimized based on performance

Software Producers
Have to rely more on channels to make sales targets Reluctant to put money into joint marketing Channel Partners with very little sales; Too many partners Less leads coming from software producers Increased competition between channel partners and with vendor’s online channels Lack of/little communications between partners and software producers

Channel Partners
52% 56%

80% 86% 85%

55% 50% 38% 70%


Lots of manual processes for channels

Periodic sales reports difficult to collect and aggregate Cut channel costs Margins decreased for channel partners Difficult to manage international partners Partners demanding faster product delivery and fulfillment Lack of/little visibility over final customers Lack of interest from channel partners to push your products
22% 22%

46% 55% 44%

80% 50%

No visibility into customer base
Figure 4: Top Channel Challenges for Software Producers

60% 60% 60%

Business Challenges: Software Producers, Intelligent Device Manufacturers and their Channel Partners

• Competition between channel partners of a given vendor Inefficient and manual channel-facing processes Both vendors and channel partners agree that channelfacing processes have a long way to go with respect to efficiency. Some of the symptoms of inefficiencies they report include (see Figure 4): • Lack of or little communications between vendors and channel partners with respect to leads, opportunities, product catalog and pricing changes, promotions and sales information “Due to order errors, duplicate efforts within the sales channels and the inability to track shipments in real-time, Seagate realized its need for a consistent process and a single system through which their distributors and OEMs worldwide would be able to quickly and accurately conduct business transactions…”5 – P. Bose and R. Dey, Infosys • Periodic sales reports are difficult to collect and aggregate • Vendors want to cut channel costs while channel partners complain about declining margins • Vendors are finding it difficult to manage international partners

Channel partners, on average, account for 40 percent2 of revenues of software producers and 67 percent3 of revenues for intelligent device manufacturers. 42 percent of software producers use more than 50 channel partners (see Figures 2 and 3). While 52 percent of respondents (see Figure 4) would admit that channel partners will play an increasingly important role in growing revenues, many hurdles remain.4 Specifically: Channel tiers are top-heavy with lots of underperforming partners The usual approach to growing channel revenues is to recruit more partners. But, the channel structure for many large software producers and intelligent device manufacturers is already top-heavy with non-performing channel partners. In part, this is the result of recent years of mergers and acquisitions by vendors, with channel partners of acquired companies being tacked on to existing tiers. The symptoms of this lop-sided structure include (see Figure 4 for details): • Lots of channel partners with very little revenue contribution • Vendors reducing partner marketing funds • Channel partners complaining that they get fewer leads from vendors

2. Worldwide and North America Software Channel 2008, IDC, August 2009 3. Positive Growth and New Market Perspective Paint Healthy Outlook for Pervasive Technology Channel, Dan Neel, Everything Channel (, May 2007 4. Software Channel Survey 2009, Avangate 5. Channel Stewardship: Driving Profitable Revenue Growth in High-Tech with Multi-Channel Management, P. Bose and R. Dey, Infosys, August 2007

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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 and fulfillment • Recruiting new channel partners is hampered if the vendor is perceived as difficult to do business with “A recent IPED study has proven that 50 percent of channel partners are dissatisfied with the relationship with their vendors...this is due to a multitude of reasons, including the need for: better training, product customization, better communication, simplified MDFs and partner programs, more shared leads and better deal registration. The bottom line: Vendors spend much time and money securing partners to market their products; however, they must enhance their ability to address many of these issues in order to retain existing partners.”6 – Institute for Partner Education & Development “We have to invest in providing self-service processes for our channel partners. Until now, we have been focusing on making better “widgets”. Now we also have to compete at making the ordering/renewal process better for the channel partners so partners will continue doing business with us.” – Director of Licensing for a prominent network equipment manufacturer Lack of visibility into end customers When you think of channel partners, think of customer usage and demand information. Ideally, information about your customer’s usage of your products should flow back to vendors, with physical goods and entitlements flowing from the vendor to customers in response, as shown in Figure 1. Most software producers and intelligent device manufacturers we talk to say they know very little about their customers when channel partners make the sale and nurture the relationship with customers. “Information is everything. Knowing your customer is the #1 goal” – Intelligent Device Manufacturer selling portable computing devices to educational institutions Grey market revenue leakage is growing for intelligent device manufacturers Intelligent device manufacturers lose, on average, $10B of their gross profits to grey market sales, which translates into 4 percent of high-tech industry profits6. The value of grey market goods grew to about $58B in 2007, up 80 percent cumulatively since 2002 (equates to 12.5 percent year over year growth). The grey market is driven by unauthorized brokers who purchase the vendor’s products from legitimate channels

at steeply discounted prices and target end customers by undercutting the vendor’s prices. On average, grey market prices are 27 percent lower than the vendor’s pricing, which eats into profits for both vendors and their legitimate channel partners. “The grey market has many sources, i.e., unauthorized dealers obtain products from a variety of sources normally at a discounted price either due to price arbitrage, abuse of incentive programs, or simply because the products are not what they seem. For example, an OEM may choose to discount products for a particular end customer to increase sales, especially if there is a stiff competition for that customer. To obtain deeply discounted products for openmarket speculation, a channel partner may deceive the OEM into deep-discounting products for non-existent customers and then divert those products to the grey market for possibly greater gain. Some brokers may misrepresent themselves in the authorization process and use the resulting relationship to obtain discounted goods that are then diverted into the grey market.” 7 “Our products are available at 90 percent discounts to regular prices in the Chinese grey market” – Large Software Producer Software and hardware business models are converging Virtual appliances are emerging for delivering complex on-premise software. A virtual appliance “provides a turnkey experience similar to today’s hardware appliances. Deploying an appliance can be as simple as a few clicks, with only configuration tweaks that need to be made. And since the appliance pre-integrates an entire software stack into a composite package, it should only receive one stream of patches, most likely from the ISV, which nearly eliminates complex regression testing. No longer will the channel be able to rely on installation and maintenance services as an entryway to the end user.”8 Software as a Service (SaaS) is expected to grow faster than on-premise software, with some analysts estimating that 25 percent of software revenues will be delivered as SaaS by 20119. Hardware products are becoming more software-like as intelligent device manufacturers enable customers to order capability and capacity on demand. In short, software and hardware revenue models will be more similar than different in future. The role of channel partners is indeed murky under these transformations.

Five Strategies for Customer Intimacy and Revenue Growth
Given the challenges that vendors and their channel partners face, we have found that five strategies can

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 2009 6

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Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h

help vendors learn more about their end customers while allowing both channel partners and vendors to grow revenues. These are discussed below. Strategy 1: Know your best partners by analyzing performance To get a handle on lop-sided channel tiers and the resulting lackluster channel performance, vendors must invest in systems that help them assess how much each channel partner is actually contributing to the top line. To do this, every order and its associated entitlements should capture all touchpoints starting from the vendor through a complex demand chain (as in Figure 1) to the end customer. To be sure, many vendors do have manual processes in place by which partners could submit gross revenues they have delivered in a given period. While this is valuable, it is not at the level of product families. As a result, it is not possible for vendors to rationalize channel partners and incentives based on product family, geography or other criteria. Tracking and analyzing order-level partner performance will enable you to: • Measure the effectiveness of joint marketing programs with partners, at the level of products being promoted • Set up performance based sales incentives for individual products • Assign leads to best partners for a given product based on past performance Studies show that revenues from channel partners can grow their revenues by 40 percent10 when vendors identify and nurture the best performing channel partners. This would translate to about 20 percent higher revenues for a typical intelligent device manufacturer and about 11 percent higher revenues for a typical software producer. IDC11 sums it up as follows: “Vendors will not be able to get ahead by simply adding more partners than the competition. 2009 will be the year that the best vendors use “partner analytics,” or the intelligent analysis of partner data, to make better informed decisions about which partners to invest in, and which partners to demote or even drop. With lower partner program budgets, getting smarter about allocating resources to partners will be critical. Vendors should be leveraging their partner data to understand which partners are the high potentials, which are the influencers, which ones do great cross-sell, and which ones are missing opportunities. With that knowledge, investments in training, support, sales

assistance, and marketing can be effectively made with the best partners. Those vendors that are able to combine good data with good analysis won’t care about flat-out partner recruiting alone. They will beat the competition because they’re doing more with the right partners.” Strategy 2: Enable self-service for channel partners Given the complexities of the channel ecosystem, in particular, business scenarios related to “Make-to-Stock” inventory models and delivery of complex product bundles, it is essential to enable self-service for channel partners to serve customers and channel partners in the best possible manner. Self-service should include capabilities for a channel partner to: • View what they ordered • Understand what their customers ordered • Add/modify customer records as agreed to between the vendor and the partner • Understand what products and associated services their customers are using • Administer transfers, mergers and splits of entitlements between end customers • Allow electronic fulfillment of software and updates These capabilities could reside within a Partner Portal, a key initiative that many vendors are thinking about to increase channel visibility and improve communication. These capabilities should also integrate to Partner Relationship Management systems for automating order processing, payments and invoicing. “Seagate has dramatically reduced order errors and duplicate effort, decreased their costs per order by 60 percent on average and capitalized on new and enhanced revenue opportunities. The company has also gained direct, real-time visibility into distributors’ and OEMs’ sales and order processes”12 Studies show that streamlined processes and deeper adoption of customer-facing systems can grow revenues by 5 percent13. Strategy 3: Establish a direct connection with end users The easiest way to learn more about your customers is to ask them to register their product prior to usage. There are several ways to do this. Many software producers we work with gather basic customer information (e.g. company name, contact email) as part of a product activation experience. Other vendors that do not use

10. High-Tech Channel Evolution: Solutions for Sustainable Growth and Success, The JS Group, 2007 11. 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. Mahowald 12. Channel Stewardship: Driving Profitable Revenue Growth in High-Tech with Multi-Channel Management, P. Bose and R. Dey, Infosys, August 2007 13.,14. Maintenance Revenue Protection 2.0: The Urgent Threat and What Software Vendors Can Do About It, Chris Dowse and Ben Galison, Neochange, 2009

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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 information on their end user’s usage of their software products after opt-in by end users to gather this information. In-product messaging is also an effective way to engage with end users on an ongoing basis to inform them of possible updates, new product announcements and other promotions. In addition, establishing a direct connection to end customers increases the value of software maintenance by using entitlement-based updating to ensure customers only receive the patches and updates their support contracts entitle them to. Revenues can be enhanced by 5 percent14 by knowing more about your installed based and driving upgrades and upsells of your products. Strategy 4: Tie channel incentives to product activation by end customers The source of the grey market for your products can often be tied back to abuse of channel incentives by partners, such as misrepresenting or faking end customer information. Tracking entitlements (e.g., sold-to customer name) as they move through the demand chain (in Figure 1 for example) along with enforcing product activation is the only sure way to know who the end customer is, who they purchased their products from and under what incentive program. While 51 percent15 of manufacturers collect device serial numbers from channel partners as part of their claims submissions for incentive programs, it is cumbersome or impossible to correlate serial numbers to incentiveeligible end customers until end customers call the vendor for technical support. As an example, suppose a manufacturer offers distributors a 10 percent rebate for units for Product A sold during the month of September. It is difficult to accurately determine actual sales of Product A by the distributor during September, in addition the 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.

“Upsell / Cross Sell Incentives - Most vendor programs put a disproportionate amount of emphasis on Solution Providers bringing in net-new customers. New customers are valuable, but they take longer to win and cost more to persuade. Don’t eliminate incentives for winning new customers, but to add a component that pays partners an incentive for winning more business by penetrating existing accounts more effectively.” “Most vendors allow partners to profit from the sale of the initial warranty and support services - whether the partner will deliver those services or not. But more vendors than ever are allowing partners to participate in the renewal of these service packages as a way to provide partners with future earning potential.” 16 Offering these opportunities will make vendors more compelling for channel partners: “From a channel partner perspective, the big problem is to get us to actually use a vendor’s system. One reason we would use a vendor system is if it helps us with maintenance renewals. The big problem we face today is that when a customer comes to us for a renewal, we don’t know fully what the customer owns to give them a complete quote. We only know what the customer bought through us, not the complete list of products they own from the vendor in question, which limits the value of maintenance renewal we can sell the customer.” – Director Sales, Mid-market Reseller17 Proactive maintenance renewals, upgrades and upsells can contribute to 5 percent revenue growth.


Table 1 summarizes these five strategies and their economic impact on vendors and channel partners. Taken together, these strategies can grow vendor revenues by 20-30 percent and channel partner revenues by 40 percent.

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, 2009 8

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Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h

Table 1. Summary of the Five Strategies and their Economic Impact Business Challenge Channel tiers are top-heavy with lots of underperforming partners Strategies Know your best partners by analyzing channel performance at the level of individual product families. Invest in and nurture the best performing partners Estimated Economic Impact 40% revenue growth for channel revenues which translates to: • 20% revenue growth for a typical intelligent device manufacturer • 11% revenue growth for a typical software producer 60% lower costs per order 5% higher revenues 5% higher revenues through effective cross-sell and upsells

Inefficient channel facing processes Lack of visibility into installed base when channel partners make the sale

Enable channel self-service for orders, entitlements, renewals Establish direct connection with customers. • Cross-sell and upsell products based on your understanding of products used • Protect maintenance revenues by updating or upgrading only entitled customers Tie channel incentives to product activation by end customers Empower channel partners to cross-sell and upsell products and renew maintenance

Grey market revenue leakage is growing Software and hardware business models are converging, threatening traditional revenue streams for channel partners Total Impact

1.5% of revenue growth for a typical intelligent device manufacturer 5% revenue growth

About 20%-30% higher revenues for vendors. Note that the above benefits may or may not be additive.

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Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h

Term Vendor Software Producer Intelligent Device Manufacturer Definition A software producer or a intelligent device manufacturer A company that is primarily in the business of selling software products 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. A company that supplies components to other companies to incorporate into an end-customer facing product. Example: Flexera Software FlexNet Operations incorporates Cognos reporting. In this example, Cognos is the OEM supplier to Flexera Software. A channel partner that primarily fulfills orders from downstream VARs and SIs. 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. A channel partner that assembles a complex solution using components sourced from many vendors. A consumer or business that uses a software or hardware product What the customer purchased. Example: 10 copies of Adobe Acrobat; 100 ports of a LAN switching capability in a LAN switch. The process by which a customer fulfills the rights to use a software or hardware product. 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

Original Equipment Manufacturer (OEM) supplier

Distributor Value Added Reseller (VAR)

Systems Integrator (SI) End Customer Entitlement Product Activation Transfer pricing

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:


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