The definition of Net Incremental Revenue is simple: The extra revenue generated through a sales channel where our standard sales strategy couldn’t reach. Calculating Net Incremental Revenue can be much more difficult.
The simplest method is when one of your partners brings your product/service to customers you wouldn’t have dreamed of courting. One of the best examples of this is the software industry. Previously, smaller software companies found it difficult to sell large fortune 500 companies. The biggest technology consulting companies had already moved in, bringing big systems that needed constant maintenance like SAP and Oracle. These technology consulting companies installed the systems, and spent months (sometimes years) customizing and debugging these complex solutions, generating billions of dollars in service fees. Small software companies, with programs that elegantly solved a small portion of the business need, were on the outside.
Recently, however, there has been a change. Channel partners, such as systems integrators are offering Cloud Computing services called “Cloud Stacks”. In essence, they are bundling together several cloud apps into “solutions”. This allows the big SI’s to offer to their clients the ability to move to the cloud, and of course, generate the fees to make it happen. This gives the smaller software provider access to an extraordinary new set of customers with deep pockets that they previously couldn’t access. This iBundling is typical of Systems Integrators (SIs) and Value Added Resellers (VARs).
Remember: Net Incremental Revenue is only customers out of your current reach. If your Sales Force has access to that customer, and could have closed the deal, the Channel Partner didn’t add any value. If the channel partner can get you access to opportunities you otherwise could not have competed for, as the systems integrator example above illustrated, then incremental revenue will be generated.
A great CSO recognizes that there are simply markets his sales force cannot reach. Far from giving up control, hiring channel partners increases your long-term viability and establishes you as a Company-First thinker.
Channel Managers and CSOs, I’d be interested to hear how you are currently measuring your Channel Partners and what metrics matter most to you.