| A value added business partner, a.k.a.VAR or business | | | | implementation. Most companies pay around 10 to 15% |
| partner, is an independent business that sells, | | | | on annual support contracts. Note; if you are going to |
| implements and supports other vendors' software | | | | pay on support, pay not only up front but each year |
| applications including HRIS and HRMS applications. The | | | | the customer renews. In addition, many vendors offer |
| HR software vendor directly pays the VAR or | | | | a referral agreement where they may pay as much |
| Business Partner a percentage of each deal they sell. | | | | as 15 to 20%. |
| The benefit to the software vendor of having VAR's | | | | Many HRIS vendors offered tiered margin structures. If |
| or having a channel, as it is sometimes referred, is the | | | | the partner sells over a certain amount, they receive a |
| software vendors add numerous organizations that will | | | | higher margin. There are problems with this structure. |
| sell and support their application and they pay the | | | | What I might make down the road if I sell this much of |
| VAR nothing unless they close business. | | | | your product is not motivating. What I make today is |
| Actually, the VARs often pay the software vendors | | | | what is motivating. |
| to participate in the service. An additional benefit to the | | | | Special note regarding hosted HRIS companies |
| vendor is if they have a large enough channel they | | | | If your company offers a hosted solution, determining a |
| gain a localized support base nationally, or | | | | pay structure for a BP may present some additional |
| internationally, for their application. Given the benefits, I | | | | challenges. Because the cost of your product or |
| am certain just about every HR software company | | | | service is spread over the duration of the contract, |
| wants to do a better job creating a channel. | | | | you are not going to match the upfront profit a VAR |
| A number of HR software vendors have asked me | | | | selling a purchased system would see. The potential |
| questions about setting up a partnership channel so I | | | | benefits of recurring revenue may entice the BP to sell |
| thought I would take this opportunity to offer my two | | | | your product, but it all depends on how much they are |
| cents. I have never setup an HRIS channel. I am only | | | | paid. If I can sell product X and make 10K upfront, |
| offering advice based on what I have seen while | | | | versus selling hosted product Y and make 2k over a |
| working for others, what I have noticed in the industry | | | | year, which product will I be selling the customer on? In |
| over the past fifteen years, and what I believe it would | | | | this case, it is likely there is not enough profit under the |
| take to entice current VARs to offer your products. | | | | hosted model to truly gain mind share of potential |
| Let me provide a warning. I have seen many HR | | | | VARs. As pointed out earlier, the VAR may actually |
| software, HRIS, and HRMS vendors attempt to set up | | | | talk prospects out of the hosted solution and guide |
| a channel and I have seen almost all fail. Most love the | | | | them toward the more profitable purchase sale. |
| idea of setting up a channel and see the advantages | | | | They may sell the system when the hosted model is |
| of doing so, but don't put in the effort and money to | | | | required but that will be it. For companies only offering |
| make the concept work. The strategies I lay out may | | | | a hosted model and wanting to setup a channel, they |
| be far more aggressive than what you are willing to | | | | may find greater success selling to service bureaus or |
| take to setup a channel but I feel many of my | | | | other types of VARs than HRIS business partners. |
| suggestions would greatly increase the potential for | | | | There simply is not enough upfront profit to compete |
| setting up a successful channel. With these | | | | with the profit made from purchase systems. Your |
| suggestions, I looked at what it would have taken to | | | | best hope is that VARs are having greater numbers |
| interest my firm in selling a new system. I can tell you | | | | of prospects demand hosted solutions and based on |
| for certain that if a vendor had contacted my firm and | | | | that, you will provide the partner the ability to meet this |
| offered some or all of the suggestions I have offered | | | | need. |
| here, they would have gotten my attention. | | | | Tip #1 |
| I worked for a manager many years ago that told me | | | | Here is a concept I recommended to several HRIS |
| the secrets to channel management are to show | | | | software companies that none, as of yet, has taken |
| value and gain mind share. If you can show that the | | | | action on. You don't want your BP's just being order |
| BP will either make more sales or earn more on each | | | | takers on leads you create and hand to them. You |
| one by offering your product, you will be successful | | | | want them out creating and prospecting for new |
| with a channel management program. Mind share | | | | business. Pay them a larger percentage on deals they |
| means getting to the forefront of systems the | | | | bring to the table as opposed to leads you provide. |
| partners are selling. Let's say I am selling X HRIS | | | | With this option, your company is gaining revenue that |
| product and making X amount of dollars per sale. If | | | | otherwise did not exist and of course, you retain the |
| you can offer the BP a product that will increase their | | | | majority of the support income for the first year and |
| income per sale and their overall number of sales, you | | | | future years. At the same time, you encouraged your |
| will have an easy time showing value and gaining the | | | | partner channel to actively market your application, |
| VAR's mind share. This, whenever possible, should be | | | | which is the entire point of a channel. As an example, |
| the main objective. | | | | perhaps you pay 40% on leads you provide and 60% |
| Why is now a great time to grow an HR software, | | | | on leads they generate and close on their own. |
| HRIS, or HRMS BP channel? | | | | Tip #2 |
| 1. With a slowing economy, many resellers will look for | | | | On the first deal they bring to the table, why not offer |
| additional products or product groups to offer | | | | the BP 100% of the software profit? If you want to |
| prospects and their clients to supplement declining | | | | gain mind share and see them actively advertising your |
| revenues. If you have a solution that does not require | | | | system out of the gate, this would certainly do the |
| a tremendous upfront investment and offers additional | | | | trick. This might only apply to purchase based systems. |
| income, you will have no problem finding BP's to offer | | | | I understand this option may not be possible with a |
| your system. Now more than ever, it will be important | | | | hosted solution. But the dollar amount could still be |
| to show how investing in your system can increase | | | | significantly increased for the first deal. |
| their revenue. | | | | Tip #3 |
| 2. There are a handful of HRIS BP's who have | | | | As a qualifying question when signing BPs, ask "What |
| established a model where they offer several | | | | margin are you currently being paid by other vendors?" |
| systems within the same market. This concept makes | | | | and then pay 10 to 15% over that amount, if possible.o |
| sense because no single system is going to meet the | | | | What will you charge to participate in your HRIS |
| needs of all prospects. Offering several products | | | | partner program? |
| allows a BP firm to act as a consultant and present | | | | Frankly, I don't understand the policy of a BP paying to |
| the product that offers the closest match to the | | | | sell someone else's system when the BP is a 100% |
| prospect's needs. There is no reason for a partner to | | | | commission sales rep. If you charge a fee, I have seen |
| lose a deal to a hosted solution or one with an | | | | them range from several thousands of dollars up to |
| integrated payroll option when they can easily create a | | | | tens of thousands for a small to mid-market HRIS |
| partnership with another HRIS application to address | | | | application. The advantage I can see with charging a |
| that need. I have heard a lot of buzz about this model | | | | fee is that a partner who does so may end up being |
| in the industry. There are a few HRIS partners who | | | | more committed to selling a system for which they |
| are having great success with this model. | | | | have made a larger upfront investment. |
| 3. I am not going to mention any names, but one of the | | | | Tip #1 |
| largest HRIS software companies with perhaps the | | | | Charge a fee upfront or yearly, but put all fees into |
| largest channel is actively reducing their outside | | | | marketing in the BP's market area to quickly create a |
| channel and bringing sales internal. This, in short, means | | | | pipeline with your system. Let's imagine how many |
| a large reduction in income for one of the largest HR | | | | leads and, thus sales, might be generated from three |
| software BP networks in the HRIS and HRMS | | | | or five thousand dollars in marketing in the new BP's |
| industry. Trust me when I tell you these partners are | | | | market area. The partner is making the investment and |
| actively looking to make up for lost income. A number | | | | that investment is directly placed into marketing the |
| of these vendors have sold their businesses, closed up | | | | program. Everyone wins. Remember, it is all about |
| shop, or started taking up new business. I have seen | | | | gaining mind share. |
| three partners disappear in Florida in just the past year. | | | | Tip #2 |
| The time to setup a channel is absolutely now. | | | | Don't make the mistake of seeing your channel as a |
| Why companies fail when setting up a HRIS or HRMS | | | | revenue source. I saw one company in particular kill |
| channelo No up Front Plan - If you are going to | | | | their channel by overcharging with creative fees. With |
| approach an independent business and ask them to | | | | one vendor, we were charged an annual training |
| invest time and resources into selling your application, | | | | certification fee to be able to state that our |
| you need to show your firm has an established plan | | | | implementers were certified. No additional testing or |
| for adding a channel. Within that plan, you need to | | | | courses were required for this designation, only money. |
| demonstrate how your firm can increase the BP's | | | | This is not the way to encourage your channel to |
| revenue. You need to show why selling your product | | | | keep selling your product and not seek out |
| will be more profitable than another. From a BP's point | | | | alternatives.o What will you offer to help the HRMS or |
| of view, let me say that before I would invest in a | | | | HR Software partner succeed? |
| company, I would want to see that they have a solid | | | | HR Software Leads? |
| plan laid out to assist me with achieving success with | | | | If you provide leads to at least new partners, this will |
| their system. If they can't show this, there is no reason | | | | provide a huge leg up on the competition. Getting a |
| to proceed.o They pay too little - If the channel is | | | | few sales into the hands of a new partner can |
| bringing you sales that you would not have had | | | | certainly motivate them to sell your system. As |
| otherwise, all the money made from those sales is | | | | mentioned above, you don't want order takers. So it is |
| profit. Don't be stingy with the BP pay. Paying what the | | | | not unreasonable to pay out less for leads you hand |
| other guys are paying is not enough. Look at it from a | | | | off than for deals the partner closes themselves. In |
| BP's side. If I have product X, which I have sold for ten | | | | your lead distribution plan, it is very important not to |
| years and that I know inside and out and that I likely | | | | create partners who are dependent on lead flow for |
| have highly qualified experienced implementation | | | | survival.o HR Software Marketing assistance? |
| experts to install, why should I sell your product Y for | | | | Some companies offer their partners marketing |
| the same, or less, profit? You may feel you have the | | | | assistance dollars based on percent of sales. This is a |
| better product so, of course, they will sell your system | | | | great idea and one that I think should be associated |
| over the other. Nope; they are likely going to sell the | | | | with any business partner plan. You might, for example, |
| product that is within their comfort zone. You might | | | | set it up where the partner receives 3% of each deal |
| have a system that addresses certain needs that the | | | | to use toward pre-approved marketing efforts. |
| other does not. Perhaps your system is hosted and | | | | You need to be able to answer these questions: What |
| the BP's other products aren't. In these cases, they will | | | | is the best way to market your application? Who are |
| sell your product, but only when that specific need | | | | your typical customers? Who are your largest |
| arises. | | | | competitors? The point is you don't want to just certify |
| If this is your first attempt at creating a channel and | | | | the prospective partner and send them out selling; you |
| you want to succeed at it, you will have to pay more | | | | need to provide guidance on what is most effective |
| than the other guys.o They don't know which VAR | | | | with selling your system. It truly concerns me when a |
| market to sell to - For your HRIS solution, you have a | | | | vendor can't answer these questions. |
| target market. This may be based on industry, need, or | | | | What type of company is best equipped to sell your |
| size of organization. Have you determined what your | | | | HRIS? |
| VAR target market is? I outline this in detail below but | | | | There are a number of ways and types of companies |
| the goal should be to sign on firms that already have | | | | you can approach about a BP model. The best model |
| marketing efforts in place or existing clients to sell your | | | | may be to approach several options to see what |
| system to. You are looking for firms who will prospect | | | | works best for your organization. |
| and close deals for your system. You are not looking | | | | Service Bureaus |
| for order takers with leads you hand off. Quality is | | | | I did not work under this model and am not very |
| going to be more important than quantity when it | | | | familiar with it; but with this option, HRIS companies |
| comes to adding a channel.o Not considering their | | | | re-license their application to either payroll service |
| product as it relates to what the partner is currently | | | | bureaus or benefit providers as a value add to their |
| selling - If you have a HRIS BP selling a system that | | | | clients and prospects. While I have no experience with |
| offers more and provides them greater revenue than | | | | this model, I know a number of HRIS vendors are very |
| your product, you will struggle to win mind share. The | | | | successful following only this model. |
| BP will sell the system they earn the greatest income | | | | HR Consultants & HRIS |
| from. If your product does not provide higher revenue | | | | I have never heard of anyone building a successful |
| than what they are currently selling, you won't win mind | | | | channel using HR consultants. I have seen a few try, |
| share.o Unable to gain mind share - Once you create | | | | but I am not sure any have succeeded. They may be |
| a plan and sign on BP's, you need to motivate them to | | | | a good starting point for a referral network but I am |
| break outside of their comfort zone and sell your | | | | not sure they are the best source to set up a channel. |
| system. As stated above, offering them a product for | | | | HR consulting and HRIS sales and implementation are |
| a specific customer need is not your objective. You | | | | two completely different animals. The skill set in one |
| want them selling your product first and foremost, not | | | | does not necessarily transfer to the other. |
| only when a certain need arises. | | | | Other HRIS Business Partners |
| This truth you must accept to develop a successful | | | | I think this, more than any other, is a great place to |
| HRIS Channel | | | | start. The benefit is these potential partners already |
| VAR's or BP's will focus on selling the applications | | | | know how to sell HRIS applications, they likely have |
| thatprovide them with the greatest profit. | | | | successful HRIS marketing plans in place, and they |
| Important Questions about your future HRIS Channel | | | | have people on staff with HRIS implementation |
| Creating a channel is not an easy process. Within the | | | | experience. Getting them to sell your product comes |
| HR software industry, I have actually seen only one | | | | down to how much you pay and if your product fits a |
| company succeed with this model. To achieve | | | | market need that their current system does not. If you |
| success, you will have to show existing BP firms how | | | | offer a hosted solution and they don't, they have likely |
| your product will add more value than another. Before | | | | lost sales as a result. They may want a less |
| you start selling the channel, you need to work out a | | | | expensive system to use as a fall out sale or they |
| ton of details. If you are going to approach a firm | | | | may want to move into a larger market. The point is to |
| asking them to invest in selling your solution, you need | | | | find out enough about the current resellers you are |
| to show that some effort has been put into the | | | | contacting and use your sales pitch to show how your |
| process. The plan you lay out upfront will determine | | | | system will grow their business. |
| your success or failure with the endeavor.o | | | | There are two types of HRIS partners. The first is |
| Determining your ideal HRIS VAR Market | | | | usually the one or two man shops who survive off |
| The following section will cover how much you will pay | | | | revenue from their existing client base, leads from |
| but as you will see, this section is more important. This | | | | vendors, referral leads, and perhaps with certain niche |
| may, in fact, define the entire way you setup a | | | | markets. The second are larger firms who have an |
| channel. If you were unsuccessful in setting up a | | | | active lead marketing program already in place. |
| channel in the past, this may explain a large part of the | | | | Obviously, the latter offers greater potential benefit for |
| reason. If your product does not meet a specific | | | | you. They are already creating leads. It's just a |
| unmet need for a partner and/or pays significantly less | | | | question of getting them to sell your product over their |
| than what they currently offer, you are likely targeting | | | | current one. This is easily accomplished by paying |
| the wrong VAR market and will be doomed from the | | | | them a greater amount to do so as I have lain out |
| start. | | | | above. The first group is going to be a greater |
| An example; let's say you have a purchase only | | | | challenge and you might want to bypass this group |
| application with a very similar feature, price and | | | | altogether. The tip offered on turning their start up fee |
| product offering as what the HRIS VAR currently sells. | | | | into seed for their marketing efforts, in this market, |
| If you pay this vendor greater income on deals they | | | | might be a good way to increase their lead activity. |
| close, you will easily gain their mind share by increasing | | | | With a few qualifying questions during your sales |
| their bottom line. If you are lucky enough to be in this | | | | presentation, you will easily see which group you are |
| situation, realize that your product offers a greater | | | | working with. The important thing is to ask how they |
| value to these partners than the system they currently | | | | are generating leads. |
| sell. Your job will be easy. This is a great VAR market | | | | Your big issue working with HRIS business partners will |
| for you to target. | | | | be gaining mind share. These partners may have sold |
| It's a little trickier if you have a product that offers less | | | | the same system for years. It won't be an easy task |
| in functionality and sells for less. This example; let's | | | | getting them to step outside of their comfort zone to |
| assume the partner is offering an HR & Payroll | | | | sell your system. This is why you hand off leads, assist |
| application and you offer a purchase HR only | | | | with marketing, and pay more than the other guy. |
| application which costs 20% less than their current | | | | Make sure to read my special note under the "How |
| product. In this example, you might actually pay a | | | | much will you pay?" section regarding hosted solutions. |
| greater margin but it is likely, due to the price point, the | | | | I am frequently asked "How can we find out who |
| VAR will make less money on each deal. The other | | | | these partners are?" Is there a list somewhere? Yes; |
| issue is that this partner, even if they sign up with your | | | | it's on Google or Yahoo. Simply search on the product |
| service, will have situations where the prospect, from | | | | name and look through the results. From there start |
| perhaps a lead you created, has to have payroll. Your | | | | cold calling. As scary as that term is, I don't think it has |
| system does not meet this need so the partner will | | | | to be. As I said before, it is my belief that many of |
| likely sell the system that does from a lead you | | | | these vendors are actively looking for other systems |
| generated. I have been in this exact situation many | | | | to offer. If you can show these vendors how they can |
| times before. If your system offers less functionality | | | | make money selling your system and, perhaps, more |
| than what a partner currently sells and they make less | | | | money than selling their existing products you won't |
| off each deal, is it worth your time pursuing these | | | | have any problems finding BP's to offer your system. |
| partners? | | | | Attracting GL or Time Clock providers with HRIS |
| If you offer a hosted solution and wish to sign up | | | | Ten years ago I worked directly for a large HRIS |
| purchase only BP's, you have a real challenge showing | | | | provider and this was how they successfully grew |
| greater value. The VAR may sell your system when | | | | their channel. They actively created interfaces and |
| the prospect demands a hosted solution, but they | | | | setup relationships between their HR and payroll apps |
| won't push the concept. Actually, in this case, they will | | | | to leading GL applications. The same thing outlined here |
| likely sell against the hosted concept. If a sales person | | | | for GL apps could easily be applied to time and |
| makes five times greater income by selling a purchase | | | | attendance vendors. Once the interface was created, |
| only system rather than a hosted system and the | | | | they approached GL BP's about selling their systems |
| prospect wants a hosted solution, the VAR will do | | | | as either an add-on or as an option to their existing |
| everything possible, within reason, to sell the prospect | | | | client base. |
| on the application that pays the greatest income. It's | | | | More and more often companies are looking for single |
| hard to compete for a BP on the basis of value when | | | | integrated applications, combining HR, payroll, GL, and |
| the BP is paid upfront upon sale of a purchase system | | | | time collection. If you find a provider who is missing the |
| as opposed to the recurring model of waiting perhaps | | | | HR portion, offering your product may assist them with |
| two or more years to earn the same amount of | | | | winning GL or time collection sales they are currently |
| income. Sure, the recurring revenue is a nice addition | | | | losing because they don't offer the HR capability. The |
| and it creates more stability of income; but in the end | | | | additional advantage is they already have an installed |
| partners will sell the system that pays them the most | | | | base to contact and potentially sell your system into. |
| money today. | | | | The challenge will be that unlike the HRIS vendors, |
| This is not to say that you should not approach these | | | | these vendors don't have direct experience or |
| particular VAR's. If they don't offer a hosted solution, at | | | | expertise with selling and implementing HRIS |
| least you are presenting them with a package that | | | | applications. More training may be required for this |
| allows them to close a deal they might lose otherwise. | | | | group to bring them up to speed on selling and |
| It's important to understand that these sales are the | | | | implementing HRIS applications than with the prior |
| exception, not the norm, for these partners. | | | | group. |
| If you wish to be successful with a channel program, | | | | Once you have created the interface, how do you find |
| you need to find those VAR's where your product | | | | these partners? As I outline above: use Google and |
| either offers a new add-on for them to sell or greater | | | | Yahoo. |
| value over the systems they currently sell. Your | | | | Tips for having a direct HRIS sales channel and a |
| system simply may not work for a purchase only | | | | partner channel |
| vendor. At the same time, it may be a great fit for a | | | | I have yet to come across an HRIS software |
| service bureau, time clock, or GL vendor that does not | | | | company that does a good job with both. Either there |
| currently offer an HRIS application. In this case, you | | | | are companies wanting to setup a 100% partner |
| have no competition and you are simply providing the | | | | channel or there are those that have the channel and |
| BP a new revenue source for their current client base. | | | | have seen the benefits of bringing sales back in-house; |
| You may have an application that fits into a larger | | | | mainly, saving the expense of paying partners 40% or |
| market than what the vendor is selling into or you may | | | | greater margins. As someone who has been in both a |
| have one that fits into a smaller market. It is better that | | | | direct HRIS sales capacity and a HRIS BP relationship, I |
| the BP sees some revenue, than lose the deal | | | | want to lay out how you can have both. |
| because they did not offer the right product. You can | | | | Let me harp on this one more time. You want your |
| earn income from VAR's without gaining market share, | | | | channel creating and prospecting for new sales. You |
| but the goal still needs to be finding your target VAR | | | | motivate them to do so by paying them more for |
| market.o How much will you pay your HRIS or HR | | | | deals they bring to the table. Your primary objective is |
| software channel? | | | | to show them how to market your product to add |
| A few years back, I was trying to sell my home. I had | | | | revenue to their bottom line. Yes; you will need to give |
| a contract to pay the listing agent 1.5% and to pay the | | | | them leads to get them started, motivate them, and |
| buyer's agent 3.0%. Five months into the process, the | | | | generate revenue but that should be viewed as the |
| house had not yet sold and I missed out on two | | | | exception instead of the rule. You certainly don't want |
| contingency offers to purchase another home. I | | | | to create a dependence on leads. If you can motivate |
| realized that if I increased the amount paid to the | | | | and train your channel to create and prospect new |
| buyer's agent from 3% to 4%, they would stop | | | | sales, your internal direct sales force can handle the |
| showing my home and would start selling it because of | | | | order taking. |
| the increased commission. It worked. My home sold | | | | If you have tricky sales, or customers that demand |
| within a month at my asking price. | | | | onsite demos or don't want to pay travel costs, then |
| Yes, this little story has a point. The same thing can be | | | | you may want to hand these leads off. If you sell a |
| said for HR software. If I have a reseller who sells two | | | | system direct in a partner's back yard, consider |
| or three systems and they basically make the same | | | | handing the consulting work and 100% of the profit |
| money off all the systems, they are likely showing all | | | | from it to your partner. Your customer will be better |
| of the products and not selling any one of them. They | | | | served because they will receive localized support and |
| may, in fact, be selling the system they have sold for | | | | the partner is happy because they are given easy |
| the longest period of time since that represents their | | | | revenue. You provide value to the partner, yourself, |
| comfort zone. If they already have effective lead | | | | and your customer. |
| generation marketing in place, it would be nice to see | | | | This article was difficult to create. The problem is that |
| them sell your system as opposed to another for | | | | defining how a partner should setup a channel |
| those leads. It's all a question of revenue. If I make | | | | depends on many independent factors. The |
| more by selling this house than that one... | | | | approaches that hosted solutions and purchase only |
| If you are just starting out with a channel, don't think | | | | solutions take in creating a channel will differ. I hope I |
| that you can simply pay the going rate and overnight | | | | have succeeded in pointing out these differences and |
| you will establish a winning channel model. In order to | | | | challenges. As I stated at the beginning, I have not |
| gain market share, you will have to offer more for less. | | | | actually setup a channel. This advice is based on |
| Typically, HRIS vendors I have contact with pay | | | | where I have seen other companies fail, succeed, and |
| anywhere from 30 to 55%; this is the case if the BP | | | | lastly, on the channel model perception through a |
| makes the sale and, in some cases, performs the | | | | partners eyes. |