From the Top


 
From the Top
- Executive to Executive -

Is Partner Relationship Management (PRM) for real? How does it fit into your organization’s overall CRM strategy as well as your channels strategy? Chris Heidelberger, president and CEO of ChannelWave Software, Inc. discusses the state of PRM and makes his case why PRM is more than a CRM ‘bolt-on.’

Chris Heidelberger, President and CEO, ChannelWave Software, Inc.


 
RealMarket: Is PRM a real market segment or is it just a marketing term?
 
Heidelberger: At least 50% of commerce and, in some segments 70% of commerce, is done through intermediaries. It varies by industry. For instance, financial service companies have brokers, financial planners, and brokerage houses. Technology manufacturers have distributors and value-added resellers. Is PRM a real market? When it involves more than half of the revenue of a company, the answer is simple - yes!
 
RealMarket: What makes PRM different from CRM?
 
Heidelberger: CRM tends to be more about the call center, unified customer information and a 360-degree view of the customer. PRM is about go-to-market strategies. Everyone has to look at all channels and address specific business processes and information flows that are unique to the channel. PRM is also about getting costs out of the channel. Everyone needs to focus on getting the cost out of the channel.
 
"When you get a lead, you need to get it to the right channel at the right time with the right resources. That is what drives revenue. Recruitment to cash in the partnering world is paramount. PRM drives revenue and drives costs out."

 
 
RealMarket: Getting cost out of the channel is also a goal of many CRM initiatives.
 
Heidelberger: True. However, partner profiling and lead management activities are quite unique. It is important for organizations to coordinate marketing dollars deep into the channel so there is a closed loop on those activities. Demand for things like certification and training systems, service bureaus, data warehouses with customer data are different for captive sales forces than they are for channel partners.
 
In very pragmatic terms it is about getting started on closing a sale. When you get a lead, you need to get it to the right channel at the right time with the right resources. That is what drives revenue. Recruitment to cash in the partnering world is paramount. PRM drives revenue and drives costs out.
 
Aligning the cost of the channel with the value is a very important part of PRM but it is not the only part. PRM also brings tremendous value by bringing together information from disparate systems. Often we find 6 to 12 systems within a corporation that have a direct or indirect impact on channel efficiency. The number of systems is not important. What is important is that the systems play together. Using PRM as a platform to bring these systems together is where organizations find true value.
 
RealMarket: You talk with CEOs from leading companies. What do they see as the number one issue or opportunity facing CRM today?
 
Heidelberger: In the world of channels, universally it is cost of ownership and time to market being too high relative to the value being created. In the macro world of CRM, we find many stalled projects or projects of marginal success. In many cases, success is based on a very interesting phenomenon - how to get people to use the systems.
 
RealMarket: Have you been able to identify winning strategies to address that issue?
 
Heidelberger: Organizations must understand there will be a partner adoption rate. The adoption rate is defined by the acceptance of a new system by your channel partners. In many cases, the adoption rate the day after rollout is not better than the day before. Certainly training can play a role but human nature is slow to change and people need to discover the value of a new system to them. We spend a lot of time on this issue with our customers and their partners, because it’s so important. But regardless of the initial adoption rate, a PRM system and more specifically a PRM platform, will give you more insight into what is going on in the channel so you can make more informed decisions.
 
RealMarket: For PRM to be a real market, there must be multiple product offerings from multiple companies. How do you see the cast of characters in the PRM space?
 
Heidelberger: We see three sets of alternatives in the PRM space: homegrown solutions, big solutions from big public companies and best-of-breed solutions from venture-based start-ups.
 
There are only few venture-based start-up companies left standing - ChannelWave and Allegis. We are very different in that we did not start as an ASP. We were never about just building web sites and content management. We have never disrupted our software business strategy with a hosted model. We have always thought of ourselves as a software company. Today, we have the culmination of four company acquisitions across one Java platform. Against Allegis, our focus is on over 50 reference customers, the depth and breadth of our solution and our flexibility and focus.
 
Next, let’s talk about the big public companies like PeopleSoft and Siebel. Sixty or seventy percent of the time we run up against Siebel. We do well because of the disruptive nature of our new software business model and value proposition. In one head-to-head example that ChannelWave recently won, we were priced at $2M with a 2-month implementation, versus $8M in 9 months for Siebel. That means our payback is in 8 months versus theirs in 24 months. A year or two ago, PRM might have been a quick discussion at the line of business level. Now we quickly try to make it an ROI-based conversation with CFOs and CEOs.
 
Lastly, organizations could take the homegrown approach. They could take Tibco, Vitria or webMethods in the bloated client server world of Siebel and others. But the integration effort is enormous. Without partner business architectures and a description of the database schema, defining roles within a partner marketplace can be a daunting task. But the real value of a PRM solution is the ability to configure different relationships on the fly -- without calling in a $3,000 a day consultant. We have a toolkit that allows people to build it themselves in the partner marketplace. Configuration is fast and flexible.
 
"Siebel’s marketing is driving demand for PRM and that is fantastic. There is belief in PRM as a solution, but anyone buying Siebel is a laggard. Siebel’s soft underbelly is the time it takes to go to market and the cost."

 
 
RealMarket: You seem to be targeting Siebel. Given their current market position is that wise to go head-to-head with them?
 
Heidelberger: There is risk and there is reward. A year ago, our platform was new, our story was not as well developed and we didn’t have all the reference accounts so we wanted to stay under the radar screen. Siebel’s marketing is driving demand for PRM and that is fantastic. There is belief in PRM as a solution, but anyone buying Siebel is a laggard. Siebel’s soft underbelly is the time it takes to go to market and the cost. When there is an objective evaluation, we do extremely well, based on price and performance and we have the references to back it up. I love to compete against them and I love the fact they are pouring marketing resources into the market.
 
RealMarket: In a crowded market, how does ChannelWave differentiate itself?
 
Heidelberger: We talk to the industry analysts. We continue to get customer and partner announcements. Today it is easier to stand above the fray with wins like Verizon, Parametric Technologies and Qwest. It’s not about loud claims like it was before. We are building references, case-by-case, one deal at a time.
 
Macro economic issues aside, people are re-thinking the way they buy software. When things turn around, we will gain market share and market cap that used to be held by the client-server companies because of our business model. In the last 12 months we grew by 150% and ChannelWave is now profitable.
 
RealMarket: Do you believe that you can maintain that sort of growth going forward?
 
Heidelberger: The forecast is extremely good for us to grow even more than 150%. It is expected that we will go public when the market turns around. We are off the venture capital drug. We don’t have to go back to the venture world to keep going. We set a goal last year to be cash flow positive by Q4 and we’re one quarter ahead of that. We need to be a $25M-$30M company, throwing off more than a million dollars of profit each quarter. That is our goal.
 
RealMarket: We are seeing more interest in CRM from SAP, Peoplesoft, Oracle and Microsoft. What does that mean for ChannelWave?
 
Heidelberger: I think it is great - bring it on! The biggest differentiator for us is the focus we have on solving this business problem and the platform we’ve built. Our price and performance is several orders of magnitude better than the big guys. We have a disruptive model and I like our chances.
 
RealMarket: Tell me more about ChannelWave’s roadmap to providing better ROI and a more complete solution offering. Heidelberger: There are a number of things I’d like to talk about. The talk about native web architecture is important but web services are about faster and less expensive integrations. We use Novell tools for displaying relevant data to the partner market.
 
We need to further build out aspects of our development toolkit so our partners can take the product and evolve and support it on their own. The same holds true with internal IT organizations either with our professional services organization or partners.
 
In January, we will have our first customer advisory board discussing product direction across different industries and market. That will be a big part of our future roadmap in a way that continues to give life to the product strategy.
 
"It is expected that we will go public when the market turns around. We are off the venture capital drug. We don’t have to go back to the venture world to keep going."

 
 
RealMarket: There has been quite a bit of press in the last year about CRM failure rates. How do you balance delivery versus expectations?
 
Heidelberger: This is a great question. Let’s take client server versus web services. You have to spend so much time up front with client server because you better get it right the first time due to difficulties in making changes at a later date. There is a lot of heavy lifting with client server.
 
We’ve done a very sophisticated ROI model that we use to engage customers about what can be done and what kind of efficiencies can be achieved. We are very willing to tie the ROI model into the license agreement. We allow the customer to hold 15 - 20% of the contract based on performance. If we fail, we lose it and if we exceed we get uplift. Customers like that.
 
RealMarket: What is the range and what percent are implementation services?
 
Heidelberger: We are about 1:1 software to services on our new software model. No one else, Peoplesoft, Oracle, or Siebel cannot re-invent the way they go to market to get off the big-five implementation model.
 
RealMarket: Looking to the future, what is the biggest change you see on the CRM horizon?
 
Heidelberger: Business users, CIOs and CEOs are waking up the fact that there is a new business model in the software world. The market will grow back but not with the same players. It will be split among the new players. Mainframe software players couldn’t evolve before and the current client server companies will find evolution painful. That is way of the world.
 
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