How Startups Can Navigate the Dynamic IT Channel
The IT industry is one of the most dynamic industries where companies are under constant pressure to keep up with the rapid pace of technological advances and trends. However, information databases on IT companies aren’t always up-to-date. Therefore, navigating the IT channel to find potential channel partners to take a product to market is often a formidable challenge.
According to the latest IT spending outlook from Gartner, worldwide IT spending is projected to grow 3.1 percent over 2013 levels to reach $3.8 trillion in 2014. In 2013, spending on devices (including PCs, smartphones, mobile phones and tablets) contracted 1.2 percent to $669 billion while spending on enterprise software grew 5.2 percent to $300 billion. Small and mid-sized businesses have also become massive customers of IT products and services.
However, finding the right channel partner to tap into this $3.8 trillion IT market is a huge challenge. Database companies like DiscoverOrg and Fossa LLC have done a good job of developing specialized databases of IT buyers, but they offer no solution for breaking into the IT channel partner market.
In 2012, I met Henry Schuck, co-founder of DiscoverOrg, an IT buyer-focused information database. Their product is geared to support technology vendors who sell into large, midsized, and small businesses. IT decision makers for each company are made available with their respective organizational charts, along with direct dial phone number, e-mail address, job description, and exact job title. They also provide a verified contact list as well as a verified background report. The background report covers what technologies the company uses (for example, SharePoint, Exchange, SalesForce, etc.) and real time projects and initiatives at the company. Founded in 2007, DiscoverOrg ramped up to revenue of $14 million in 2012. The company is 100 percent bootstrapped.
But what about the other end of the spectrum? How does an IT company find a potential IT channel partner that can sell its products?
In the 1M/1M program, I came across a company that is looking to do just that. Fossa LLC was founded by Clark Richter, who has spent over 20 years in channel development, sales management, and marketing roles at Check Point Software, Citrix Systems, Hitachi and Websense. Clark knows the channel development problem at a visceral level, and has lived and breathed the issue of identifying, qualifying and engaging channel partners.
To his frustration, traditional databases were inadequate to address the needs of channel managers like himself. In addition, they are outdated. An IT value-added reseller (VAR) or system integrator company dealing with a certain technology a decade ago probably specializes in some other technology today, but the database would still profile its earlier business. Also, there would be inadequate detail as to the specialization of the company, whether it was in security, cloud computing, or analytics.
While IT-focused databases like DiscoverOrg focus on the IT buyers at larger companies, broader databases and new models like InsideView, NetProspex, and Jigsaw/Salesforce.com are crowdsourced, with a lot of contacts but little detail on the companies to be able to address channel development needs.
To plug the gap in the market, Clark worked with his brother, a database developer, to build a comprehensive and up-to-date database of IT channel companies with detailed profiles of relevant terminology and vendor relationships. After working for two years on the idea, they launched the Channel Navigator database in February 2012. It was on track to achieve revenue of $100,000 in 2013.
The Channel Navigator database includes 25,000 companies, 80 percent of which are SMBs with fewer than 20 employees.
Currently, the company has 33 active customers, including Alcatel-Lucent and McAfee. Its customers are primarily channel marketing organizations that pay licensing fees and channel sales organizations that use the online tools. The company also sells to earlier stage companies that primarily want the data or consulting services rather than ongoing access. Its top IT industry target segments are companies selling SMB solutions, security, cloud services, and solutions targeted at managed service providers.
Trends like cloud hosting and platform ecosystems enable startups to build businesses rapidly. When it comes to penetrating the market with these solutions, entrepreneurs need to start thinking about building effective channel partnerships.
Channel Navigator is a strategic tool that ought to be in the arsenal of all channel managers working on building far reaching channels for their products.