How to sell its products and services is probably the key question any software company has to answer. It will decide the cost of sale, the risk, customer intimacy and experience and the growth rate. When these parameters risk going off the rails, it is usually a good idea to reconsider the sales channels.

Although software may be recent in human history, selling as a discipline goes back to our prehistoric roots. And even in prehistoric times there evolved a division of labour between the person making a product and someone else undertaking long journeys to sell it. Concepts like sales agents and merchants buying and reselling products evolved at the latest in Greek and Roman times. The concept of buying a product and then integrating into some bigger product is ancient too. Think of complex products and projects like ships and buildings. The US insurance industry of the 18^thcentury is credited with separating salespeople into hunters and farmers, sales reps closing new business or collecting on existing policies.

Since then, technology and sales and marketing have become extremely sophisticated and differentiated. For the purpose of this post, I will focus only on those roles that close deals, handle money and are measured on revenue targets. However, understanding the full spectrum of marketing and PR tools including social media to get the word out to the customer is essential as is the interplay between sales and marketing.

What options then do we have selling our software and what are the trade-offs for each?

Direct sales

A salesperson employed by the company is in direct touch with the customer. Historically this is the route many successful B2B software companies have gone. The logic is pretty compelling: The software is complex; it needs an expert to explain how it will provide benefit and negotiate the complex terms. Possibly it will also require services to install. This was definitely true for the beginnings of software on mainframes and is still true for many businesses today. The approach does have its downsides: It is expensive. The company pays a group of highly skilled experts hoping they will close deals effectively financing the sales cycle. There are other challenges though: The salespeople need to be current in the customer’s business and they have only their own networks to build on. The upsides are also compelling: A high degree of control over the deals, customer intimacy, and forecasting accuracy

Web Direct

This is a variation on direct sales but at a drastically lower cost. Selling over the web works well if the customer knows what he wants and is ready to navigate the information. Usually, he will also need to do the implementation if any himself. This works quite well for instance, when selling software to engineers. Atlassian is a great example of doing this very successfully. In a more crowded market space and with larger deals the approach may run into limitations.

Agents

Personally, I have not seen that many successful agent sales strategies in software. It seems to happen mostly when software is bundled with some hardware that has a tradition of being sold via agents. This makes sense from the perspective of the agent, as he can sell more goods to each customer. Creating and keeping customer relationships being his primary cost. Another factor is that there is a lot of legislation around sales agents that you probably want to stay clear of.

Integrators

The integrator is one of the most used and also most misunderstood sales models. The logic for the software maker is easy to follow: The expense of the direct sales force lies in paying for the feet on the street while the deal is in the making. In this model the integrator pays for his people and picks up a cut of the deal when it closes. The other aspect is the pain and risk of getting software to work for the customer, particularly when more than one component is involved. Transferring this risk to the integrator can free up resources that can focus on other aspects of growth. For many vendors working with integrators not only costs them margin, but also loses them control over the deal and being so far removed from the customer that they miss valuable feedback. In the worst-case partners may be working with multiple vendors, playing them off against each other. This is a model that has great potential, especially in strong growth. It also has big risks.

OEM

OEM is often overlooked on the side of software makers. Probably it is because we all want to rule the world and seeing how our own product is part of something bigger does not come naturally. Also, OEM deals have very unique structures and are not casually done on the side. OEM relationships can have a very profound effect on both parties. It can help looking at the issue from the perspective of the OEM. If the functionality is really critical and not commoditised, the company will prefer to make it themselves or buy a company that has the tech. OEM deals, more than most other relationships, also rely heavily on the OEMs commercial success.

Role of the Channel Manager

In addition to the farmers and hunters already introduced, the channels in the list above sometimes require the role of the partner or channel manager. The mission statement for these individuals is often not clear. In the worst case it will be to help the partners win deals. In the best case it will be a metrics-based role to analyse and constantly reshape the channel to suit a strategic purpose.

Channel Conflict

To make the number of choices larger, the channels can exist side by side or in complementary form. Usually, companies opt for a hybrid of the approaches above creating what is known as channel conflict. This can be healthy or destructive. I have seen sales forces spending more time internally with who got credited for a deal than they spent with customers. A clear set of simple rules and comp plans that recognize people for doing the right thing are very helpful.

Picking the mix

Picking the right mix of sales channels is an art more than a science. Is the product new or is it a commodity? Does it need complex explanation or implementation? Who are the decision makers at the customer and how do they make their decision? What are the company’s business objectives? Often looking at these and other questions will lead to the realisation that in some form the sales channel is actually baked into the product.

Execution

Equally important as the right mix of channels is managing the execution. Clear messaging, good qualification, accurate forecasting, correctly set expectations, profitable deals, sales growth, customer satisfaction and retention do not just happen by themselves. They are the product of a well-executed plan. None of the channels inherently guarantee or preclude achieving these laudable goals. The art is in picking the right mix and then getting the execution right for each specific situation.