Tips for Expanding Your Business Partner Channel for Human Resources Management Software, HRIS, or HRMS
HRIS and HRMS applications are just two examples of software that a value-added business partner (a VAR or business partner) may sell, install, and support. The VAR or Business Partner receives a commission from the HR software provider for every transaction they help close. When a software company partners with value-added resellers (VARs), or a channel, it is sometimes called, it gains access to a larger pool of potential customers for its product without incurring any upfront costs.
VARs frequently compensate software makers for their participation in the service. If the vendor has a sizable channel, they also profit from a national or international network of localized support for their application. Given the advantages, it’s safe to assume that every HR software provider wants to improve their channel creation efforts.
Since several HR software providers have requested advice on establishing a partnership channel, I will use this post. Never before have I created an HRIS feed. This is my opinion based on my experiences working for other companies, my observations of the business over the past fifteen years, and my assessment of what it would take to get existing VARs to start selling your products.
Please permit me to issue a caution. Many companies that sell HR software, HRIS, and HRMS have tried and failed to establish a platform. Most people like starting a channel and can see the benefits, but they don’t put forth the time and resources necessary to make it happen. My proposed strategies for setting up a channel may be much more radical than you’re prepared to try. Still, I’m confident that following many of my recommendations will significantly increase the likelihood of setting up an effective channel. In light of these recommendations, I investigated what it would have taken to get my company interested in marketing a new system. Without a doubt, I would have paid attention to a vendor who approached my company with some or all of the suggestions I have given here.
Many years ago, I had a manager who told me the keys to channel management are to demonstrate value and increase market share. You can increase your chances of success with a channel management program by explaining to the BP that they will see increased sales or improved profitability due to stocking your product. Gaining a dominant position in the partners’ proposed networks is what is meant by “mind share.” Let’s assume my average sale price for HRIS product X is $X, and I’m making $X per transaction. The easiest way to prove your product’s worth and win over the VAR’s attention is to provide the BP with a solution that boosts their sales revenue and margins. This ought to be the primary focus whenever feasible.
As an HR software, HRIS, or HRMS BP channel, why is now a fantastic moment to expand?
1. As the economy begins to slow, many resellers will seek to expand their product offerings to offset the loss of customers and income. You won’t have trouble finding BPs to give your system if it doesn’t demand a significant initial investment and can generate extra money. Now more than ever, it will be crucial to demonstrate how your system’s investment can boost its bottom line.
2. A select group of HRIS BPs has developed a business strategy based on providing multiple options for their target audience. Given that no one solution will be ideal for every possible scenario, this idea makes a lot of logic. A BP company can take on the role of a consultant by offering multiple options from which the client can choose the one that best meets their requirements. When a partner can quickly form a relationship with another HRIS application to meet this need, there is no reason to lose a contract to a hosted solution or one with an integrated payroll option. There seems to be a lot of excitement about this design among professionals. Some HRIS collaborators are finding this approach to be very fruitful.
3. I won’t name names, but one of the most prominent HRIS software vendors with arguably the most extensive channel is actively working to reduce their external canal in favor of a more internal approach to sales. This spells disaster for the HRIS and HRMS industries’ most extensive BP network for HR software. Believe me when the partners are trying to recover the stolen funds. Many of these suppliers have moved on to new ventures or shut down permanently. In the past year alone, I’ve had three exes vanish in Florida. Establishing a connection at this moment is crucial.
Reasons why organizations struggle to implement an HR information system
If you want an independent company to spend time and money marketing your app, you’ll need to demonstrate that your company has a strategy for establishing a channel. Your company’s sales growth strategy in that plan must be detailed and convincing. You must explain why buying and selling your goods will yield a higher return on investment. I’ll speak as a BP here and say that before putting money into a business, I want to ensure they have a clear strategy for helping me succeed with their system. If they can’t provide evidence of this, there’s no point in moving forward.
If the channel generates sales you wouldn’t have had without them, then the commission they give you is pure profit. Don’t be cheap with the BP money. Just matching the going rate won’t cut it. View it from the perspective of a BP. Why should I sell your product Y at the same or less profit if I have product X, which I have sold for ten years and know inside and out, and for which I likely have highly certified, experienced implementation experts in installing? You might think your method is superior so that more people will buy it. They are more apt to push the item with which they are most familiar. Perhaps your way is better suited to meeting some of your requirements. Possibly BP’s other goods aren’t hosted, but your system is. They will purchase your merchandise under these circumstances, but only when needed.
It will cost you more than the competition if this is your first time trying to launch a channel.
Your HRIS system has a specific audience you’re trying to reach, but they don’t. This could be because of differences in field, necessity, or company growth. Do you know who your VAR’s ideal customer is? I explain in greater depth below, but in short, you want to partner with businesses with established marketing infrastructures or client bases to offer your system. You need companies to do sales prospecting and deal closing for your system. You’re not on the lookout for people to accept your leads and complete orders. When it comes to introducing channels, quality will always outweigh quantity.
If an HRIS BP sells a system that gives them more features and higher profits than your product, you will have difficulty gaining market share from them. The BP will unload its most lucrative technology. You won’t be able to steal customers from the competition if your goods can’t outsell what they offer.
You must inspire your business partners to step out of their comfort zones and market your system once you’ve developed a strategy and recruited them. As was previously mentioned, satisfying a particular customer need is not the reason you’re approaching them with a product. You want them to actively sell your product whenever a condition occurs, not just occasionally.
You must recognize this fact if you want to create a prosperous HRIS Channel.
VARs and BPs will concentrate on peddling the programs that
give them the highest possible return on investment.
The Future of Your HRIS Channel: Critical Issues to Consider
The procedure of developing a channel is not simple. I can think of only one HR software firm that has used this business model successfully. To succeed, you must demonstrate to established BP companies how your product improves upon the status quo. There are many moving parts to figure out before you can begin marketing the channel. You must demonstrate that you have invested in selling your product before approaching a company for funding. The success or failure of the undertaking depends on the strategy you establish at the outset.
o Identifying the Perfect Market for Your HRIS VAR
This part is more crucial than the next, which describes the costs you’ll incur. The way a channel is built up may depend on this alone. This could be a significant contributing factor to your previous channel setup failures. You are probably going after the wrong VAR market if your product does not solve a particular unmet need for a partner and pays significantly less than they presently offer.
For the sake of argument, assume that your company offers a purchase-only application with features, pricing, and product offerings that are competitive with those of the HRIS VAR. Gaining this vendor’s support is as simple as offering them a higher commission on sales they help you complete. If this happens to you, know that the value of your product exceeds that of the system your partners are presently selling. The workload will be light for you. You should focus on the VAR industry in this area.
It’s more challenging if your product has fewer features and a lower price point. Let’s say your business associate is selling an HR and payroll application, and you’re selling a similar but cheaper HR application. In this case, you may end up paying a higher profit, but the VAR will almost certainly earn less from each transaction because of the lower price. The other problem is that even if this associate signs up for your service, there will be times when the prospect, possibly from a lead you generated, needs payroll. If you produce a charge for a system that fulfills this requirement, your partner will likely close the deal using the information you provided. Many times before, I have found myself in a predicament similar to this one. Is it worthwhile to pursue partners if your system offers less functionality than what they presently sell and they make less off each deal?
You’ll need to demonstrate significant value to sign up for purchase-only BPs for your hosted service. The VAR will sell your system only if the customer requests a hosted option. They will almost certainly market in opposition to the shared idea here. Suppose a VAR’s sales team can earn five times as much money by selling a purchase-only system as a hosted system, and the prospect desires a hosted solution. In that case, the VAR will do whatever it takes to sell the option on the application that pays the greatest income, within reason. It’s challenging to compete for a BP on the premise of value when the BP is delivered in a lump sum upon the sale of a purchase system, while in the recurring model, the same amount of money is earned over two or more years. Having a steady stream of income from subscriptions is excellent, but in the end, partners will sell whatever method brings in the most cash right now.
This is not to suggest that you shouldn’t try to get in touch with these VARs. If they don’t have a hosted option, you’re still giving them a chance to win the business by offering a bundle that includes everything they need to get the job done. Remember that these transactions are the outlier, not the standard, for these partners.
Suppose you want your channel program to be effective. In that case, you need to identify the value-added resellers (VARs) for whom your product represents either a new revenue stream or an improvement over existing offerings. Your software may be incompatible with a business that deals exclusively in sales. Conversely, it could be a good match for a service bureau, time clock, or general ledger vendor without HRIS software. You’re not competing with anyone here; instead, you’re allowing BP to earn more money from its existing clientele. The market size for your application may be bigger or smaller than the one the vendor is targeting. BP should make money rather than risk losing the sale due to a poor product offering. Even though it is possible to profit from VARs without expanding your market share, identifying your ideal customer base should remain a top priority.
o What is your budget for the HRIS or HR software distribution channel?
Several years ago, I attempted to sell my house. The listing representative received 1.5% of the sale price, and the buyer’s agent received 3.0%. After five months, the property had still not sold, and I had already turned down two offers with contingencies. I calculated that if I bumped up the commission I was offering to the buyer’s representative from 3% to 4%, they would be incentivized to stop showing my house and start selling it. The plan was successful. In less than a month, my home sold for the asking amount.
There is some truth to this short tale. The same holds for HR management systems. If a reseller only makes the same amount of money from each of my three computers, then they are probably just displaying them all and not selling them. They may be sticking with what they know best—the system they’ve been marketing for the longest time. It would be great if they could use their existing lead creation marketing to push your system instead of a competing one. It all comes down to money. If I can get a better price for this home than that one, I will.
Do not assume that you will magically create a successful channel model overnight by shelling out the current rate overnight if you are just getting started. You must provide more value for less money to increase your market portion.
If the BP makes the sale and, in some instances, performs the implementation, the HRIS vendors I work with typically pay between 30 and 55 percent. Annual assistance contracts typically cost businesses between 10 and 15 percent of revenue. Pay for assistance at the outset and every year the customer renews. In addition, many companies provide 15% to 20% commission for referrals.
Several HRIS providers used graded pricing models. The partner’s profit percentage increases above a predetermined level of sales. This framework is flawed in some respects. Making much money in the future is not motivating me to offer this much of your product. What drives me is today’s earnings.
Take notice, especially about hosted HRIS firms
If your business provides a hosted solution, figuring out how much to pay a BP can be more challenging. Your profit margin will be lower than that of a value-added reseller (VAR) offering a pre-owned system because your product or service will be paid for throughout a contract rather than all at once. Depending on BP’s compensation, the promise of recurrent income may be enough to convince them to promote your product. Which product will I recommend to a client if I can earn $10,000 immediately or $2,000 annually from offering the hosted version of the same service? In this instance, likely, hosted model profits aren’t high enough to win over potential VARs’ attention. As was mentioned earlier, the VAR may try to persuade potential customers away from the hosted option in favor of the more lucrative purchase sale.
If the hosted approach becomes mandatory, they may sell the system, but that would be it. It’s possible that service bureaus and other types of VARs, rather than HRIS business partners, would be the best bet for businesses providing only a hosted model and looking to set up a channel. There is not enough profit to offset the cost of the technology upfront. The ideal scenario is that VARs’ clients start asking for hosted solutions more frequently, and you give your associate the tools to satisfy that demand.
Here’s an idea I pitched to several HRIS software firms, but none of them have implemented it so far. You don’t want your BPs to merely act as order collectors for leads you generate and provide. You need them to be actively thinking creatively and looking for new opportunities. You should compensate them more for deals they deliver you than for leads you generate. With this choice, your business is opening itself up to previously untapped revenue streams, and you get to keep the vast majority of the support income in the first year and beyond. You have simultaneously accomplished the channel’s overarching goal by inspiring your partners to promote the application in question. You could, for instance, agree to compensate them 60% for leads they bring in and 40% for charges you get in.
Why not give BP full ownership of the software revenue they generate from their first deal? This would undoubtedly work if you wanted to gain mind share and see them actively advertising your system. This may be relevant only to pay-for-use models. I get the impression this isn’t a possibility with a hosted service. Still, the initial transaction’s dollar number has room to grow.
Asking, “What margin are you currently being paid by other vendors?” is an excellent qualifying question to ask when signing BPs, and if possible, you should pay 10 to 15% more than that margin.
o How much will it cost to become an HRIS associate of yours?
If you do charge a fee, I have seen them range from several thousand dollars up to the tens of thousands for a small to mid-market HRIS application, and I must admit that I do not comprehend the policy of a BP paying to sell someone else’s system when the BP is a 100% commission sales rep. One possible upside to charging a fee is that it may encourage partners to put in more effort to sell a system that requires a more significant initial investment on their behalf.
If you want to build a pipeline with your system rapidly, you should charge a monthly or annual fee and invest that money in marketing in the BP’s market area. Consider how many potential customers the new BP could reach with an investment of only $3,000 to $5,000 in marketing in the region served by BP. The money is being put up by the partner, and it will be used for advertising the event. All achieve a triumphant outcome. Mindshare is everything, so keep that in mind.
Don’t forget that your viewers are also potential customers and income. Overcharging for creative services was the death knell for one company’s platform. With one provider, we had to pay a yearly fee to be able to say that our implementers had completed the required training and were, therefore, qualified. This designation did not require extra testing or coursework, only financial compensation. Not the best strategy for keeping your channel from defecting to competitors.
o How will you contribute to the success of the HRMS or HR Software partner?
Do We Have the Top HR Software?
You’ll have an enormous advantage if you provide leads to at least new partners. New partners can be motivated to promote your system if you can get a few sales into their hands. Those who follow orders are not what you need. As a result, it is acceptable to offer a lower payout for leads passed along to a partner than for deals that the partner personally closes. Your lead distribution strategy mustn’t make any associates wholly reliant on incoming information.
Need Help Promoting Your HR Software?
Partners can earn commission-based marketing funds from some businesses. I believe this is a fantastic suggestion that should be included in any partnership strategy. You could agree to give the partner 3% of each deal for use in advertising that has already been authorized.
To successfully promote your app, you must know how to answer the following questions. To whom do you typically cater? Who do you see as your primary rivals? It’s not enough to certify a potential partner and send them out into the world to market; you also need to instruct them on the best practices for promoting your system. When a supplier can’t address my issues, I lose faith in them.
To what sort of business would your HRIS be most appealing?
A BP strategy can be pitched to various businesses through various channels. It’s possible that exploring multiple possibilities will reveal the best strategy for your company.
I’m unfamiliar with this business structure, but HRIS vendors re-license their software to third-party payroll or benefits administrators to offer to their clientele. I haven’t used this approach, but I’ve heard several HRIS providers have found great success with it.
Recruiting Firms & HRIS
I have never heard of anyone employing HR consultants when establishing a profitable channel. A few have made an effort, but I doubt any have been successful. While they could serve as a springboard for developing a recommendation system, I wouldn’t count on them as your primary informational resource when establishing a channel. There is no comparison between HR consulting and the sale and deployment of an HRIS. Competencies in one are not always applicable to another.
Partners in Other HRIS Businesses
More than any other option, I find this to be an excellent starting point. These potential partners have the advantage of being familiar with selling HRIS applications, having developed effective HRIS marketing strategies, and employing personnel with expertise in HRIS implementation. The price you offer and whether or not your product addresses a market need not being addressed by their existing setup will determine whether or not they will sell your product. They have likely lost business to you if you provide a hosted option, and they do not. A cheaper method could help them make up for lost sales, or they could expand into a new market. The goal is to learn enough about the existing resellers you are contacting to tailor your sales pitch to demonstrate how your system can boost their business.
Two distinct varieties of HRIS alliances exist. The first type consists of sole proprietorships and small partnerships that rely on repeat business, new clients found through word of mouth, and leads provided by third parties such as suppliers and other businesses. The second type consists of more prominent organizations with established lead marketing departments. The possible rewards for you are higher with the second option. They have already begun producing prospects. All that remains is to convince them to stock your product instead of their present offering. Paying them more money to do what I’ve outlined above is a simple solution. The first set will present more difficulty, so you may want to skip them. In this industry, the suggestion to use the startup cost as a springboard for other advertising could be helpful. During your sales pitch, you only need to ask a few simple qualifying inquiries to determine exactly who you’re dealing with. It is crucial to inquire about their lead generation processes.
Gaining the attention of HRIS business associates will be your primary challenge. These affiliates may have been selling the same product for a long time. Getting them to leave their comfort zone and promote your method won’t be simple. This is why you share prospects, provide marketing support, and offer higher compensation.
For more information on how much you can expect to spend on hosted options, see my additional comments there.
I often get the question, “Where can we find a list of who these partners are?” Find it on either Google or Yahoo! Just type in the name of the merchandise you’re interested in and peruse the results. Make some unsolicited calls from that point on. Even though it sounds terrifying, I don’t believe it’s necessary. As I mentioned, many of these sellers are eager to expand their product lines by offering complementary systems. There should be no trouble finding BP’s to give your system if you can convince them that they will make money (or more money) by selling it instead of or in addition to their current products.
Using HRIS to entice suppliers of GL or Time Clock
This is how a primary HRIS provider I worked for directly a decade ago expanded their channel. They connected their HR and payroll software and industry-standard GL programs and built links between them. The same logic used here for GL applications could be extended to time and attendance services with minor adjustments. After the interface was developed, they contacted GL BPs to sell their systems to the GL BPs’ existing customer group.
Human resources (HR), general ledger (GL), payroll, and time and attendance are all functions that many businesses are seeking to consolidate into a single application. Offering your product to a service provider who lacks the HR functionality could help them win the GL or time collection sales they are presently losing. They also have an established customer group to solicit business, which is a definite plus. The difficulty will arise because these vendors lack direct experience and skill in selling and deploying HRIS applications, unlike HRIS vendors. More education may be needed to get this crew up to speed on selling and deploying HRIS applications.
The next question is where to locate such collaborators once the interface has been developed. Just use search engines like Google and Yahoo, as explained above.
Suggestions for establishing both a direct and a partner route for HRIS sales
I haven’t found an HRIS software vendor that effectively addresses these issues. Some businesses would like to establish an entirely partner-based sales channel, while others, having already established such a channel, have realized the advantages of re-establishing in-house sales. Having worked in direct HRIS sales and a BP/HRIS partnership, I’d like to explain how the two can coexist.
Allow me to reiterate this point yet again. It would be best if you had your channel to generate new leads and make purchases. You encourage them to do so by rewarding them monetarily for any business they bring to the table. Your priority should be to demonstrate practical methods of selling your merchandise to increase their profits. Providing them with leads is necessary for starting things off, keeping them motivated, and making money, but it should be the exception rather than the norm. Lead reliance is something you should avoid at all costs. Your internal direct sales team can take care of order-taking if you can inspire and instruct your channel to generate and pursue new sales.
You may want to pass on leads that are particularly difficult to close, such as those from clients who require onsite demos but are unwilling to pay for your time or travel. If you sell a system straight in your partner’s territory, giving your partner all of the consulting work and the proceeds from the deal might make sense. Your customer service will improve due to the localized assistance provided, and your partner will be pleased with the additional income. You benefit the partnership, yourself, and the client.
It was challenging to write this essay. The issue is that numerous unrelated factors influence how a partner should build up a channel. Regarding channel setup, hosted solutions and buy-only solutions will take different methods. I trust I’ve been able to highlight these distinctions and difficulties effectively. As I mentioned at the outset, I have not yet created a channel. This guidance is grounded in my observations of other businesses’ successes and failures and my understanding of how partners view the channel model.
Clay C. Scroggin has worked in the Human Resource Software field for over fifteen years. Clay presently serves as President and owner of CompareHRIS.com, a website designed to aid human resource professionals in their hunt for, selecting, implementing, and utilizing HR software. If you need help choosing an HRIS, HRMS, or other HR software, compareHRIS.com is a great resource. Grab a copy of CompareHRIS.com’s HR and Payroll Software Buyer’s Guide without spending a dime.
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