Teaching Partners To Finance Solutions

Success is not predicated on one's willingness to serve, but rather, on one's skill and expertise at serving! It has always been that way and it's not likely to change. One of the indisputable truths of life in the channel is that all the partners' fates are bound together. Much of the present carnage is among the VARs, who frequently struggle with day-to-day survival.

Many of them, whether from a lack of experience or lack of training, try to remain competitive by cutting prices. No one has to be reminded that the ramifications of this can be deadly. I have long maintained that it is a lack of skill, rather than a lack of will, that accounts for so many failures in the IT field.

Manufacturers and distributors have a vested interest in ensuring that VARs survive and thrive. Many have actively taken measures to address this. Companies like Ingram Micro, Hewlett Packard, and Lucent Technologies, for instance, can quite legitimately step forward and take credit for new initiatives they have already put into place to address the express need for their resellers' fundamental sales training and development.

Such companies understand that facilitating strong VAR sales skills is necessary to ensure their own success and survival. That is why there is now a more proactive movement to establish new budgets - where there were none before - to improve the skill levels of resellers. It is, as I have already stated, a matter of enlightened self-interest. These companies are doing what they believe is necessary to ensure they're not the next to be voted off the island!

Better-trained sellers, who can shift conversations from price to "Unique Value-Add," are absolutely integral to everyone's success - everyone's! Nevertheless, providing sales training to VAR channel partners is only a first step. Manufacturers and distributors need to address another challenge that will be instrumental to future sales and greater profitability.

This involves finance solutions. These will be increasingly important in the IT industry, and manufacturers and distributors have a long way to go in facilitating VARs' ability to finance programs.

Why is financing becoming so important? An evolution is taking place in financing sales within the IT industry. On the high end, large companies talk about TCO (total cost of ownership). On the low end, television advertisements from companies like Gateway, Dell, IPC and even IBM extol the benefits of "Rent-to-Own," "Rent-to-Upgrade," "Lease-to-Own," "Lease-to-Upgrade" and so on. Finance has finally reached all market segments of the IT world.

In embracing financing, the computing industry is following in the footsteps of the office equipment companies (OECs) and the telephony industry. Lessons of financing from these sectors are thus very relevant. OECs embraced financing in the early and mid-1980s. The telephony industry became heavily involved in financing slightly later, in the late 1980s and early 1990s.

Today, statistics show that the office equipment and telephony industries finance nearly 90 percent of all sales! Most are on three to five year leases. Moreover, approximately 80 percent are upgraded or changed before they reach full term. Financing of large system integration or products like Xerox Docutechs over seven to ten years is no longer uncommon.

Industry analysts believe that the IT industry's experience will be similar to these two industries. Their history shows, unequivocally, that those OECs and telephony companies that embraced finance prospered from it, and those that didn't suffered because of it!

While this lesson is clear, it is not clear that all VARs are learning it. Over the last three years, working with VARs across Canada and the United States, I always ask resellers if they offer financing as part of their solution-sell. They indicate that they do, but usually, this involvement is limited to putting the customer in touch with a local leasing company. The financing is outsourced partly because it complicates the sale, and partly because financing is not the VAR's area of expertise.

This, from my perspective is a major error. Selling experts agree that to be successful in sales - any sales - you must maintain control of the deal from the beginning to the end. Look at any reputable selling course.

What do they teach? Proven methods and techniques designed to get and maintain control of the selling process! Manufacturers and distributors interested in providing support to their valuable frontline VARs now need to offer them fundamental finance training as well. Modern VARs do not have to be certified accountants or chief financial officers, but do have to be able to speak to them. More and more IT solutions end up in the decision-making - or breaking - hands of corporate financial experts.

Salespeople who can't speak the language of IT are obviously not credible. Given the importance of financing to the process, however, salespeople who are ignorant of the language of finance are equally dangerous to the modern reseller. Salespeople who understand financing are in a position to offer a further value-add, the cost benefits of financing that can be provided in conjunction with a solution-sell.

Manufacturers and distributors must accept that the competitive landscape has changed, and learn from the experience of some of their new challengers. The OECs are behind the IT companies in technology, but they are able to compensate with nearly two decades of refined finance solution selling. The telephony industry is completely up to speed on information solutions - and is at least a decade ahead of the IT world as it relates to finance!

The above accentuates the fact that the IT industry must move to a finance solution-based protocol. The VARs are the ones who will confront this each day on the front lines. Manufacturers and distributors can help them, however, by providing similar finance packaged solutions like those introduced by Dell, Gateway and IBM. There is plenty of evidence to suggest that small and medium-sized businesses - still the largest market segment of business - will welcome a move into financing by the IT industry, particularly since the telephony and OECs have already led the way.

Providing VARs with the tools of financing is one necessary step. Providing VAR owners and sellers with a conversant understanding of financial fundamentals to round out their IT and sales expertise is another. By becoming more adept with these fundamentals, the chances of VAR profitability and success in both the short and long term are enhanced. Their channel partners will share in both the profitability and success.

Manufacturers and distributors need to learn from the experience of the office equipment and telephony industries, and teach their VARs knowledge of financing fundamentals, so that the VARs will be able to add financing to their solution selling. Since manufacturers and distributors who sell through the channel are inextricably dependent on VARs to create pull for their wares, they need to train the VARs how to finance these products as well as sell them.