Transcript

Michelle Ruyle (Introduction):            The challenge with building an indirect channel that many of these smaller companies don’t know is it takes about 18 months to see significant results from an indirect channel if you start out with a strong plan using best practices. And I have seen and worked for companies that did not do this, where it took four years to actually see results.

Announcer:      Welcome to the Software Channel Partner Podcast where you’ll hear leaders of partner programs talk about their greatest challenges and most successful solutions. And now your host, Louis Gudema, the president of revenue & associates.

Louis Gudema:            Welcome to the Software Channel Partner Podcast where we talk with leaders in software partner programs to learn about what’s working today. I’m Louis Gudema, the president of revenue & associates, where we help companies grow faster by helping their channel partners grow faster.

Today I’m talking with Michelle Ruyle, the CEO and founder of Optimized Channel. Michelle has over 20 years of channel experience at companies such as XO Communications and Qwest, and five years at IBM.

Michelle, welcome to the podcast.

Michelle:         Thank you so much. I’m glad to be here.

Louis:   So you have some terrific experience in the channel and software channel. Please tell me about your career path and what brought you to where you are today?

Michelle:         Yeh, as you had mentioned, I’ve had a 20-year career history. And for the last 20 years I’ve actually been at the forefront of selling emerging technologies through the indirect channel. I have a history of working for smaller companies that get bought. And actually in the last 20 years I’ve worked for four companies all who were purchased. And actually early on in my career I landed a role with dot-com company named AnaServe. I was employee number 30 and we sold one of the first email software programs called Eudora Pro. And we also sold a WYSIWYG software tool called HotDog Pro that built websites.

Louis:   I remember Eudora.

Michelle:         Yeah. Those of us who have been in the industry for a while will recognize those products. They were actually the first email — Eudora was the first email program before outlook came out. And HotDog Pro was the first WYSIWYG software tool for building websites before Microsoft came out with FrontPage.

Louis:   Yeah, yeah, great tools. All right.  So where from there?

Michelle:         Yeh, so besides selling the software at AnaServe we also offered shared and dedicated web hosting services. And what’s fascinating to me is today those services are actually called cloud, infrastructure as a service.

Louis:   Yeah, these things all come around, and a lot of these things have been around for years, but get renamed. I had a company that we had a SaaS content management system that we developed, but it wasn’t called SaaS then, it was called application service provider.

Michelle:         That’s right. It’s fascinating to me how, you know, IT is very similar to fashion industry. Everything comes back around.

Louis:   Right, just with a new name.

Michelle:         That’s right. Exactly.

Louis:   Okay. So where did you go from there?

Michelle:         Yeh, so AnaServe was actually bought by Concentric Network and then Concentric Network was bought by NextLink, a phone company, which then changed its name to XO Communications. So that was actually a six-year journey for me as I continued on in various roles with the purchasing companies helping to build their channel sales program. And then I actually ran the west region channel sales team. So after XO I went to Qwest Communications, which is now CenturyLink, they were purchased, to be a channel sales manager. Then onto SoftLayer, which is now called IBM Cloud, where I helped bring on new channel partners for IBM Cloud infrastructure as a service, platform as a service and their SaaS portfolio. So that’s what brought me to where I’m at today.

Louis:   Well, yeah, and I knew when I was making that introduction and mentioning those companies that there was a lot of background to each one of those. That it wasn’t as simple as just, oh, you were hired by XO Communications or you worked at XO. It actually was quite a number of different companies or transactions that went along the way.

So you’ve worked for some great companies. What prompted you to start your own?

Michelle:         Yeah, I’d like to say this was planned, but actually what happened is a former colleague that I worked with at CenturyLink contacted me while I was at IBM. He had actually left corporate America to start his own channel sales consulting business. And he asked me if I would be interested in helping him build an indirect channel program for a hybrid cloud company. I said, sure I’m interested in exploring this more. He set up a meeting with the client. We won the contract and I started Optimized Channel. And that was a little bit over a year ago, and ever since then I’ve been fortunate to have a steady stream of clients.

Louis:   That’s great. Sounds like you really hit the ground running there. I’m sure that you had a lot of great industry contacts that knew the work you had done that made a big difference.

So you’re really focused on working with SaaS startups rather than kind of growth stage or mid-market, larger companies. Why that niche? What are the unique challenges and opportunities you see with SaaS startups?

Michelle:         We specialize in with smaller companies who have less than 100 million in total revenue. And the reason these are kind of our specialty is I’ve noticed that these companies really need the expertise of a company in the services of Optimized Channel to help them actually shortcut and accelerate their generating revenue from the indirect channel. What’s interesting is there’s a sweet spot where companies that are really between at — once they hit about 25 million in revenue — they should start using the indirect channel as a channel to sell their services. And actually some VC companies kind of recommend that 25 million mark in total revenue as the point of when they recommend their companies that they fund start building indirect channels.

The challenge with building an indirect channel that many of these smaller companies don’t know is it takes about 18 months to see significant results from an indirect channel if you start out with a strong plan using best practices. And I have seen and worked for companies that did not do this, where it took four years to actually see results. And what happens is those companies that didn’t have a good plan and using best practices, they spent a lot of money. I call it throwing things against the wall to see if they would stick. And Optimize Channel, myself, as well as some other people that I work with and bring on who have industry experience, we really help to shortcut that process. And this really helps our clients get to revenue faster, through the indirect channel.

When you look at that compared to a direct sales channel, with direct sales you hire a person, you provide benefits to that person and then they start selling services for your company. With the indirect channel you only pay, in many cases, partners on if they close the deal or if you get resell partners which are reselling your services. You’re not paying for benefits and things like that. You’re not holding those components of a P&L for the company. So it can be a very exciting, fast way to accelerate revenue with your company. But you have to be smart about it.

Louis:   Yeah. Well a lot of times the software companies that I’ve worked with, when they’re considering a channel program, they don’t realize how much work is involved. They just think, Oh yeah, have other people, have other companies sell our stuff too. That would be great. But it is quite a lot of work. As you said, it takes a lot to get it right.

So when you say 25 million in revenue, since these are SaaS companies, that’s really annual recurring revenue?

Michelle:         That’s right.

Louis:   So why that number? I mean I understand they need to have a proven sales model before they want to go and develop a channel partners. But why isn’t 5 or 10 or 15 million enough to kind of prove that they have a repeatable model?

Michelle:         Yeah, it’s a really good question. And don’t get me wrong, I do have clients that I work with that are early stage as startups with no revenue. But what’s interesting about working with those particular clients is they are still, we are at the early stages of a startup and building messaging around the services. And so what I notice is we spend anywhere from two to six months just working on the product portfolio, the product messaging, and then putting that product messaging into tools for the indirect channel and building a training program. Because essentially you have to train partners to sell your services.

So, if you go back to that $25 million number, the assumption is — and it’s truly an assumption — the assumption is at 25 million revenue, you’ve already defined your product portfolio. You already have messaging to go out and sell that through your direct sales channel, right, through your direct sales team. You may have already built a training program to train your direct sales team. And so a lot of those pieces are already in place.

Louis:   Yeah, for sure. So startups often have trouble getting their first customers because they lack brand recognition. How does that lack of brand recognition play into the recruiting of partners?

Michelle:         Yeah, it’s really interesting and this is a common discussion that I have with my clients. And actually as I’m helping them put their indirect channel program together, we spend quite a bit of time on developing and getting your brand out there. And I highly encourage my clients to utilize a variety of accolade opportunities that exist. Because they don’t have a brand, like an IBM has brand. And so when I say accolades, I provide a recommendation of a variety of different ways to go accumulate accolades. And there’s a variety of ways that you do that. And some of those are very traditional in the sense of we’ll just say like Gartner Magic Quadrant and working with Gartner to get placed on a Magic Quadrant.

Now that can be a costly option for my clients and some of them have the money to do that, but many don’t out of the gate. So then there’s other ways that you can acquire accolades that are not as expensive, and where you’re just filling out forms and you’re having a discussion with someone. And then you get put on a list. Whether it’s a CRM list, whether it’s some other type of an MSP list or some other type of list that highlights you as a top company in your field. But really important to, out of the gate, focus on acquiring those accolades to build your brand.

Louis:   Building that brand equity really does take some time usually, this is part of what’s behind my Bullseye Marketing approach is direct response programs and some of the other things I talk about in the center of the bullseye can produce results quickly for companies. But in the long run you do need those brand building programs as well, but they can take two or three years or more to really have an impact.

I actually just saw a study out of the UK for consumer brands that was talking about the balance between brand and direct response advertising for a company. And they were saying that after studying a thousand campaigns they were recommending a 60/40 mix of brand and direct response ad programs, because in the long run the brand programs would generate more revenue. But in the short run, those direct response ones would.

But do you find that it can take, that these startups, especially the ones like you said that are pre-revenue, that it’s hard for them to recruit partners?

Michelle:         I think you can have success recruiting partners when you’re just starting out if you lay the foundational components. And those really start, from an indirect channel perspective, from having a program that is competitive in the marketplace that you’re selling in. So make sure your program, that you’re in the payout you’re offering partners or the margin points that you’re offering your resell partners, are commiserate with what’s happening in the market place. So you can’t go to the market with paying half of what your competitors are paying. But you can go to market, if you have a true value statement that differentiates you significantly from the competitors, then you can’t go to market with something less compelling than your competitors.

But what I find is most of the companies I work with aren’t able to really articulate that true differentiator, so it’s more of the same. And so you have to come out with what I call, at least a like for like partner, payout compensation program. If you do that, and then if you start to build those accolades, build out the value differentiator to the best of your ability —  and again, that’s one of the biggest challenges my clients face is really differentiating themselves from the, in many cases hundreds of other competitors doing something very similar.

And so I think that what I see is if you build some of those foundational components and you have just the basic, those kind of three basic things, right? The program that’s competitive, you build those accolades as quickly as possible to say, here’s, People are outside of our company say, you know, we’re great. And then the third is really creating those differentiators to the best of your ability. You can actually have quick success by working with a company like Optimized Channel because we’ll help you do all that stuff, and then we’ll actually make the introductions to the partners once those foundational things are in place.

Louis:   Yeah. Well even companies that have been around for years, small and midsized companies, have problems explaining their differentiators and what makes them unique. Do you have any ballpark figures of what vendors are paying partners? What kind of compensation? What kind of percentages, or does it vary a lot by industry or solution?

Michelle:         Yeah. So I primarily specialize in working with MSPs that offer private and managed AWS and Azure cloud services or hybrid cloud providers. And what I’m seeing in the market place, and this is standard for what these particular types of clients that I work with and what’s kind of happening in the marketplace for the last six years. And I think if it, if they’re looking to work with the MSPs to offer, take their services and wrap a service around that, they’ve got to offer a 30% margin to that MSP to even consider using their services. And then the agent model, what I’m seeing is, 15% payouts to agents or referral partners is about, is a standard number right now.

Louis:   Okay. And then of course they have to do a lot to stay top of mind with those partners, which is a whole other set of challenges. But what are the advantages? Do they have to develop their own direct partner programs? Some software vendors go through distributors.

Michelle:         Yeah, I’ve worked with all kinds of partners across the United States, including distributors, and I think distribution has its place. However, you do have a lot more control building your own channel program versus working through distribution. And what I mean by that is with distribution you can get lost in the ocean of all of their providers. You also tend to have to pay quite a bit of money to access their sellers, and not that you don’t have to do that when you build your own program, because depending upon the type of partners that you’re working with, you do have to access their sellers.

When you build your own program, we help our clients put together an indirect channel, go to market strategy based on a variety of different partner types. And a distributor is a type of partner. And we believe that our clients are the most successful when they look at a variety of different partner types. And we make those recommendations based on the type of service that they have and truly what’s the best. And also how they hand deliver that service. And what I mean by that is, some of my clients don’t have a model, a reseller model program. They can’t do a white label of their offerings. So then the agent channel, referral channel is really the best channel. A distributor channel could be an option for them in that particular case, but a lot of times distributors want to resell.

So there’s a couple of different types of resell programs. So it’s a lot more complicated than it sounds. And I think people don’t really understand that there are a variety of channels within the indirect channel to sell your product, but you also have to have a product that’s sellable within those different channels. You have to create different marketing tools and messages to those different indirect channel partner types like district distribution. So it’s a lot more complicated than it sounds.

Louis:   Yeah, it always is, isn’t it?

Michelle:         Absolutely.

Louis:   I mean distributors will certainly say that they’re making your life a lot easier instead of writing dozens or hundreds of checks you’re writing one. And that they will handle a lot of the tech support issues and training of partners and such. But yeah, everything takes work, everything takes effort.

You know, an area that that we work in is marketing. Do you see a marketing skills gap between the vendors and their partners?

Michelle:         Wow, yeah. So I see a huge marketing skill gap with my clients and that’s because most of them do not have adequate marketing resources. And that isn’t unusual for companies that are under a hundred million in revenue. So it really kind of starts with my client’s ability to market their services adequately and creating those messages that we talked about earlier, right? Your differentiator messaging. Even something that talks about getting client testimonials. Having case studies, just kind of some of those basic Marketing 101 items that that you know all about. A lot of that isn’t there with the clients that I work with.

So when that’s not there on just kind of the base level, then it makes it very difficult to transition that into the partner arena. Because you have to step back and you have to start with the basics of Marketing 101, and make sure what you’re delivering to the marketplace. And if you have a direct sales team, you’ve already started that. But what I find in many cases is even though you’ve started it, maybe it needs work and you need to either bring in a marketing organization or some marketing people or you need to work with an outside marketing agency to help really fine tune that message.

Once we have that message down, then I help my clients actually take that message and translate it into the indirect channel based on the partner type. So we talked about distributors before as a channel within the indirect channel, agents and referral partners is another partner type. MSPs are another partner type. ISVs. Lots of different partner types. So you have to actually translate the basic marketing message for your product into individual messages for those different partner types. Because when you talk to an agent or referral partner, you are talking in a certain language and you have to articulate that in your marketing. When you’re working with a reseller and they’re reselling your product, they’re white labeling it, you’re talking to them in a different kind of language as well. So while you can use the kind of base level components of your marketing message, you have to take those and you have to modify them for your audience.

Louis:   Yeh. Well you do need different messages for those different markets for sure. I guess most of the companies that I’ve talked to on the podcast so far have been around a little longer than a lot of your clients who are much newer. And so they often have their marketing nailed down or in pretty good shape, but they find that their partners don’t. And in fact Jay McBain from Forrester says that something like two-thirds of MSPs want the marketing done for them, that they don’t want to take on the marketing themselves. But it may be that you’re not experiencing that gap because a lot of your clients are still getting their own marketing revved up too.

Michelle:         That’s absolutely right. So the stage in which many of my clients are at, they really need to fine-tune that marketing piece for themselves, and they haven’t reached a maturity level to get to the point where they’re now creating marketing programs for partners. However, some of my more larger clients are at that stage and we do work with them to help them build those programs, and also aligned to specific partners to have those kinds of pre-canned programs. And what I mean is we don’t just throw it out to every partner. We select a handful of partners and create these kinds of pre-canned marketing programs for them, and we work with them directly. So that is something we have done with some of our larger clients.

Louis:   So you’ve worked in the channel, as we were saying at the beginning, for over 20 years. How have you seen it change? Have you seen it change in the last few years?

Michelle:         Absolutely. I mean, and I’ll tell you, it’s interesting because the marketplace is changing so quickly. And the indirect channel is really, I’m going to say led by product, right? Partners are selling products. And the products in the marketplace today in services are changing so rapidly. And an example of that is let’s just talk about software. Software was selling through CDs, right? Now today all software, the focus of software is through a SaaS model. And it changes everything, right. It changes how end customers consume. It changes how partners sell. Because some partners are used to selling kind of one-time solutions, which was very common in the software industry. You’d sell something and it would be for one two three years and then you go back and renew it. Well now what you’re doing is you’re selling your software as a service, as a monthly component.

Louis:   Yeh, a subscription.

Michelle:         A subscription, exactly. And that’s a new concept for a lot of your traditional partner types that have been out selling in the market. And then through that now you’ve got the onset of cloud infrastructure as a service and platform as a service, right, along with software as a service. And what’s really interesting is you have to ask yourself, is platform as a service going to take over for software as a service down the line? Possibly, right. Because it’s truly the fusion of everything coming together.

So product really defines the change that’s happening. And my clients, their partners are constantly trying to manage to how fast technology’s changing.

Louis:   It’s interesting. Yeah, because it used to be software was on premise and it was sold or it was licensed, and now you’ve got it in the cloud and it’s subscribed to. So this is still a shift that you’re finding MSPs and other partners are trying to wrap their head around?

Michelle:         So I’ve been actually working with companies that have been converting their software to software as a service. I’ve been doing that for seven years now. And so I’ve actually seen the beginning stages of it seven years ago when I worked with a client to take their on prem software and put it in a SaaS model and deliver it to their end customers that way, all the way to today. And we’ve come a long way from where the marketplace was six, seven years ago. And I think today it’s more natural to just sell it as a software as a service type program. And I think embracing that has really happened over the last couple of years. So now it’s just a kind of a default where everybody goes, right. It’s just assumed it’s being delivered as software as a service.

But prior to like three years ago, it was not that way. And actually when I worked at IBM, I saw an enormous shift in a hundred year old company that has a significant on prem software portfolio convert over the years that portfolio into a SaaS offering for all of their software. And that really goes to show you that this is standard, SaaS as a service is just de facto and everybody today just like That’s the way it is.

Louis:   Since I headed up a company that was doing SaaS 15 years ago, I don’t think I fully appreciated how much of the industry was still making this transition and getting comfortable with this transition today. I remember going to a conference 15 years ago about SaaS and a lot of the CEOs who are on the panels were CEOs of companies that were transitioning from shrink wrap boxes to cloud and SaaS. And talking about how they were suddenly so much closer to their customers as a SaaS company than they had been as a shrink wrap box software company.

And we had come, I had come, our company’s transition was from a services company to a SaaS company, so we had always been close to our customers. That was the part we were used to. It was all the other technical side that was new for us. But for them the technical side was what they had been doing all along, but it was the relationship to the customer that was totally different.

Michelle:         It’s fascinating to hear that story. You know, 20 years ago when I joined AnaServe, we were actually selling our software through distributors, through retail, through Best Buys, through CompUSAs, and it was a shrink-wrapped product. I would work on getting end cap shelf space and doing all these promotional things. It’s fascinating to me in the 20 years like how much that’s transformed. Like you go into an Office Depot or Best Buy or whatever today and you hardly see any, if there even is any, shrink-wrapped box software products today, right. And with Microsoft, the biggest software company out there, converting everything that they have to SaaA. I mean that’s just another example of this is the new de facto and it’s just, it’s here to stay and everybody’s on board now.

Louis:   Well another change is when I was doing marketing work with Lotus and after they were acquired by IBM, the enterprise customers would typically put off upgrading their enterprise software for one entire release, not a point release, a full release. Like if they were on 3.x point x, they were going to wait. They weren’t going to take 4 right away, they were going to wait for 4 to get proven and debugged by everybody else. And they would take it when 5 came out.

Michelle:         That’s right.

Louis:   But now with SaaS, you have constant iterative upgrades happening all the time. It’s not even an issue.

Michelle:         Yeah, exactly, and you become a beta tester for the software whether you want to or not, right.

Louis: Right, right.

Michelle: I mean, that’s kind of just the way it is today. And before that was something that many companies said no to and now it’s become again, the kind of the de facto, we all are beta testers for new releases.

Louis:   Yeah, they were much more willing to be a year behind on their release than to deal with the bugs of an early release. So what technologies do you think are important for vendors to use or set up to help make their partner programs successful?

Michelle:         Yeah. My clients, number one, their number one goal is to generate revenue from the indirect channel. And with that said, you can do that with not a lot of technology. And so we help our clients stay focused on that’s their goal, here’s how you can get to that. In addition, so that’s short-term goal. Generating revenue is a constant goal but they want that out of the gate, right. Which means you can do that with limited tools and limited investment and things to kind of get the program going. But you need tools in order to continue kind of supporting and being in front of your channel partners.

And so we kind of talk through different phases of building their program and we bring tools into kind of a phase three. And some of those tools that are really important right now are to have a partner portal. Have a single place that your partners can go access their commission statements if you’re working with agents. Or for referral partners a place where your reseller partners can go in and spin up resources on the fly without having you involved. Get access to technical documents and training. So the partner portal is an important tool, but it’s not needed out of the gate.

Louis:   Okay. So what should I have asked you that I didn’t? What keeps you up at night or what keeps your clients up at night?

Michelle:         What keeps me up at night is trying to help my clients understand that the indirect channel is a viable way of bringing revenue, generating revenue for your company. But it’s not a short-term fix. It’s not going to happen in two months. Not going to happen in eight months, not going to happen in a year. And you really have to commit for the long haul for it to be successful and for you to actually see the return on investment. And that’s what keeps me up at night. Just that commitment by my clients to be in it for the long haul.

Louis:   Okay. So the business world is changing very rapidly. How do you keep up? Any particular podcasts or blogs or events, websites, publications, other things that you use to keep up with business and the channel?

Michelle:         Yeah, all the above. So I use podcasts, websites, publications, events. I actually have been doing quite a bit of speaking, and through doing speaking and being on panels and doing podcasts, it’s actually that really keeps me in front of what’s happening in the industry. It makes sure that the information that I’m delivering to my audience for those type of things is relevant and that it matters to what’s happening today. So, because I’m highly involved in doing things like that, I have to stay relevant.

In addition, I think my clients keep me young and keep me relevant. They’re emerging technology companies, right? They’re selling the latest and greatest tech services. And by working with them, I get to kind of stay on the forefront of what’s happening today. And also some of my clients that I’m looking to work with are those in the IoT space as well as in the security space. So I’m constantly staying abreast of what’s happening in those arenas.

Louis:   Yeah, some people I’ve talked to have had special preferred podcasts or publications,  websites. But Tony Rummans, who I spoke to recently from BitTitan he was saying, I think similar to what you said is, at conferences, at live events, he talks to a lot of people and that’s what keeps him up to date. So that makes a lot of sense, too.

So, Michelle, this has been terrific. How can people contact you?

Michelle:         Thank you again for the opportunity to talk today and have this conversation. I really appreciate it. And I can be contacted at michelle at optimizedchannel.com. Or of course we can do it the old school way if anyone wants to have a conversation with me over the telephone, and you can do that by contacting me at 310-927-4967.

Louis:   Okay. And are you on LinkedIn? On Twitter? Are you active on social media or?

Michelle:         So I’m absolutely on LinkedIn. So you can find me on under just, look for Michelle Ruyle, you’ll see my name pop up. And I am doing some stuff on Twitter through Michelle Ruyle and ask op channel.

Louis:   All right, terrific. So thank you for joining us today. Michelle.

Michelle:         Thank you so much for having me. I’ve enjoyed the conversation.

Louis:   I’ll be sending you a copy of my Bullseye Marketing book as I do to all guests in appreciation.

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