Question

Topic: Student Questions

B2b Reseller Put On Back Burner By Oem

Posted by Anonymous on 6/12/2008 at 12:06 PM ET 500 Points
I work for a small B2B software reseller. In January, I was promoted from within to establish a marketing agenda (previously, all marketing was done via our OEMs). Since then, I have obtained a new logo, tagline, CRM system and have been working nonstop on an entirely new web site (still yet to go live).

The web site, our business plan and all marketing collateral ultimately focus on two products we resell and the services we provide for those products (support, maintenance, training, etc.). Our services have always differentiated us from these two OEMs. They also create a separate brand for us--which is huge because we've been so dependent for so long. All of my marketing collateral--including the web site--for these products is geared around our robust support and training offerings.

I've always thought our business plan/strategy was a little weak because it still calls for some significant dependence on OEMs. Well, recently our strategy was completely crushed by one of our OEMs! They were recently acquired by an ENOURMOUS business application firm, and this firm decided to take a more direct, less channel-friendly approach. Here are some of the changes, which apply to us and all other resellers:

1. Them taking over all of our current and future marketing contracts (so we can only sell the software licenses) *HUGE LOSS OF REVENUE FOR US*
2. Support will be provided by them directly
3. Training must be provided by them directly
4. Cutting our margin by 1/3
5. No more tiered discounts, no matter the size of the opportunity (this has been key for our positioning in the past)

They also suggested that all resellers develop other value-add services to essentially account for the loss of revenue on the ones we will no longer be able to offer. These services basically include consulting, implementation and product programming/integration--all things we currently don't have the manpower or resources to do.

For the past two years, this product and our support and training services for it have provided us with about half of our revenue. The other half comes from the competing product of another OEM and the services we offer for it. Losing the opportunity to sell maintenance and provide support also takes away from a key touchpoint between us and our customers.

The two business owners here are avoiding addressing these issues, and still expect me to proceed with my job as normal. I cannot focus on a marketing objective when I don't know who we are and where we're going anymore though! They both want my input on the situation; and I feel a little out of my league. I have narrowed down our options to four:

1. Continue on the same course of action and just try to sell more product
2. Don't renew our contract with this OEM and try to focus our efforts on the other OEM's product (which I fear could potentially lead to the same situation when they one day get larger and/or acquired)
3. Put both products on the back burner and come up with an entirely new business plan (we have extensive background in IT services)--though this would likely call for an entirely new target market outside of our database and knowledge
4. Try to offer these "value-added services", which would require new staff and new resources--HUGE RISK for such a small company

Thank you for reading this--I know it's pretty long-winded! Please let me know which option you would choose and the reasons why so I can come up with a recommendation for my employer. Of course, I understand any choice made will need to be heavily research beforehand...
To continue reading this question and the solution, sign up ... it's free!
SUBSCRIBE
Or, SIGN IN

RESPONSES

  • Posted by Frank Hurtte on 6/12/2008 at 12:30 PM Accepted
    In my world your issue is unfortunately very commonplace. There is nothing worse than being forced to compete with your suppliers. That being said you can still successfully do business.
    1) Enomormous companies often do not fully understand the needs of their customers. You should begin working to develop very narrowly focused training products. To use a MS product example, you dont teach how to use word - you teach how to use word to for a specific business application. Large companies can not make money pursuing that path.
    2) Surely there is a new supplier whose products can be developed. Often small companies vertually surf the waves of technology development.

    keep establishing your brand. keep building customer relationships. keep pushing into why you are better than the giant companies.

    You need to be nimble and able to run between the legs of the giants.

    Contact me via my profile if you would like to learn how other technology companies have done it.
  • Posted by melissa.paulik on 6/12/2008 at 1:32 PM Accepted
    Lisa,

    This is the world I live in. I have worked for and with Microsoft and SAP. I have been both the crusher and the crushee. While I hated the former, it’s a fact of life. With any move a big company makes somebody gets crushed. At the end of the day, they are accountable to the shareholders and not their business partners.

    But, having worked with many software companies, big and small, here are some things to think about.

    First, how accountable are you for the product mix? If the owners of the company own the product mix and want you to continue doing what you have been doing, then you probably don’t have much choice.

    If this is the case, and you are uncomfortable with it, make sure your resume is up to date. If the ship sinks at least you've headed toward the life boat already.

    You might also try to understand from the owner’s point of view why they are not dealing with the issue. Perhaps they know something you don’t.

    If you do have some control over the offerings, you didn’t mention one of the other options that I think is available to you. Can you back burner the “offending OEM” product and focus on the other while you look for additional products and services to add to your mix?

    Also, do you have any negotiating power with the OEM? You mention that their products accounted for half of your revenue. Were your revenues significant to them as well? While I wouldn’t go in with “guns blazing” you should try to get some time with the new owners of the OEM. Come in wanting to understand better how you can help their business. When working with execs from big companies I’ve always found that you can “catch more flies with honey…”

    Coming up with your own IP, be it services or software, can insulate you against situations like these. For example, are their services that you have established expertise and that there is a market for that you can redefine the company around? Today, it sounds like your organization is built around license revenue. Services revenue is often more profitable to resellers.

    Finally, I think somebody said this before, but these things do come in waves. The new owner of the OEM may reverse their position by this time next year. In hi-tech, tomorrow never looks like you think it is going to.

    That’s a bit of a brain dump. Obviously some of these things won’t resonate because I don’t have full visibility into your situation. But, I hope you can pull out a few helpful thoughts from this.

    All the best!

    Melissa
  • Posted by Tracey on 6/12/2008 at 7:10 PM Member
    My company was sort of in the same situation (but not quite so dire) -- We took route #3 and it's made us incredibly successful. We used to sell software to mobile phone OEMs. Their objective is to get the cost of everything on the phone as low as possible. Not an ideal situation for us.

    Now we sell directly to mobile operators. The mobile operators tell the OEMs what to put on the phones. We have a more powerful customer that has more money. It's enabled an entirely different vision for the company, not to mention new products and more business. Hope that helps.
  • Posted by adammjw on 6/13/2008 at 8:55 AM Member
    The issue is how fast or slow will the owners be able to realize the situation.Or putting it another way how soon they are ready to face the new landscape.Another problem is coping with emotions which all of you have toward the OEM.
    Let's assume that options you presented are about all you can do.Let's assume further that emotions are put aside and you try to go 100% rational, owners included.Why not try to shape decision tree for all of them figuring out expected value of particular solutions?
    Another way to handle the situation is assume that you have made each one of the decisions and they failed;the company went bust.Then ask why it might have happened, what you missed when making a decision.
    Referring to opinions voiced already, yes the other OEM can do the same.It's also true that your OEM can at some point in time reverse their decision,but it does not mean your company is still there to enjoy it.
    As pointed by W.M.M.A you have to go deep into the company to see what potential you have to try to go independently.You could buy some time doing business as usual but focusing your resources on what offers largest promises for the company. Can you survive for a year or two like that?
    All of it asks unbiased analysis.

    Adam
BACK TO TOP

Post a Comment

Related Discussions

Community Info

Top 25 Experts
(Student Questions)