Salesnet Turns to the Channel to Capture the Midmarket

In a bid to reach a wider audience hosted CRM supplier Salesnet launched an extensive channel program to sell its CRM services through the same technology and process consultants the midtier already engages to solve its problems. The success of the program, which was launched in late 2003, has spurred Salesnet to move deeper into the channel, with private label variants of the software for large integrators and resellers looking to strengthen their own brands. Partners now account for more than half of Salesnet's new accounts in the midtier. "I saw an opportunity to expand our presence in the market using an indirect route, and there has been a response from the marketplace," says Ronald Martin, vice president of channel business development for Salesnet. According to Martin, the recent wave of interest in hosted CRM has created a gap in the midmarket integrator's portfolio. Midmarket customers are not coming to Salesnet cheaply. According to the company, partners share in roughly one third to one half of ongoing account revenue. To reach a new class of customer, Martin says it's a price Salesnet is willing to pay. "They are expanding the marketplace, going after firms that weren't able to support an implementation of SalesLogix, for example, and actively turning over their base into a hosted offering--instead of going through the next upgrade cycle of GoldMine or ACT." The company is hoping for big things from private-label deals, in addition to the integrator relationships, such as its relationship with media advertising-solutions provider Encoda, which is marketing Salesnet under the MediaExec name. "It's going to allow us to grow very rapidly," Martin says. One risk for Salesnet and other hosted CRM providers who move to a channel model is the contamination of one of their primary messages--that hosted CRM is less complex to employ, and therefore less expensive to own, than packaged solutions. Partners are still seen as the conventional gatekeepers to the midmarket, however. "Our research shows that over half of midmarket companies want to go direct, but they also want that helping hand when they need it," says Erin Kinikin, research director at Forrester Research. According to Martin, partners provide invaluable change management and consulting services to clients. "The software, really... is easy," he says. "The challenging part is changing the behavior of the sales organization; it's the training and the process." Yet there is a deeper message here--the instant-on allure of hosted CRM loses some relevance when it is asked to perform highly integrated tasks for the business. "We're also seeing the reality of hosted CRM, which is that integration is still important, and integration means IT and technology resources," Kinikin says. "The more sophisticated functionality you want, the more integration you want, the more you need an implementation partner who can deliver that sophistication for you. It may well be that you can pay just as much for a sophisticated hosted implementation as a sophisticated on-premise implementation."