In recent years, many companies were captivated by the concept of disintermediation--using the Internet to interact directly with customers, thus saving money by cutting out the middlemen's slice of the revenues. Of course, it didn't happen.
"Traditional middlemen organizations that populate sales and distribution channels create far too much value to be dispatched into the annals of economic history," says Aberdeen analyst Kent Allen.
As it turns out, most businesses need middlemen--the resellers, dealers, distributors, wholesalers, and outsource service partners that companies use to reach customers.
Indirect business partners are usually better at serving local markets and specific customers than companies that focus on developing and marketing product lines across a broad spectrum of markets.
Seven out of ten enterprises earn the majority of their revenues via indirect channels, according to AMR Research. In some industries, such as consumer package goods, discrete manufacturing, and high technology indirect sales account for between 60 to 70 percent of all revenues, according to the Yankee Group.
Most enterprises now recognize that instead of trying to marginalize their indirect channel partners, they need to find ways to work more effectively with them. The result is a whole new crop of software products.
In the last couple of years, an application category called partner relationship management (PRM) has arisen to help companies collaborate more effectively with their indirect channel partners. PRM tools are available from a variety of vendors including Allegis, ChannelWave, Click Commerce, Comergent, Haht Commerce, InfoNow, Oracle, and Siebel Systems.
These vendors have done a good job of implementing functions to help companies work more effectively with their partners. However, it's not clear that PRM can stand on it's own as a separate software category.
PRM tools help automate tasks shared by companies and their partners. Their main functions are to deal with lead management, online training and certification. Cooperative marketing content management, order management, collaborative forecasting, contract negotiation, campaign management, partner recruitment, and partner profiling also fall under PRM's jurisdiction.
Lead management tools help automate the allocation of sales leads and the tracking of results. Through marketing, enterprises collect potential sales leads and pass them along to their indirect channel partners, who are often closer to the customer and better equipped to make the sale. Enterprises need to be selective about matching up leads with the partners most likely to convert them into sales.
Online training works to educate partners about a company's products in order to make them better salesmen. Enterprises can track the progress of specific partners as they complete various steps of courses and automate the certification process.
Enterprises and partners also work together on marketing, with the enterprise subsidizing the partner's efforts on a local level to help spread their own message. PRM tools are available to help manage co-marketing programs, track results, and reimburse market development funds.
These functions of PRM do offer benefits, but overall, PRM's grand vision is far from being realized. Most enterprises that implement PRM are only using specific tools to address isolated processes rather than creating a broad range of integrated capabilities.
"We are trying to create incremental visibility into where there was none before," says Drew Williams, vice president of marketing for PRM vendor ChannelWave. "The indirect channel is the area with the least visibility because you are working with companies that owe you nothing and are often reluctant, he says.
Proponents believe that PRM will ultimately offer its greatest benefits by providing visibility throughout the demand chain. But that's going to be hard to achieve. The relationship between enterprises and partners is a contentious one and the underlying trust and cooperation necessary to deploy new technology is largely absent.
"Partners don't want to share information because they are afraid that the corporation will go around them," says Yankee Group analyst Sheryl Kingstone.
Although a few enterprises, such as Toshiba Canada, Symbol Technologies, and the Trane Company, have reported some initial success with PRM initiatives, it will probably be a long time before most enterprises implement broad PRM programs.
"For PRM to succeed it requires discipline, good project management, incentives, and a system that's easy to use--all of these have to conspire to make PRM work and its not happening quickly enough to sustain a separate software category," says Forrester Research analyst Laurie Orlov. She predicts that most vendors will go out of business, merge, or get acquired.
Consolidation among PRM vendors is likely. By and large, PRM will probably merge with CRM because it is just a set of links in a bigger chain that spans the relationship between customers and the companies that serve them.
Aberdeen's Allen believes that the traditional concept of CRM was overly focused on the direct channel and will expand to include the indirect channel, subsuming PRM in the process. "As this hybrid model emerges--possibly on a Web services backbone--merger and acquisition activity among IT suppliers of channel-specific applications will increase," says Allen.
Nonetheless, PRM features and capabilities will continue to develop because it's the only way that companies working through indirect channels can gain visibility of their end customers. When PRM functions are fully integrated into a broader definition of CRM, middlemen will finally get the respect they deserve.