Segmentation Plays Critical Role In Lucrative Software Vendor Partnering Programs - International Data study - Industry Trend or Event

EDP Weekly's IT Monitor, Dec 6, 1999

But Traditional Segmentation Methodology Can Yield Mistaken Notions Of Market

Technical training, lead generation programs, and affinity programs are "critical areas for partner program investment" for technology vendors targeting the highly coveted value-added reseller community, finds a first-of-its-kind study by International Data Corp. (IDC). By using an entirely new methodology to segment the partnering community, IDC says the study comes up with a "new understanding of partner requirements according to the specific business needs of partners."

The new model, says IDC, will enable vendors to "re-evaluate their approach to recruiting and supporting partners by identifying which types of partners are likely to be most effective" in delivering access to key markets.

"Our research found that traditional segmentation methodology can yield mistaken notions regarding market reach," emphasizes Stephen Graham, vice president of IDC's Software Channel and Alliance Strategies research program. "Our results imply, for example, that logistic- oriented resellers have an important role as a product supply pipeline to large firms, particularly those customers with annual revenues of more than $1 billion. The focus of value-added resellers and service firms on midmarket opportunity is most likely the result of these firms having the domain expertise required by this market."

IDC's "Ternary Partner Segmentation Model" divides the reseller universe into six major segments, based only on the relative proportion of product, service, and resale revenue: logistic-oriented resale, value-added resale, services oriented, hybrid products/services, hybrid product/resale, and product oriented.

"Partner segmentation means isolating firms that have the characteristics required to help pursue opportunity. These characteristics often include complementary functions such as logistic resale capability, services, or domain expertise within a specific technology or vertical market," Graham explains. "Segmentation plays an essential role in any software vendor's partner strategy and getting it right is critical for software vendors as they develop strategies to target high value-added partners for specific market opportunities."

IDC's new report, North American Software Reseller Segmentation, Sizing, and Satisfaction, explores the structure of North America's large software resellers. It is based on discussions with 190 North American value-added software resellers with annual revenues of more than $5 million and is segmented into three sections: segmentation, sizing, and satisfaction. For more information visit www.idc.com.