"It's all about the information" says Ben Kingsley to Robert Redford in one of the peak moments of the tech suspense movie 'Sneakers'. And he was right.
Caption: Still of Dan Aykroyd, River Phoenix, Robert Redford and Sidney Poitier in Sneakers (1992) Source: IMDb
Collecting data and then converting it into information, insights and ultimately actions is what separates today's market leaders from the followers.
High tech companies are spending close to half a billion dollars every year to collect, clean, and analyze their channel data in order to gain visibility into their channel business, market share, pricing pressure and create the right sales incentives for their internal and channel sales organizations. Almost 85% of this spend is on internal tools, processes and people and about 15% goes to external solution providers and BPO companies. The question is: are these tech companies getting their money's worth?
In part one of this two part series, we will examine the challenges corresponding with channel data management.
Recent market information published by GSA, IHS and other sources has indicated that the developed countries are reaching saturation in terms of consumer ability and desire to consume new generations of technology. They're also concerned that the promise of connected devices, sensor-filled cars, homes, and medical devices are yet to drive the next big wave of growth.
With this backdrop, the fact that developing economies are growing but consuming older-generation technologies presents CEOs of tech companies with a real challenge — how can they grow their business? This is partially addressed by the numerous acquisitions and the ongoing consolidation of the market. But companies still need to improve their organic growth, and they can if they intelligently leverage channel data.
Channel data is critical to providing companies with visibility into the sales activities in their channels, inventory levels, market penetration in particular geographies and new application markets. It is also critical to understanding which marketing and incentive programs are delivering value and which should be stopped so that sales and channels can be compensated correctly. For this data to be useful, it needs to be made available quickly and needs to be clean. It needs to be enriched, completed, segmented and analyzed if it is going to drive insight.
And for this data to initiate action, it needs to be integrated into channel revenue management (CRM), enterprise resource planning (ERP) and revenue management applications, including quoting, contracts, deal analysis tools, pricing analysis tools, as well as rebates and incentive management solutions. Most solutions and BPO companies fall short in all these areas.
Anyone who has managed channels and had to deal with channel data will concede that the data never comes in quickly enough. At that, it is rarely clean and requires significant work to be converted into information, insight and actions.
Let's explore the specific challenges associated with channel data management in more detail to better understand why this is so.
- Timeliness — Most companies face multiple challenges on this front. Starting with the different cadence of POS and Inventory submissions from different channels, followed by late submissions, incorrect submissions, electronic data interchange (EDI) error issues and last, but not least – no submissions. It is not atypical to see tech companies unable to collect data from as much as 25% of their channels. To combat these issues, companies spend time, energy and internal personnel on handling this process. Those who have subscribed to traditional BPOs may find some cost reduction relief, but since these business process outsourcing (BPO) offerings use mostly people to manage the process, the aspect of timeliness is not really addressed.
- Cleanliness — Channel data is notoriously unclean. Customer names are spelled incorrectly, product SKU numbers, prices, dates all have errors, and very often information provided is incomplete (e.g., customer name and address may be provided, but not the state or ZIP code). Data from Asian markets presents its own set of challenges. Tech companies spend significant resources to develop smart tools, fuzzy logic, algorithms and people's time to bring the raw data to a state where it can actually be used. Again, some have selected BPO options and have reduced internal costs somewhat. However, they still have to go through the cleaning process for every submission and this involves manual error-prone work.
- Data to information & insight — Cleaning the data makes it useful, but it is still only raw data. In order to convert the data into information and insight, the data must be enriched with missing information, segmented and categorized based on markets, geographies, applications, channels, customer types and more. These classifications can be used as business intelligence (BI) tools in a meaningful way. Most companies' internal tools and resources are challenged to keep up with the scope, and BPOs also strain to scale their output to provide these services.
- Insight to action – When using point of sale and inventory data to drive day-to-day actions - such as where to focus sales and marketing resources, paying out rebates and incentives correctly, applying POS lines to volume commitments in quotes, contracts and order processing in ERP, accruing financial liabilities correctly and recognizing revenue – channel data must be relied upon. Most companies currently depend on a set of manual processes and homegrown integrations to manage such processes. In addition, most BPOs offer very limited help, which does not scale. Not only does this approach entail higher costs, it also does not guarantee accuracy. In fact, I have witnessed firsthand how the hand-off of data between BI tools and ERP has caused companies to incorrectly "miss" millions of dollars of revenue that were mistakenly not recognized. This could be due to a number of reasons, including millions more being overpaid to channels and/or the incorrect payment of sales incentives.
All of this impacts sales effectiveness both with internal sales and in the channel. Sales people who have their compensation impacted by channel sales will spend 15% to 20% of their time verifying and matching POS lines to opportunities in their CRM. Ineffective rebate programs remain in place, draining margins but driving no growth. Competitors gain market share and sales leadership is slow to respond. Fixing the issues in channel data management can help companies grow channel sales by 5% to 10%, according to Gartner
Stay tuned for part two of this two part series which will examine exactly what is needed to effectively manage channel data.