Previously we talked about five compelling benefits for outsourcing your channel program: controlling costs, increasing operational efficiencies, reducing labor costs, focusing on core business, and reducing risk.  In order to determine whether outsourcing is right for your organization, you will need to validate if your current processes in-house are cost-effective versus outsourcing.  You will need to research the key processes in your program to determine how long they take to complete and how much they cost on an hourly basis.

Here is an example of a spreadsheet you can build for this assignment:

An explanation of each process is as follows:

Plan Submission and Approval: the method by which a partner makes a request for funding of market development campaigns or activities and the procedure by which the program sponsor (manufacturer) approves them.  This submission can range in scope from a partner’s annual business plan to a claim form for a print advertisement.  The process also must account for your time to review, act on, and communicate your approval to the partner.  In your assessment of total hours, make sure you include the time needed by your partners to generate and submit this information to you.  This is often referred to as the “opportunity cost” invested by partners to participate in your program.

Claim and Remittance Processing:  the method by which the manufacturer receives, audits, and issues payment on the funding claim.  This is a process area where partners too often experience the most delays in manufacturer response and, not surprisingly, the largest block of labor hours in a campaign lifecycle is found here.  Concurrently, opportunities to streamline tasks and workflow and increase functional efficiencies are greatest in this area.

Partner Operational Support: this is the customer service component of the program, where the manufacturer provides assistance to the partner.  The assistance could be technical (i.e. logging on to the hosted site) or program specific (clarifying rules of engagement).  The method of delivery might come from a toll-free call center or a simple exchange of e-mails.  In larger companies, these service hours may already be logged and tracked by an internal system to measure support costs and customer satisfaction.   

Report Preparation:  the aggregation of program data over time from partner profiles, funding requests, pending claims and processed payments, needs to be presented in a logical framework for analysis and subsequent decision-making.  Whether done on spreadsheets or via other software applications, the collection process is often decentralized as different parameters are created by various program stakeholders in sales, marketing, finance, and executive management.  Report output to partners can range from simple fund balance statements on paper to detailed market spend trends viewable from an online dashboard.  Hours for preparing both administrative and partner reports must be taken into account in assessing effort and cost.

Reconciliation:  this could be understood as the final reporting step and is primarily executed by the accounting or finance department.  All program incentive funds for partner activities must be accounted for in a “snapshot” at month or period end.  These funds move linearly in a marketing activity lifecycle—requested, approved, claimed, and remitted.  In the reconciliation process, the beginning fund balance must be broken down to show all paid and unpaid funds in their various stages.  If there are multiple funds from a program or programs, they are also rolled up and reconciled here.   

In using the above spreadsheet, for each process you would estimate on a monthly basis the total number of hours and then attach a “baseline” or average cost per hour.  Monthly hours will likely involve multiple persons working in the process area, not just one individual.  For estimating your baseline cost, be sure to consider that labor required to complete tasks in one process might be more or less expensive compared to another process.  Remember that the numbers in the spreadsheet are for demonstration purposes only.  Your mission is to do the research within your channel group, plug your findings into the spreadsheet, and come up with an estimated total cost of operating your channel program.  You will then be ready to compare your legacy costs against an outsourcing model.  Good luck!

Michael DeBarros is the Business Development Manager at CCI. He is a veteran of 22 years in technology sales and has held channel management positions at two leading software companies. Michael's experience in working for both partners and vendors offers unique insight into today's channel challenges.