Gavin Smith, director of Element, looks at the way tech is distributed in corporate travel and discusses how this will change, and what benefits it will bring for both companies and TMCs.
‘Do not waste a good crisis’ has become something of a mantra for many of us over the last year. Are corporate tech providers wasting this crisis? No, I donâ€™t think they are, but there is one area I believe they are not giving the attention it deserves â€“ indirect distribution and the growth an indirect partner channel can achieve.
You may be thinking â€˜well, he would say that, wouldnâ€™t heâ€™ and you are quite right. We are a value-added reseller (VAR) of travel tech and we wouldnâ€™t be doing what we do if we didnâ€™t believe in it, but sometimes the benefit of such intermediaries is lost at both ends of the relationship â€“ supplier, buyer (the TMC) and, ultimately, the buyerâ€™s clients.
Letâ€™s consider some non-travel examples where the role of VARs is better established.
Look at how the likes of Cisco, SAP, Zoho etc and how they distribute their tech. What did they work out a long time ago? ‘We cannot be everything to everyone’. How do we reduce support overhead, drive growth and deliver innovation?
What they did was look at their clients and prospects and segment them. They worked out that if they own a specific segment of customers, and then partner with others to sell and support their products, they can achieve these goals.
Now that change in thinking was not without cost. They had to invest in their tech stack to allow others to work in it. They had to create, train, and support a new indirect sales and marketing channel. This took forethought and a change in accepted technology distribution methodology. There was a substantial amount of risk associated with this new idea.
The challenging work and innovation paid off for these businesses, their clients and partners, and a new business practice was born â€“ the value-added reseller.
But what does that mean for corporate travel tech?
The major suppliers in our sector, such as SAP Concur, Cornerstone and until recently Amadeus, have unwittingly created an elite club of users and clients, as they have dramatically reduced their indirect sales partners to the point where they are not taking on any new TMC reseller partners.
New entrants like TapTrip, Zenmer and Troovo have come in to fill the gap created by TMCs not getting access to their clientsâ€™ preferred solution, but they too have fallen into the same trap.
They build their products without thinking about future distribution. They invariably do not have a solution that allows for indirect distribution. Search for VARs that support corporate travel tech â€“ you won’t find many.
What should these technology companies be doing now? They need to be looking at how they can get their products into the hands of the people who want them. The likes of SAP (though not SAP Concur), Oracle, Microsoft and many other IT and software companies have been using VARs or channel partners for many years. SAP and Microsoft invest heavily in these indirect sales channels.
So what does it all mean for travel managers?
As a travel manager, you want your service provider to have access to your preferred technology. Given the current situation with technology distribution, you may have access to tech at your current TMC, but you have chosen to move and your new TMC cannot get access to the tech, as the primary supplier is not taking on new partners. What do you do? Stay where you are? Move to another TMC who has the tech? Try to do a direct deal?
The current situation is not level, there is a limited choice of who has access to what tech across TMCs, especially across the smaller business travel agencies. Ideally, all primary suppliers should make sure their product is where their customers are. Customers should not be forced to change the supplier because the supplier cannot get access to the tech.
How should tech suppliers address VAR opportunities?
- Research and talk to tech companies in other industries about using VARs to drive growth and share of market;
- Invest in their tech to create a true reseller product;
- Segment their clients and prospects to get a clear understanding where direct or indirect relationships work best for them and their clients;
- Create a channel partnership team, that includes relationship management and marketing support
- The three-year ROI on this new strategy comfortably beats the cost of the lost opportunity by not doing it at all.
No change in direct is without its challenges. Many tech companies are not ready to lose control because of the opportunistic tendencies of their sales teams. Meanwhile, resellers can be seen as being negative to the business and devaluing the direct offering, rather than adding value to the products and services of the primary supplier.
Two of the key advantages of creating and supporting a partner channel, however, are that VARs have an intimate knowledge of the market and can penetrate different segments with ease compared to the primary producer. Secondly, this sales channel gives the direct sale teams the opportunity to focus on larger accounts.
Tech companies have clients who want their product, so they need to make it easy for them to get access to it. If you are building tech solutions for our sector and are in the early stage of your plans, ignore the indirect channel at your peril.
Gavin Smith is the director of Element, a travel technology company that helps TMCs gain access to cutting-edge travel technology. A former manager at SAP Concur, Smith has vast experience across various functions within TMCs. He has worked with TMCs of all sizes supporting their goals to deliver technology and payments to their clients.