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Is the Incumbency Policy Good or Bad for the Channel?

Scott Frew
Scott Frew

I’ve been writing about this topic a lot lately, but on time renewals processed through the channel are much less common in reality. Based on some analysis we’ve done, the average on time closure rate is less than 50%.

There are many potential root causes for this issues because it is affected by so many different factors. Anything from staff taking annual leave to slow customer systems and processes potentially affect the actual timing of the renewal order.

I wonder though, whether the legacy of incumbency policy is also at a factor at play.

What is the incumbency policy?

Briefly, the incumbency policy denotes that the incumbent channel partner or one who first made the sale is somewhat protected for the renewal opportunity. Usually pricing advantage restricts availability to anyone else, unless there is a specific reason such as the channel partner agrees to relinquish the opportunity, has gone out of business or shifted it's business focus.

The incumbent channel partner is also entitled to better discounts on the opportunity for having originally secured the sale.

With all these benefits accrued to the incumbent channel partner, why are on time closure rates still so low? In some cases, I doubt that some renewal opportunities are even being acted upon. I don’t want to say that it’s laziness, perhaps it’s more complacency that what’s theirs today, will be theirs tomorrow and always so what’s the hurry.

A different method

In a way though the incumbency policy is inhibiting a free market competition because the vendor is reliant on the incumbent channel partner alone to process the renewal. While I do not advocate for increasing channel conflict, I think a bit a healthy competition to promote faster and more focused renewal transaction would be beneficial for both the vendor and the channel.  Here’s what I would propose:

The incumbent channel partner is given the first access to process the renewal opportunity from 90 days before renewal. Assuming you have the systems to manage this (by the way, can help if not!), if at 30 days, the renewal opportunity has not been validated, reviewed or there has been some level of engagement by incumbering channel partner, the vendor would have the right to assign it to an alternative pathway to process.

In this way, both the vendor and the channel partners are incentivized to process transactions quicker. The earlier the order is secured, the quicker the cash comes in, creating a happy and healthy channel.

After all, it is up to each level of the channel to make sure the renewal is in and on time!  

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