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The Best VAR Management Program in the World?

How SolidWorks grew to $400m a year in revenues by helping their VARs become world class business leaders

How SolidWorks grew to $400m a year in revenues by helping their VARs become world class business leaders.

SolidWorks was started back in 1993 with the vision of bringing solid modeling for mechanical design to the masses. Before SolidWorks entered the market, solid modeling was only available from PTC at $20,000 per seat, on expensive Unix workstations. Jon Hirschtick, the founder, set out to change all of that by offering a fully featured product at a fraction of the price. He also decided to use a reseller model to get the widest distribution at the lowest cost. This combination of features, price point, Windows OS and reseller channel, turned out to be wickedly successful, and within a few years SolidWorks had created a whole new mid-market and clearly established itself as the market leader. Today the company is one of Boston’s most successful startups, with revenues in excess of $400m, and an operating profit margin that would be the envy of the software industry if it were publicized.

A key part of what made SolidWorks so successful was how well they managed their VAR channel. I observed three distinct phases. The first phase was initiated by Vic Leventhal, who joined the company as COO in the early days. Prior to joining SolidWorks, Vic had been CEO of a CAD reseller, and had first hand experience of what it was like to be mistreated by vendors. His understanding of how VARs think, and what it would take to earn their trust and loyalty, were key to shaping the early VAR program.

The second phase occurred under the great leadership of Jon Hirschtick, CEO, and John McEleney, COO (who later to rose to CEO). SolidWorks had clearly recognized that revenues were directly linked to the number of effective reseller sales people selling SolidWorks, and their productivity. John McEleney focused on systematically growing those two key numbers.  Systematically meant a data-driven analysis of every piece of geography on the planet — where did they need more feet on the street, and how many? That phase took the company to over $100m in revenues.

The third phase occurred when Jeff Ray joined. Together with John McEleney, the CEO at that time, Jeff took on the challenge of slowing growth due to a lack of growth in VAR productivity, and the difficulty of adding new VARs into a territory without angering the current VARs.

Traditional approaches to solving this problem have been:

  • Add more VARs into the territory, creating too much competition and removing the incentive from the better VARs to invest
  • Start selling directly to larger customers – really angering VARs
  • Constantly inventing new sales incentive programs
  • etc.

Rather than taking this approach, Jeff chose to address the problem in a far more innovative way by looking at their existing VAR channel as an un-optimized resource, and figuring out what steps would need to be taken to further develop the business skills of that channel.

The result was something extraordinary: a program where SolidWorks provided their VARs with a full education on every aspect of running a business, equivalent to a mini-MBA program. Jeff and his team became business mentors to the VARs, educating them on all aspects of how to run a great company. This included not only sales and marketing, but also finance, HR, recruiting, business planning, etc. Their efforts paid back in spades, as SolidWorks quadrupled sales and grew their profit margins to double the industry norms.

In my experience of seeing many channel programs, including those from Microsoft, Lotus, IBM, etc. what SolidWorks put in place was revolutionary, and significantly more advanced that anything that came before it. Very likely the best VAR management program in the world. While this may not be directly applicable to smaller startups, understanding what the end game should look like can be very valuable as you start creating a reseller program of your own.

In this three part series, Jeff Ray, the current CEO of SolidWorks, humbly describes the program.

Click here for Part OnePart Two and Part Three.

I hope you enjoy reading them.
-David Skok

Read the original blog entry...

More Stories By David Skok

David Skok joined Matrix Partners as a General Partner in May 2001. He has a wealth of experience running companies. He started his first company in 1977 at age 22. Since then he has founded a total of four separate companies and performed one turn-around. Three of these companies went public.

Skok joined Matrix from SilverStream Software, which he founded in June 1996. Prior to its July 2002 acquisition by Novell, SilverStream was a public company that had reached a revenue run rate in excess of $100M, with approximately 800 employees and offices in more than 20 countries around the world. His work as a value added investor is best known for helping JBoss take its Open Source business to a successful exit with its sale to Red Hat, and for helping AppIQ, Tabblo and Diligent Technologies, which have all had successful exits, from their inceptions to their acquisitions by HP and IBM.

He serves on the boards of Digium (makers of the very popular Asterisk Open Source PBX/telephony software), CloudSwitch, Enservio, OpenSpan, Solidworks, VideoIQ, and HubSpot. In addition to his broad focus on enterprise software, he is specifically focused on the areas of cloud computing, Open Source, Software as a Service (SaaS), marketing automation, virtualization, storage, and data center automation.

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