Renowned management consultant Peter Drucker is often quoted as saying that "you can't manage what you can't measure". A somewhat simplistic axiom for how businesses should operate. Nowhere does that axiom prove truer than in the world of revenue, where measuring what comes in is critical for keeping businesses in the black.
Yet many of those in the channel often look at managing revenue as the job of the accounts receivable team, which is supported by various sales and marketing staffers. More often than not, if a company has positive revenue and is turning a profit, well enough it is left alone, and the source of revenue remains shrouded in mystery.
In a recent State of Revenue Report, commissioned by revenue management software solutions vendor Model N, some surprising statistics were revealed. The report, which was written by ReRez Research, included data derived from surveying 300 C-level executives across pharmaceutical, medical technology, semiconductor/electronic component manufacturers, and high tech companies, all of which leverage some type of channel to move services and goods out to customers.
The report identified three primary goals that businesses need to focus on to achieve growth and improve profitability. Those goals included; improving profit margins; reducing revenue leakage; and growing top-line revenue. Interestingly, each of those goals require measurement to determine success.
Even though those goals were determined by several industries, they all ring true for those in the IT channel. Integrators, MSPs, solution providers and other members of the IT channel have much the same goals, and as such, encounter the same obstacles to achieving those goals.
For example, revenue leakage is a primary concern for most any enterprise and proves to be a significant challenge, since revenue leakage can happen at any of dozens or more moments throughout the lifecycle of a contract. From the first point of engagement to every step of the way through the fulfillment of the contract, to tracking regulatory requirements. It is an issue that proves the need for businesses to incorporate a systematic, end-to-end way to manage revenue.
Other impediments to optimizing revenue management include the complexity of partnerships and channel programs. The survey revealed that more than two thirds of life sciences and high tech revenue comes from partners, generated either through managed channels or through joint partner deals. For those in the channel that are partnering with other businesses, that proves to have significant implications.
Without direct control of more than half their revenue, companies can lose the ability to see and forecast their revenue in real-time. They may misunderstand their financial position and make strategic or operational errors as a result. In addition, they are reliant upon resources they do not directly control, making it harder to implement changes and roll out marketing and sales programs intended to drive revenue. What's more, the number and complexity of channels continue to expand. Some 90 per cent of respondents work with 20 or more partners, and 70 per cent work with 40 or more, and respondents expect that number to increase.
Revenue management as a platform?
The report does a good job of exposing the challenges facing businesses and proves to be worthwhile reading. That said, there is still much more to learn about what a platform for revenue management can bring to the table. Beyond having up-to-the-minute information and a data store of actionable information, the platform-based approach to revenue management creates a foundation for automation and proves to be a good opportunity for solution providers to share their knowledge and build new offerings. Revenue management can also be a component of supply chain management, bringing forth further opportunities for integration and customized deployments.
Simply put, end customers may need the same capabilities that channel players are demanding when it comes to managing revenue. After all, technologies such as RPA (robotic process automation), artificial intelligence, and machine learning, along with business intelligence all fit into the revenue management model. Revenue management becomes an opportunity for the channel to practice what they preach and bring forth additional opportunity, while also heading off the challenges that new regulations and compliance requirements are sure to bring to businesses in the near future.
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