SolidWorks: 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.

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                                                                                                                         FZVCT2HRB44U

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.

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  • http://twitter.com/analyticsseo Analytics SEO

    As usual a really useful post. Could you shed any light on how to structure the commercials for a SaaS VAR (just a range would be helpful as I appreciate every business is different). We’re a startup that is just setting up some VARs. Some want exclusivity others not – and I’ve been asked for 50:50 revenue splits and am considering this, as well as a lower starting commission of say 30% with it ramping up to 60% for over target performance. What I’m interested in is incentivising the right kind of behaviour to generate the best results. I love your advice on finding the right kind of VARs and managing them….I’d also love some practical advice on deal structure if you can share.

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