Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Channelinsight, a Salesforce.com for B2B, Lands $10 Million From Rho Ventures

It’s a widely accepted convention of modern business that if you sell pretty much anything in large numbers, you can benefit from using technology to keep track of all your customers, what they buy, what they like and don’t like, and all the various bits of information about your relationship with them. Huge software companies like SAP have made billions selling customer relationship management software, while newer players like Salesforce.com have made billions more moving that software off the premises and into the cloud.

But what if you’re a company who doesn’t always sell directly to your customer, but rather relies on a reseller who stands between you and the end customer? That’s a different dynamic entirely. And it may seem like an insignificant detail until you consider that there are more than $2 trillion worth of goods sold annually through indirect business-to-business sales relationships.

Companies tend to call these “channel sales,” or use some variation of that phrase to describe this aspect of their business. And it brings with it a level of complexity that’s different from conventional direct sales.

And as Mark Geene, the CEO of Channelinsight tells me, it’s a sector of sales that has yet to benefit from the kind of productivity gains that Salesforce.com and SAP have brought to direct sales. The company has created a cloud-based service that does two things: First it aggregates live data, including inventory and point-of-sale data provided by a network of some 5,000 business-to-business resellers, distributors and retailers. Then it combines that with some screening and analytics tools that can run either as a standalone application or as an add-on to Salesforce.com. You can see who bought your stuff, who the end customer was, whether or not incentives or other programs are working, and whether or not they have inventory in the right places given demand trends.

“Indirect sales have been sort of the stepchild of salesforce automation,” Geene told me. “It hasn’t benefited at all from the kinds of things that Salesforce and SAP have been doing.” Managing indirect sales is often a rather labor-intensive process involving a lot of time looking at spreadsheets. Channelinsight’s play is to automate that process.

It must be working. Customers include printer manufacturer Lexmark and the chipmakers Advanced Micro Devices and Nvidia, both of which sell a great deal into the channel, as well as the German industrial giant Siemens. That sounds like momentum.

Channelinsight just closed a $10 million Series C round led by Rho Ventures, with participation from Sevin Rosen Funds, Sequel Venture Partners and Vendanta Capital. Its total venture funding so far is $21 million. Paul Bartlett, a Rho Ventures Partner, is on Channelinsight’s board.

“Our expertise is in identifying and investing in companies that redefine the status quo,” Bartlett said in a statment. “Channelinsight fits this profile by reinventing the way channel sales are managed, saving companies millions of dollars in the process.”

Separately, Channelinsight said it added Ram Gupta, the former CEO of Cast Iron Systems, which IBM acquired last year, to its board of directors.

Geene is a former Oracle vice president who ran its mid-west sales, and has held senior management jobs at Tenfold and Dorado Software.

He told me one big problem companies often run into with indirect sales is screening for regulatory compliance–in particular the Foreign Corrupt Practices Act, which covers, among other things, bribery.

You may remember that last month IBM settled allegations by the U.S. Securities and Exchange Commission that it paid bribes to officials in China and South Korea during a period beginning in 1998 and ending in 2009. IBM never admitted to any wrongdoing, though as the SEC noted, the purpose of the payments was to “secure the sale of IBM products through IBM-Korea and LG-IBM’s business partners.” Hewlett-Packard had its own headache with bribery allegations in Russia last year.

This is the sort of thing that Channelinsight can help a company watch for, Geene said. “This is a big issue for any company that works with partners,” he said. “We screen every transaction that gets processed on our system, looking for red flags.” It also looks for instances where products might be sold indirectly via partners to countries that are subject to trade embargoes. This sort of screening is something that companies have till now generally had to manage manually with some sort of custom solution.


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