Why do Partner Relationship Management Systems fall short of expectations
For industries where resellers constitute a significant part of the downstream supply chain, partner relationship management (PRM) systems have been proclaimed as having significant potential for supporting relationships and improving profits. This has led to a rise in the implementation of these systems, yet performance improvements have not been consistently realised. This paper investigates whether the performance of PRM systems were related to how suppliers provided oversight of their partners.
For industries where resellers constitute a significant part of the downstream supply chain, partner relationship management (PRM) systems have been proclaimed as having significant potential for supporting seller-reseller relationships and improving profits. A PRM system is a computer-mediated capability that enables suppliers (i.e. sellers) to exchange information and transact with their partners (i.e. resellers), as well as assist them in activities such as training, providing technical support and after sales service to the end customer. By using these systems, companies strive to build closer and more productive supplier-partner relationships while streamlining processes that run across suppliers, partners and customers.
This has led to a rise in the implementation of these systems, yet, unfortunately, the performance improvements have not been consistently realised. Research suggests that less than two-thirds of suppliers implementing PRM systems claimed a positive return on investment whereas only 66% of partners thought that the PRM systems of their suppliers were effective.
In light of this contradiction, Dr. Chris Storey and Dr. Canan Kocabasoglu-Hillmer set out to investigate whether the performance of PRM systems were related to how suppliers provided oversight of their partners. In other words, they considered the implications of governance mechanisms, which are the means companies utilise to regulate or influence the behavior of their partners, to the performance of PRM systems.
Within this context, the researchers considered two capabilities of PRM systems: the relationship capability, which encourages the creation of strong ties between suppliers and partners, and fulfillment capability, which supports the transactions between the supplier, partner and end customer. They also distinguished between two governance mechanisms: Those that are formal and provide oversight through regular monitoring of performance as well as setting of clear goals, as opposed to those that are founded on positive reinforcement of the relationship and help partners expand the level of value created by the partnership. The former was captured via the certification issued by the supplier to the partner, whereas the latter was assessed through service support. Moreover, the performance of PRM systems was captured in terms of trust, relationship commitment and customer satisfaction. While the former two were indicators of the strength of the relationship, the latter could be seen as a measure of market success.
Their analysis of data collected from 192 partners in the information and communications technology (ICT) sector led to surprising results. For example, as expected, the relationship capability of PRM systems was positively linked to both trust and relationship commitment. Yet, contrary to expectations, the researchers did not find any relationship between fulfillment capability and customer satisfaction and, even more surprisingly, a negative link between fulfillment capability and relationship commitment. The results also underlined the importance of governance mechanisms in the success of PRM systems: Service support negated some of the detrimental impact of the fulfillment capability on performance. Yet, certifications, which are quite common for that particular industry, weakened the positive effects of relationship capability on performance. To help understand the results, the researchers provided insights into the possible reasons for such dynamics between PRM systems, governance mechanisms and performance. This study shows that the link between PRM systems and partner governance is not straightforward and therefore requires managers to carefully cultivate to get the results they anticipate from those systems. For more comments on the results as well as a more extensive discussion of the managerial implications, please refer to the full paper at the link below.