A Word Of Caution On IT Vendor Exclusivity


A few years ago, a good solution provider friend of mine who owns a $50 million business and had been dedicated to a single vendor for more than a decade came up to me at our XChange Event and told me I was right about conversations we had on exclusivity years earlier.

What he was referring to was my long-held believe that partners have a lot at risk when they only represent a single vendor in the market in any category. My concern has always been is if that vendor falls into a particularly difficult situation, the partner is at risk as well. This, of course, was exactly what happened with Sun Microsystems, whose hardship directly translated to bankruptcies of dedicated Sun partners. But even vendors that are able to right the ship after taking on water can present risks, and every vendor at some point hits a rock or two.

This concept holds true for vendors who obviously are not exclusive in their partner model as well. They can, however, become too reliant on the 80-20 rule and suddenly become concerned as to why the company growth rate isn't where it needs to be. The difficulty for vendors is if they get too baked into the 20 percent group, if those partners don't grow sufficiently, the supplier has a problem.

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So why bring this up now? Because every major vendor in the business would love nothing more than to have a set of exclusive partners, especially as we move deeper into cloud.

We've seen the wave before of vendors asking for exclusivity in the past, and no supplier has been able to make it work over the long term. Instead, what vendors should focus on is being the strategic lead of as many of its partners as possible. It's an easier conversation, and one that immediately turns to how can we build a plan to do just that because it is structured in such a way that both want to do so.

If a vendor comes to you and says it wants to understand how to become your lead strategic supplier, it is a conversation worth having, in my opinion, and a deal, if structured properly, can be a smart decision as long as its product set is complete enough. Exclusivity, on the other hand, is not something I have ever believed in. I can name a lot of partners that went out of business being exclusive. I can't name a single one that has become wildly successful with it over the long run.

Partners that are well on their way to building significant hybrid cloud practices and are north of $40 million in sales are going to be on the list that vendors are looking for to have more strategic relationships moving forward. Those north of $100 million are going to be highly sought after.

Major transitions result in a significant change in the collection of suppliers partners have in their sales bag. What's different about the cloud transition is that, in some cases, the product is the network, be it private, public or hybrid.

So a lead vendor for a partner is in many ways more meaningful than it has been in the past. Many customers will be far less concerned about whose technology is running in the background and more concerned about the trusted adviser and supplier relationship that the solution provider brings. So it stands to reason that vendors want a bigger share of wallet from partners, and there is nothing wrong with that. The issue is that the suppliers need to earn that fat wallet, not demand it. Solution providers, in turn, should think long and hard about who they lead with and not be afraid to get deep with a supplier that has solid technology and profitable programs, but remain diversified with other suppliers that can step up if others stumble.

BackTalk: Make something happen. Robert Faletra is CEO of The Channel Company. You can contact him via email at rfaletra@thechannelcompany.com.