BMC Stays The Channel Course

Just months after this breakthrough decision, however, the Houston-based developer of systems-management and administration tools hit a wall. Sales collapsed and the company missed expectations for the three months ended June 30, 2003. Layoffs totaling 13 percent of the workforce followed, and shares of BMC stock dropped by more than 10 percent.

It was, says BMC vice president William Donahoo, not exactly the best time to be a channel advocate. Still, BMC continued to promote a channel agenda inside the company--even though early returns were anything but promising.

Fast-forward to a year later. BMC continues to be a channel advocate and stands by previous projections that channel sales could one day total 25 percent of its business. Though hardly the transformation that, say, Cisco made when it went from being a company that generated 80 percent of its sales direct to one that generated just 10 percent of its sales direct, the change inside BMC is, nonetheless, noteworthy. Here's a look inside BMC.

Founded in 1980, BMC produces software that is used by some of the largest companies in the world. Customers such as UBS AG, Wayne State University and Toyota Motor Europe depend on it. Historically, BMC has derived the majority of its business from the sale of software that runs atop mainframe systems used by very large enterprise companies. As with other ISVs that develop software for mainframe computers, BMC found that the best way to reach customers using these systems was via a direct sales force. The problem was, those sales have been declining as a percentage of overall revenue as customers moved to lower-cost, distributed systems sold by resellers. As a result, BMC found itself locked out of certain deals.

To combat the problem, it brought in seasoned veterans, including Donahoo, a Novell veteran with years of business and partner-development skills under his belt, to augment existing sales and business-development executives including Paige Erickson, Donahoo's boss. Together, they launched ambitious programs and initiatives designed to attract the best and brightest solution providers who have the capability of delivering comprehensive enterprise-management solutions. Still, the company's product portfolio wasn't exactly geared to third-partner allies. Flagship products, such as the company's award-winning Patrol enterprise offering, were expensive, complex and limited in their appeal.

So now BMC is ready to roll with Patrol Express 3.0, a slimline version of the more expensive original. Aiming to introduce infrastructure monitoring to the small and midsize business market, BMC is offering Patrol Express for as much as 50 percent off for the next several months. The thought is that those customers will eventually grow and migrate to the full-size version; in the interim, the company is offering SMB customers a product that can effectively monitor servers, applications, network infrastructure and Web transactions at a fraction of the price of similar solutions from other companies.

Because Patrol Express offers agentless monitoring and quality-of-service monitoring, BMC believes the product is ideally suited to business partners. So it has put together a program that offers free training, marketing and sales support, and financial incentives once certain sales thresholds are achieved. As an additional incentive to VARs, BMC is offering 4 percent rebates on total BMC Patrol Express net sales for this quarter.

Some things to keep in mind: BMC is not looking to work with a distributor, but rather wants to establish close ties with roughly 100 or so committed partners around the United States. (It believes a boutique approach will help it achieve its goals, though I wonder.) More than a quarter of go-to partners already are Veritas Elite partners, so you get an idea of what the company is looking for, at least at the onset of the initiative.

Will such an approach help it reach its goal of 25 percent of sales through partners? Remember, that's several hundred million dollars' worth of business, given that BMC's annual sales will likely top $1.2 billion. My gut says the company will have to increase the size of its total partner base to reach its goals. That said, an opportunity to sell a blue-chip product into SMB accounts awaits. Let me know if you think it's worth the effort.