What Price Loyalty?

On the face of it, this is a good thing because it rewards people for selling solutions, not just products. But like all things, there is a hidden caveat: The reason HP and other vendors are devising channel programs that cover all of their products is they want to make sure that solution providers are attaching as many of their own products as possible to any given sale.

In HP's case, that means solution providers that are not attaching HP printers or services to HP PC sales will find themselves at a disadvantage to competitors selling a full range of HP systems. Similarly, IBM's revision to its channel program will give better incentives to partners that sell, for example, WebSphere alongside pSeries systems. Even Microsoft is providing incentives to get solution providers to stay loyal to the complete Microsoft stack. In short, every vendor is trying to buy loyalty to a given set of products.

The challenge this presents to solution providers is that the more best-of-breed products from different vendors there are in a solution, the higher the solution provider's value proposition is to the customer, and the harder it is for any single vendor to take any given customer direct.

On top of that, solution providers need to ponder what will ultimately happen to margins when HP, Dell, IBM and everyone else gets into a price war over the entire solution. Once that happens, any best-of-breed solution provider that doesn't have a fair amount of its profits being generated by services is likely to find itself pushed out of the business. The only people that will make worthwhile profits on products will be those selling multiple products from the same vendor.

As the old saying goes, forewarned is forearmed. Spreadsheet jockeys are in charge at the major vendors, and they are determined to change the dynamics concerning how products get to market. If you're not on the profitable side of their solution-selling equation, then they will rightly or wrongly consider you little more than costly overhead that needs to be eliminated.

Are you on the right side of the equation? I can be reached at (516) 562-7477 or via e-mail at [email protected].