Rethinking Relationships

Theoretically, partner programs that operate in such a fashion perform more efficiently. And that makes everyone happy. But when looked at from a partner's perspective, especially the small-to-midsize resellers that make up the vast majority of any large vendor's network, the reality can be quite different. Our most recent Annual Report Card survey reveals that overall partner satisfaction with vendors has decreased from 75 percent in 1998 to 68 percent last year. That's not an alarming plunge, but it does show the economy's recent struggles have made more and more VARs feel lost in the shuffle as vendors try to stabilize their own bottom lines.

This doesn't mean that resellers are powerless to change their situations. Just as vendors constantly re-evaluate their partners, these same partners can do likewise, figuring out which vendors--and more to the point, which vendors' products--will continue to maximize their revenue.

Datavision, a wireless and mobile solutions integrator in Warminster, Pa., for example, currently is going over its vendor list to decide which ones to keep and which ones to jettison.

"At the beginning of each new year, we spend a lot of time looking at our alliances to see how much time and effort they're taking," says Paul Speese, Datavision's CEO. "We currently have too many and need to get rid of a bunch, but we're adding new ones as well."

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The company partners with a number of what Speese calls "widget guys," as well as with Oracle, SAP and others. As you might expect, it's the widget guys that are more likely to end up on the chopping block if they don't perform well, but that doesn't keep Datavision from bringing other small vendors into the fold, as evidenced by the recent addition of wireless switch vendor BelAir Networks to its partner list. "In wireless, the products tend to become commoditized very quickly, but we've been looking for a technology like BelAir's for years," Speese says. "We look for breakthroughs like these because they crash the cost of implementing systems, and the more cheaply I can get wireless coverage, the more I can increase revenues."

As always, the price/performance equation plays a big role in determining whether to stick with an existing vendor or bring on a new one.

Ben Reytblat, CEO of CEDev, a custom systems integrator based in Piscataway, N.J., says the cost efficiency of open-source software is what drove his company to that platform. CEDev, however, also partners with other vendors, based on the same criteria. "We pick the ones that meet certain thresholds of performance and price/performance," he says. "Oracle's databases set such a high standard that no one else could touch them, but we looked at open source for obvious cost reasons."

CEDev generally has a primary and secondary vendor in each product category. The company uses NetScreen as its primary firewall vendor, but also deploys WatchGuard solutions. Similarly, Oracle is the company's first choice for relational databases, and CEDev uses MySQL as well.

Reytblat says the company began using this system after learning its lesson on more than a few occasions. "Being true to one vendor just didn't work. Whenever we committed too much to one vendor, they inevitably would start taking us for granted within a short period of time," he says. "Having a second vendor in the same category gives us the flexibility we need to deal with the vagaries of customer needs. For example, when Red Hat started moving more toward enterprise products, we knew our customers wouldn't like it, so we picked up SuSE Linux."

Even though CEDev partners with Oracle and a few other large vendors, it's fair to say that Reytblat has grown more than a little dissatisfied with the bigger players over the years. He says when a large vendor goes through one of its inevitable channel restructurings--reassigning account reps and territories--it's partners like CEDev that bear the brunt of the organizational pain.

"I've had experience with two or three partner programs, and without exception, when the vendor is 100 times bigger than us, the program is tilted so far to the vendor's favor that it's not worth the effort," Reytblat says. "When the vendor is about your size, you get much more favorable results, but we've given up on trying to be really cozy with the vendors and join their partner programs because they don't really benefit us. I'm so disillusioned with the larger vendors that I don't think it will ever change."

Reytblat says he thinks this situation probably is similar for most midsize VARs, but it isn't likely to affect the Tech Datas and CDWs of the world nearly as drastically. "I expect that large VARs, because they're much more nearly the same size as their vendors, will get taken more seriously as partners," he says.

This complaint, that large vendors take their not-so-large partners for granted, is a common one, and it can be even more pronounced these days as big vendors acquire smaller ones to fortify their end-to-end offerings.

Tom Shaw, president and CEO of Wide Area Management Services (WAMS) in Santa Clara, Calif., saw this unpleasant process up close last year, receiving a double whammy when Symantec bought two of his primary vendors, Riptech and Recourse Technologies. In both cases, WAMS enjoyed a relatively prominent partner status with the smaller companies, a status that changed dramatically after the acquisitions.

"We were a big fish in a small pond with the end users, but became lost in the shuffle when the billion-dollar company came in," Shaw says. "Acquisitions like these can put systems integrators behind by one year, because generally the bigger company's channel already is overdistributed at the time of the deal."

But it doesn't take a behemoth like Symantec to make a partner's life difficult. Shaw faced a similar predicament when NetScreen bought Neoteris last fall (Juniper Networks has since acquired. both companies.) WAMS had been an early adopter of both companies' technologies, but when they combined forces, it changed the nature of the partnership. "NetScreen changed its direct relationships and contact practices in a very detrimental way," he says. "Now I have their channel manager calling me to ask what we're doing; there's nothing proactive."

Reytblat has been through the same thing, saying that when bigger vendors move their channel reps around and have them work with an indeterminate number of other VARs, chaos can ensue because of the lack of personal attention the partners get. "The best relationships are always personal relationships when your rep has a clue about what you do and what's going on in the market, and has a say with his company in the decision-making process," he says.

This doesn't necessarily mean that smaller vendors are somehow nobler or a safer bet to partner with. Big vendors got that way because so many people use their products, something VARs obviously can't ignore. Also, given the recent consolidation wave across many sectors, there's always the chance that one of the smaller vendors a reseller has chosen as a partner won't be acquired by a giant like Symantec or Cisco, thus compromising its chance for survival.

One big difference between large and small vendors is how much more comprehensive the sales and marketing operations are of the large vendors.

Plano, Texas-based Lucidity Consulting partners with Oracle and others in its enterprise-systems practice. Lucidity consultant Joel Patterson says the company sometimes seeks out smaller vendors for their technology, and sometimes the vendors come to them. But Lucidity is leery of smaller vendors that rely on their partners to do their legwork for them. "Smaller companies are looking for anyone to help them by acting as sales leads, and so on," Patterson says. "Sometimes this happens too much; they do too much prospecting with partners instead of pursuing their own leads."

Another problem VARs can face when their smaller partners are acquired by larger ones is the potential change in how the reseller can secure credit. Shaw says Cisco is one large vendor that's particularly good about providing things like 60-day terms (instead of 30 days), a little thing that can make a big difference if a VAR gets a sudden influx of orders. "If I'm on a $500,000 credit limit and get a $500,000 order, I'm on credit hold," Shaw says. "We look for vendors that are flexible about things like extended terms and accounts receivable because it's a huge factor in us being able to fulfill our orders. Two years ago, my credit lines were double or triple what they are now."

It would be difficult for all but a few select VARs to partner solely with smaller vendors; eventually, a client is going to want Windows desktops or Oracle databases. But resellers should realize that they have options when it comes to beginning and ending partnerships. Even though it might not always seem like it, individual VARs, no matter how small, can control their purse strings and their destinies.

Know Thy Vendor
Five questions to ask yourself when

re-evaluating your vendor partnerships