Not So Spiffy

Richie, who has been heading up various solution provider businesses for 22 years, has a strict policy against his sales reps participating in spifs without his approval. "I'm the one that pays my salespeople's salary," he said. "My people don't work for HP. I resent HP giving these things to my people without my knowledge or my approval."

Richie would like to see an end to the entire practice of vendors providing cash and other incentives directly to his sales reps to push their products. He calls spifs an end run around solution provider management. "I have no objection to rewarding salespeople for selling, but that decision should be between me and my sales rep, and me and the manufacturer," he said. "We should work together. They should not circumvent the company."

Furthermore, Richie said spifs encourage bad behavior among sales reps, incenting them to do what's right for their pocketbook rather than what's right for the customer.

Richie is not the only one who's upset. A number of solution providers told CRN that vendors giving rewards directly to individual sales reps can cause problems for both the solution provider and its customers.

"We absolutely don't allow reps to have spifs," said Peter McMahon, vice president of sales at London, Ontario-based Protek Systems. He said his sales force should always be focused on delivering customer solutions, not pushing specific products.

John DeRocker, senior vice president of sales and marketing at Nexus Information Systems, Plymouth, Minn., said that spifs "can influence an account manager to sell something to the customer that isn't a correct solution."

One of the flash points that has emerged around this issue has been HP's Spif Central, which encourages solution provider sales reps to register with the vendor through a partner Web site for a variety of rewards ranging from $25 for selling HP StorageWorks Nearline tape to as much as $1,280 for selling an enterprise AlphaServer (see sidebar, p. 22).

Said DeRocker: "There is a minimum of 1,000 [HP] SKUs that [sales reps] can claim a cash spif against,which is why we hate them."

Yet, not all solution providers are down on spifs, which have a long history in many industries. Some applaud any and all vendor spifs, including HP's aggressive efforts. They see them as welcome extra cash for their sales reps.

Steve Israel, executive vice president of New York-based AMC, is a big fan of HP's PartnerOne program and the vendor's aggressive spifs. "This is something extra to drive our sales reps," said Israel. "If this will get [sales reps] motivated to do extra business, I'm all for it."

Israel said that during the dot-com days spifs were a much bigger factor, noting that one of his salespeople once earned a whopping $250,000 on spifs in one year.

Russell Madris, president and CEO of Boca Raton, Fla.-based MoreDirect, the enterprise sales arm for PC Connection, also said he has no problem with his reps making hay on spifs without management's knowledge. "If our reps can make more money, God bless them," he said. "We don't try to control our reps. We want them to be independent thinkers and make things happen on their own."

HP Vice President of Partner Development and Programs Susan Reynolds insists that there is no way for a sales rep to participate in HP's spif program without solution provider management approval. She said that before a sales rep can participate, HP sends an e-mail to the solution provider owner or supervisor, who can opt in or out of the spif program. "The manager has absolute control," said Reynolds.

Richie said the HP notification process did not work for him in the case of the Australia trip and a number of other spifs. However, he is quick to point out that Palo Alto, Calif.-based HP has assured him it will address his concerns. "I've seen a big change in the new HP management team," said Richie. "It's like a breath of fresh air." Richie, in particular, gives Kevin Gilroy, vice president and general manager of HP's new Solution Partners Organization for the Americas, credit for listening to partners and getting HP sales reps to work more closely with partners.

Other vendors take a different approach from HP when it comes to spifs (see chart, p. 22). Veritas Software, Mountain View, Calif., uses spifs to get sales reps to take technical training and sell products. And display vendor ViewSonic, Walnut, Calif., offers spifs on its products through a program that pays reps directly on a MasterCard.

IBM, for one, has done only minimal sales rep product spiffing. "We don't want to screw up the compensation levels that management has set up for its sales force," said Frank Vitagliano, vice president of distribution channels management at IBM, Armonk, N.Y. "That may work against us. When vendors start providing significant rep spifs, it really impacts the capability of the [solution provider] organization to strategically drive behavior. What you end up getting is vendors driving strategy as opposed to the management of the organization driving the strategy."

Cisco Systems, for its part, offers spifs for some SMB-targeted products but does not offer spifs in the enterprise solutions market, said Chuck Robbins, vice president of U.S. channels for the San Jose, Calif., networking leader. "Partners selling really complex solutions in the midmarket or higher want to be the trusted adviser to the customer and want to be [vendor-]agnostic, solving business problems," he said. "If a vendor puts in a lot of rich incentives for sales teams, sometimes it can be counter to the best solution for the customer. A lot of partners won't let you do it."

Most solution provider executives who oppose spifs say they don't want their sales reps compromising the all-important "do what's right for the customer" credo. This, they say, is more critical than ever as their organizations strive to become the one that businesses of all sizes turn to, selling and integrating complex multivendor solutions and stressing strong return on investment rather than focusing on point product sales.

The way Nexus' DeRocker deals with the incentive issue is to claim any spifs for his sales force and use those funds to sponsor company picnics and outings.

Protek's McMahon said his sales reps do not even keep vendor prizes, such as PDAs and other sales reward items. "We use them for giveaways," he said. "I dictate where they go."

At channel giant CDW, Vernon Hills, Ill., the policy is that all spifs must be approved by CDW and must come from CDW.

That's also the case at Riata Technologies, an Austin-based solution provider, which doesn't let individual sales reps receive spifs. "We collect the spifs and do something like throw a company party. I'm very clear about that," said Riata President Tommy Wald. "Today's solution provider model is not based on a salesperson but on the technical staff. We need more technical incentives."

Overall, distributor Ingram Micro has seen a progressive decline in the number of spifs offered by vendors, said Bernard Luthi, director of U.S. product marketing at Ingram Micro, Santa Ana, Calif. "The mentality of the channel has evolved, and the push toward solutions and targeted demand-generation marketing campaigns has placed many spifs on the back burner and made them less of a 'must-have' component to our manufacturers' channel marketing campaigns," said Luthi.

However, Wald said spifs will be difficult to get rid of because of their legacy in the VAR industry. "It goes back to incenting the individual salesperson to make a sale when we were all just selling products, not solutions," he said. "Manufacturers are stuck in this mind-set."

CRAIG ZARLEY and BARBARA DARROW contributed to this story.