Q&A: Channel Executives Take On the 80/20 Rule

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But partner enablement means different things to different people. In some cases, it's about training and certification, the subdivision of channel programs or requirements for technology and market specifications. In other cases, it's about incentives--discounts, promotions, rebates or marketing development funding. How these programs are received by solution providers is often a reflection of their size and market position. Larger solution providers, for example, will sometimes receive different treatment and incentives than their smaller peers.

Regardless of their approach, vendors' partner enablement efforts have the potential to transform the channel. Through their technology and business training, and associated incentives, partners will lift those solution providers willing to accept the challenges and risks of growing beyond their current capabilities and capacities. Consequently, solution providers not heeding the call of enablement may get left behind in the channel of the future.

VARBusiness invited several leading vendor and distribution channel executives to discuss partner enablement. Each participant represents different technology and market segments: Frank Vitagliano, VP of worldwide channels and U.S. enterprise operations at Juniper Networks in networking and security, Lori Cook, VP of worldwide professional services, channels and alliances at BMC Software for infrastructure software, Doug Kennedy, VP of worldwide alliances and channels at Oracle for business software, Leonard Iventosch, VP of worldwide channel sales at Network Appliance for storage and Kirk Robinson, VP of North America channel marketing at Ingram Micro for distribution. This discussion reflects the diversity of opinions and approaches to partner enablement. And it reveals how solution providers can succeed in these often complex vendor channel programs, partner ecosystems and the rapidly evolving IT marketplace.

VARBUSINESS: Vendors are increasingly talking about "partner enablement"--helping their partners become better businesspeople, target new markets and grow their revenues. How does each of you define partner enablement?

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"Partners give me constant feedback on what they need to their jobs done," says BMC Software's Lori Cook.

COOK: Because our software product is complex and requires a great deal of knowledge to understand the portfolio around business service management, I created an advisory board. Partners give me constant feedback on what they need to get their jobs done and maximize their opportunities. It revolves around continued support with education, both from a sales perspective and from a technical perspective, and around certification on our solution set and our products.

KENNEDY: Enablement is a major thing for Oracle, because we've got hundreds of products and more than 19,000 partners. I put a task force together about 16 months ago to dive into the requirements and what we were delivering for education. And we were delivering thousands of unique courses across the globe. I focused this task force on ensuring that the curricula are complete--for the partner to find out which type of courses they need based on what their discipline is.

"You're always going to have the majority of the revenue driven by a smaller number of larger players," says Juniper's Frank Vitagliano.

VITAGLIANO: To me, enablement starts with the training and certification, but it's broader than just that. It includes presales and postsales support, and it includes things like pricing support, marketing support and just general enablement or engagement kinds of activities.

ROBINSON: One of the most obvious areas is the communities that we've built over the years, the flagship community being VentureTech. That program's been up and running for more than 7 years. With the success of that community, we've rolled out the Government and Education reseller community and the SMB Alliance community, which is much broader. And last year, we rolled out the System Architect community for systems builders, because we recognize the need of those resellers and thought that, with the success that we've seen in our other communities, we could easily replicate that and help them have one community to go to, to learn more about how to be more profitable in business with the vendors.

NEXT: Training issues, plus whether the 80/20 rule is valid.

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VARBUSINESS: Let's zero in on training. How do you differentiate the need for training or the level of training by the different sizes or volumes of partners that you have?

VITAGLIANO: To have an adequate level of coverage throughout the world, you have to be really careful not to differentiate too much and base training and/or certification on the size of partners or revenue. If you do that, you'll naturally gravitate to just the largest partners and end up missing coverage in tertiary markets and the SMB space. Juniper bases training on the qualifications and capabilities of partners. And in a small market, there may be a partner that has the majority of its people trained on our products, and they would be certified for the highest-level status.

KENNEDY: We're heavily focused on industries, as well as segments of the marketplace, such as SMB. Our focus is on selecting the right partner for the right market or the right industry. It's complex to a certain extent, but the nice thing is that we've got dedicated industry business units that we work with that say, 'Hey, look, here are the partners...we need for specific industries. Here's the partner list that we've analyzed by looking at the best that's in the entire marketplace, not just inside of our walls.' Then we go target those partners for recruitment or for further enablement. The reward for the partners is that we're going to give the most business exposure, leads and opportunities to the partners that really step up and become the most enabled.

VARBUSINESS: Our research consistently shows that one of the greatest obstacles solution providers face across the board is the time and expense of training and certification. How do you offset solution providers' ability to pay, in terms of direct cost and lost productivity, for training?

"The whole concept of feeding the strong perpetuates the 80/20 rule," says NetApp's Leonard Iventosch.

IVENTOSCH: The first key is that the partner makes a commitment to the vendor. Short of that, each partner has a number of different vendors that they work with. We've found that those looking at Network Appliance to fill out their line card are typically not going to be very successful. Our products require selling, so when a partner makes that commitment to actually become part of your extended team, it paves the way for a willingness to take on the enablement functions.

COOK: You ask the question of how to get a partner to commit time and effort to get the level of education they need. [Their effort] is directly related to the value that they perceive they're getting. We started with a very small group of partners in our sales-foundation courseware, and right now I would say that 75 percent of those taking the course are partners, and the balance are BMC employees. And it's got a payoff that I didn't initially realize. Because you work so closely together in teams, and you really demonstrate that you understand the industry that your solution maps to, the team ends up not being able to identify who's the BMC employee and who's the partner salesperson. And they develop relationships that last far beyond just the class. I've seen an interesting trend--a large number of partners teaming up with other partners once they understand the areas of specialization that they represent through the contacts they've made in this course.

VITAGLIANO: You still have to try to do some things to offset the cost associated with that, whether doing Web-based training and other things that allow people to stay in the office. Or maybe [you cover some of the expense] through MDF. The key is, when most partners rank what's important to them, training is right up there with pre- and postsales support. Most of them view it as a value-add and not as an issue associated with running their business or your program.

"We need to look at the programs we're running and help solution providers grow," says Ingram Micro's Kirk Robinson.

ROBINSON: What I'm hearing from resellers is that they have to make decisions on whom they choose to partner with. They can no longer get certified and have their people going through training for multiple vendor partners. The cost is too much; the time out of the office is too much. What they're looking for is the whole picture. If I'm going to get into this, how am I going to be profitable? And do I consider that vendor a partner who is going to be looking out for me and my best interest, whether it's post follow-up, pre- and post-sales support or MDF dollars or anything else? When they're looking at how they're going to go to market with their end user, they want to make sure they're aligning themselves with a vendor that has their best interests in mind and that's consistent with how they go to market.

VARBUSINESS: When growing and managing their channel programs, many vendors struggle with the 80/20 rule--the division between top-performing solution providers and smaller, harder-to-reach VARs. First, do you agree that the 80/20 rule is alive and well in the channel? Second, what are you doing to get beyond that first 20 percent?

VITAGLIANO: That rule absolutely lives, and it's pretty significant. In fact, [the ratio] might be closer to 90/10. We've spent a lot of time looking at the fact that we have a number of partners that are sort of in the 80 percent category--partners that we're just not driving very much revenue with, or none at all. So we're doing some propensity studies on these solution providers. For those that are doing some business with us, we're trying to find out what their natural groupings are. In other words, we're doing some profiling to figure out their buying behaviors--whether they're typically selling high-end security, low-end security and lots of services around solutions. Through the profiling, we'll get a sense of what their business looks like and what their business models are. We want to provide coverage for this group of solution providers a little bit more intelligently, beyond just calling everybody and supporting them, to drive campaigns to specific partners based on what we think their profile looks like and what we think they want to do. If we can do that effectively--and we're just starting it--it will make a major difference and begin to shift that 80/20 ratio.

KENNEDY: First of all, I would agree that it's more of a 90/10 issue that we face. But, really, you've got to look at two markets here. We've got emerging markets in a lot of our countries where we just don't have enough resellers. And there are clear opportunities for the partners to get onboard and expand business there. The bigger challenge, though, is ensuring we've got the right partners bubbled up to the surface by industry or by application or by product in the right regions. Then, we need to make sure that they're being properly rewarded for the investments they're making in training. The challenge becomes how to get the next farm system under them trained and really driven to the marketplace so they can take the place of top-tier VARs that do falter, or so they can penetrate the market even deeper.

NEXT: How vendors reach lower-performing VARs, plus brand balancing.

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VARBUSINESS: Let's drill down on this 80/20 rule a little bit more, because I think it's a bit more complex. How do you reach those lower-performing VARs and move the needle from 80/20 to something closer to 70/30 or 60/40?

IVENTOSCH: I don't think it's realistic to go from 80/20 to 50/50 or 60/40. I would love to get to 70/30 or 65/35. In some sense, we create the problem ourselves, because we run lead programs and give the best leads to our best partners because we know they'll take care of those leads and drive the opportunities of closure. And so the whole concept of feeding the strong perpetuates the 80/20 rule. One of the things that we're trying to do is identify for our partners that we want to move up into that space where they become go-to players.

The other thing is that we look toward distribution partners to play a big role in helping us change that 80/20 equation. Together, we can identify some partners that we believe have very high potential. And we start treating them almost like they're big partners and giving them some of the tools, maybe even some of the incentive programs, that help jump-start them so they have an opportunity to become big partners.

ROBINSON: It's natural that smaller solution providers are dependent on distribution, because not everybody can afford to just go out with a field crew. Ingram tries to work with vendors in hitting that next level down. And I don't think it's the lifestyle VARs that you're talking about. We're not trying to convince them that they can go from $1 million to $50 million. I think it's working with the VARs that have well-established businesses and looking at them and seeing where they play and what their capabilities are--how strong their companies are. And then we need to look at the programs we're running and help them grow.

COOK: We retooled our certification program based on VAR feedback, recognizing the complexity of the environment and some of the additional solutions that we've acquired. It's not based on volume for these partners; it's based on their level of expertise and industry-specific capability, and where we need them to play in strategic markets both in the emerging growth areas and in the emerging countries.

VARBUSINESS: Does this mean we're looking at smaller but more efficient channel programs eventually? Or does this mean that we're still going to have those marginal and lifestyle VARs as part of a large community where only the best performers get most of the attention?

VITAGLIANO: It's going to be a little of both. I totally agree with the point that we'll never get to 50/50 or 60/40. You're always going to have the majority of the revenue driven by a smaller number of larger players. The key, though, is that you can have well-certified, well-trained, well-qualified partners that are doing smaller amounts of revenue in the marketplace that they operate in. That's partly because the marketplace is capped based on where they are. The trick is not to differentiate based on that, and not to drive programs that are just geared to large players. Offer programs that every partner can take advantage of.

What I would like is for partners to drive business and not have to have one of our sales teams in the middle of every transaction. To do that, we've got to ensure that they're adequately trained--particularly in those tertiary markets. I'm not going to have the capability to have face-to-face direct-sales coverage for everybody; therefore, I need the partners to drive it.

VARBUSINESS: A lot of solution providers are leading with your brand. In the future, do you see them taking advantage of some of the performance-based incentives you may develop? And do you see a need for them to act independent of your brand as well?

IVENTOSCH: Absolutely. We used to have sort of a policy at NetApp that if a partner sells a competitor's product, we're not going to sign them up. And we've seen loyalty programs from our competitors that put [partners] in a very difficult spot. We've moved quite a bit away from that. Some of our most successful partners are those that present themselves as independent storage consultants or solution providers. Our job is to provide them with the enablement, tools, technology and margin opportunity so that, even while being an independent consultant, they're going to recommend NetApp eight times out of 10.

VARBUSINESS: Where is that balance between the vendor brand and the VAR brand going forward?

"Our focus is on selecting the right partner for the right market or the right industry," says Oracle's Doug Kennedy.

KENNEDY: We're not demanding exclusivity from our partners. Higher up in the marketplace, as we deal with some of the largest service providers out there, their brand carries an awful lot of weight with the customers that they're selling to. Obviously, in the smaller markets and the industry markets, we would like those resellers to showcase our solutions and our brands first. But what they need to win with is their capability--their ability either to sell that product in the marketplace or to sell the services that they deliver along with those products in the marketplace.

COOK: When we look at our emerging businesses, we tell our partner team that partners have the first right of refusal when it comes to service implementations. It's a powerful statement to tell them that when they go into our fast-growing businesses, services belong to the solution providers.

IVENTOSCH: We're doing the same at NetApp. Giving partners the first right of refusal to provide services is critical. We're actually looking at building programs that train our partners how to provide services themselves so they'll be in a position to go out and deliver that on their own paper.

ROBINSON: We've invested a lot in our field resources. And it goes beyond just sales. We've also put marketing resources out there. We're trying to start with, 'Here's how you can improve the profitability of your company through these different means. Here's the training, so you can defend [your territory] whether on the Web or in person.' And then, on top of that, that's when we're getting into the solutions. And we're really trying to focus on how they can be profitable in deploying those solutions.