High On 3Com

3Com

The vendor's North American channel event—hosted at a hotel in Boston's Southie neighborhood, about 30 miles east of 3Com's Marlborough, Mass., headquarters—amounted to a coming out party for President and CEO Edgar Masri. He addressed partners for the first time since taking the job less than seven weeks before.

Masri made the most of the opportunity. Partners expecting to hear yet another CEO's fluffy "Go, Channel!" rallying cry instead heard a candid discussion of his plans to right the wrongs in 3Com's past.

If he can, 3Com and its partners have much to gain as they challenge rivals such as Cisco Systems, Avaya, Hewlett-Packard's ProCurve Networking by HP division and a host of others for top spots in SMB infrastructure markets like LAN switching, wireless and VoIP. Cisco dominates the overall networking space but is still making its way downward into the SMB market, an area where 3Com partners have traditionally focused. And, unlike Avaya, Basking Ridge, N.J., and HP ProCurve, Palo Alto, Calif., 3Com has a scalable portfolio that matches the breadth of San Jose, Calif.-based Cisco's, including routers, wired and wireless switches, wireless access points, VoIP and security wares.

Partners attending the event lauded Masri for pledging channel commitment, providing a focused go-to-market strategy, promising new products and demonstrating what they called an unprecedented level of genuine concern for the health and well-being of 3Com's channel partners.

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"It was great to have a guy at the top that's going to sit at the table with me and ask what's going on, ask how I can make more money and how he can make more money with me," said Mark Essayian, owner of KME Systems, a Lake Forest, Calif.-based solution provider. "With a lot of vendors, the CEO shows up [at a partner conference], pays us lip service and takes off. Not this guy, and it's heartening."

Partners said they felt Masri was speaking their language.

"He has the entrepreneurial spirit," said Dennis Davison, president of Seattle-based TelData Systems. "He talks like he's the owner of a small business. He was talking about things I talk about every day."

Inherited Challenges
Masri's message couldn't come at a better time for partners, still reeling from the surprising events that led to his return to 3Com. His successor, Scott Murray, who himself had replaced the retiring Bruce Claflin in January, resigned after just seven months on the job when the time commitment required to run 3Com's China-based joint venture with Huawei Technologies proved too great. For Masri, signing on with 3Com represents a homecoming of sorts: He previously spent 15 years at 3Com in various management positions, including head of its network systems business unit, and left in 2000 to join the venture-capital community.

In the wake of the quick and unexpected turnover, solution providers said they came to the partner conference looking for affirmations of 3Com's channel and product strategies, as well as reassurances that the company's financial position is not as bleak as its repeated quarterly losses and recent layoffs seemingly indicate. The company, after all, hasn't turned a profit in several years, a point rivals are quick to pounce on.

Aside from its TippingPoint security division, 3Com also has struggled to grab significant market share in key segments. The company that basically invented the Ethernet market with its founding in 1979 today does not place among the top five vendors in the U.S. Ethernet switch space, according to the latest quarterly figures from Synergy Research Group.

The company is also still struggling to regain standing in the enterprise market after pulling out of it in 2000—a move that left indelible scars by stranding its CoreBuilder switch customer base—and then re-entering it in 2003 via the Huawei-3Com (H-3C) joint venture.

Nevertheless, partners said their 3Com practices are growing, margins are strong and they are winning competitive deals on the strength of the vendor's technology and price/performance.

"There's ample market opportunity for 3Com to be a successful and profitable company, and for resellers like us to be successful with 3Com," said Robert Plessett, managing partner at TeleSwitch, a Miami-based solution provider.

Mark Mills, principal at Communication Concepts, Sunrise, Fla., agreed that there is plenty of room for 3Com to compete, noting that he expects his 3Com sales to grow 30 percent to 40 percent this year compared with last year.

"We're at the point where people who drank the Cisco Kool-Aid that it was all things to all men realize that isn't true. We are able to sell [3Com] solutions talking about the value and overall cost of ownership," Mills said.

Partners by and large also praised 3Com's channel program and its primary architect, Nick Tidd, vice president of global channels. Unhappy with its partnership with Avaya, TelData Systems signed on with 3Com 10 months ago, wooed in part by the strength of 3Com's channel program. The company has already hit well more than $1 million in 3Com sales, Davison said.

Tidd said 3Com has pushed 700 leads out to partners through its LeadLogic lead-generation program since launching it in mid-March. Through its deal-registration program, partners have closed $2.8 million in sales since March with an additional $17 million worth of deals in the pipeline, he said. "What it has done is drive profitability into the channel," Tidd said.

Masri's Mission
One area 3Com partners find troublesome is back-end support. With sales force turnover and company downsizing, some partners said it's nearly impossible to get quick answers to questions.

"My biggest problem with 3Com is just its internal disarray. Those internal points of contact are not there," said Marc Harrison, president of Silicon East, a partner in Manalapan, N.J., who did not attend the conference. "Any problem you have, you have to make half a dozen phones calls to find the person who knows the answer."

It's a point that has come to Masri's attention, and he said he plans to improve communications with partners and boost back-end channel support infrastructure. "In many cases we have that personnel, but it right now comes to us as an exception when a partner has a challenge or a question. I want it to become more formalized and more straightforward," he said in an interview with CRN at the event, his first press interview since rejoining the company.

Masri also pledged to create opportunities for partner growth. "I am very, very keen on living up to your ambitions. I want to make sure each of you has the ability to make your business as large as you want," Masri told the conference attendees.

To aid in that growth, Masri outlined his vision for 3Com's enterprise strategy, an effort he said was too broadly focused in the past. "We are intent on winning enterprise business, but we're going to do it by walking first and then running, and walking means winning first in the small and medium-size enterprise businesses," Masri said, referring to customers with up to 2,000 users.

Masri called on partners to develop solutions around 3Com's technology to target those customers, particularly in education, government, health care and retail. The company at the conference unveiled 3Com Solution Playbooks, a set of how-to guides for channel partners that aims to help them build solutions for specific market segments.

While 3Com won't be targeting those verticals exclusively, it will be expending resources there, he said.

Masri also promised to address channel partners' most common complaint: lack of effective marketing. Solution providers said that 3Com's last big marketing campaign, launched last fall, focused too heavily on speeds, feeds and price when it should have driven home the message around the value of 3Com solutions.

3Com will provide more "air cover" for partners in the form of marketing programs and market development funds, Masri said. The company will be launching marketing campaigns customized for different types of partners.

Masri also called attention to 3Com's narrowing losses, its sizable bank account—approaching $1 billion as of Sept. 1—and strength he said the company gains from "the China factor," the H-3C joint venture.

3Com is seeking to increase its majority stake, a move that will ultimately benefit North American channel partners, Masri told CRN. "With an increased ownership in the joint venture, we're going to have more coordinated activities and more influence on adding the feature set that is essential for the midrange," said Masri, who is also chairman of H-3C.

Partners said one product line they'd like to see come out of the joint venture is a Layer 2 switch, particularly one with PoE capabilities, that is competitively priced to go against rival offerings from HP ProCurve. Such a switch would complement 3Com's VoIP lineup, they said.

Aside from the joint venture, partners also said they need 3Com to move downstream with its TippingPoint technology to target smaller locations. While the company's X505 intrusion-prevention appliance was a step in the right direction, it still doesn't meet the necessary price point, solution providers said.

"TippingPoint is a phenomenal product that does answer a whole litany of issues customers have, and when you put it in, you can sleep at night," said Bob Inpyn, CEO of Team One Networking, Roseville, Calif. "Now they have to go to the next step as far as [addressing] teleworkers and remote offices."

Masri said partners won't have to wait much longer. "I assure you, we will have security solutions for the channel in coming months. You can be sure leading intrusion-prevention solutions will be provided to you by 3Com through the channel for SMBs," he said.

Partners said one of Masri's most crucial directives is maintaining the company's development on innovative technology. It's a task they think he's suited for: In his previous life at 3Com, Masri helped usher in the vendor's purchase of IP telephony vendor NBX in 1999, an acquisition that serves as the foundation for the VoIP product line that today is driving much of the growth partners are seeing in 3Com sales.

"Technology kept 3Com alive through the transition period they've been going through," Inpyn said. Is it the reason he stuck with the vendor through tough times? "Absolutely."