Blending Old, New Technologies Key To Effective Strategy

Before he allows his company to align with another vendor, Jim Simpson, president and CEO of MSI Systems Integrators, thinks long and hard about exactly what he and his team of 200-plus sales, administrative and technical people are getting into.

"Not all vendors are alike when it comes to relationships," he said. "A bad one can be as deflating as much as a good one can be uplifting."

He should know. Omaha, Neb.-based MSI, which is one of IBM's top business partners—it was recently recognized by IBM as its most outstanding partner in the Americas—dropped a few companies that it just couldn't effectively align with. He won't name names, but think of someone big in storage with a name with three letters, for example.

For MSI and scores of companies like it, managing vendor partners effectively is a science, complete with a well-thought-out methodology and purpose.

Yesterday, Toni Clayton-Hine, the managing director of CMP's Institute for Partner Development (IPED), and I showcased some new thinking on bringing on new technology into a partner business. It's but one of three considerations a VAR must make before taking on a new vendor—the other two include reviewing the programs a vendor offers and the quality of its best practices.

For some companies, building a product portfolio is easy: Get behind the hottest-selling product and enjoy the ride. But often such a feeble approach produces less-than-satisfactory results. That's because hot technologies often attract more product sellers than a market can effectively support, which results in less-than-appealing product margins when these resellers start engaging in price wars to win business. Many partners including Milestone Networks of Parker, Colo., have purposely decided to align with 'alternative' vendors, figuring they can make better margins on underrepresented companies than overrepresented ones. In its case, Milestone Networks chose Juniper Networks over Cisco Systems for that reason.

Experts and many VARs suggest the best way to look at building a partner portfolio is to recognize that vendor products fall into three basic categories: core technologies, gap products and emerging innovations. Each is defined by its own set of criteria and characteristics.

Core products are defined as those technologies that drive a business. They come in two flavors: leading-edge products that have high margins and trailing-edge products whose profit margins may have slipped but who still generate cash flow. Both have their place in a vendor's product portfolio.

Gap products, like core products, can be leading-edge or more mature. In some ways, going with a mature gap product that has a significant installed base and well-defined routes to market—as well as understood and anticipated support needs—may make more sense than representing an emerging gap product.

Terry Calloway, president of Pittsburg, Kan.-based Data Technique, said his company looks carefully at emerging technologies before making any decisions. That's especially true if an emerging technology is coming from a new vendor rather than an established player in the market. He's looking for vendors that can ultimately enhance his core relationships or help him expand into vertical markets.