Deal Registration A Plus, But Not Without Hurdles

Under the typical deal-registration program, a solution provider working a particular deal with a customer can register that deal with a vendor whose products will go into the installation. Some vendors may protect the deal from other solution providers and direct salespeople, while others may provide the registered solution provider an exclusive discount to prevent a competitor that hasn't done any presales work from taking the deal away by undercutting the price.

Hardware vendors have had deal-registration programs in place for some time, but despite their good intentions, the programs can cause problems for both solution providers and customers.

Doug Marlin, managing partner of Independent Technology Group, a La Canada, Calif.-based solution provider that takes advantage of deal-registration programs whenever possible, said it is an imperfect system at best.

If the deal goes sour for some reason, the customer may not want to do business with the registered solution provider, Marlin said. "Maybe something doesn't click, and the customer wants to get out of the deal," he said. "Most manufacturers don't have the procedure to let them get out."

That's the case with one CIO of a midsize company, who asked to remain anonymous. The CIO said that early last year, his company's management decided to upgrade its database server and was told by Oracle that a standard commodity two-way server was needed.

The CIO, who was new at the time, contacted IBM and was told to work with the solution provider that had registered the deal. Instead, the CIO bid the job to that solution provider and two others. The other two both came back with lower prices, and one was awarded the bid.

"Lo and behold, the registered VAR complained to IBM," said the CIO. "They filed a formal complaint through the VAR channel against the other VAR, and said that VAR had no face-to-face contact, no value-add, despite the fact that there was no value-add. It was just an upgrade to a database server. No custom programming, no custom applications."

Two weeks later, the CIO was told by the second solution provider that IBM's penalties were so strict that he was worried about losing his status with the Armonk, N.Y.-based vendor. "So I went to the aftermarket to buy a used Unix box on principle," the CIO said.

One former solution provider executive, who left his company and the storage industry late last year, said he did so in part because of flaws in the deal-registration system.

One problem with the programs is that registration typically lasts only three months, at which time the deal must be reregistered.

Getting the deal could take much longer, said the former solution provider. So failure to reregister could open the door for someone else to come in and, without doing any footwork, register the deal, he said. "I worked for months on a half-million-dollar deal, but missed the deadline to reregister it by two days, during which time someone else grabbed it," he said.

In a separate incident, the former solution provider said he spent about six months working a deal with a customer before finding out that another VAR from across the country had registered the deal.

"When it came time to close the deal, we found out that we couldn't give the customer the best price," the solution provider said. "The other VAR was some company that never met with the customer."

Deal-registration programs aren't necessarily in the best interest of the customer, Marlin said. "It's meant to protect the partner. But if the end user squawks loud enough, the manufacturer can cut a deal on the side for the protected partner."

Several vendors do offer such deals.

Scott Cooper, vice president of worldwide channels and SMB marketing at IBM, said the vendor sometimes ends up paying everyone from the IBM direct salesperson to the partners when there is a conflict as to who initiated a deal. "A bigger conflict for us is when a customer decides whether they are going to go direct or indirect," he said.

Many vendor executives aren't as public about whether they offer such compensation, but solution providers said vendors such as Hopkinton, Mass.-based EMC and San Diego-based Overland Storage have been known to do so.

Overland has one of the best deal-registration programs, said Brad Wenzel, president and CEO of Wenzel Data, a Stillwater, Minn.-based solution provider. "They even protect us against CDW taking a deal away," he said.