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SAP is trying to revolutionize the way it identifies and recruits prospective partners with a data-heavy approach that puts a premium on cash flow and healthy balance sheets.
SAP channel chief Kevin Gilroy spoke with CRN Tuesday at SAP's Partner Leadership Forum in Hollywood, Fla., about the company's extensive effort to add more channel partners. SAP last year began taking a "surgical approach" to finding the right partners, specifically systems integrators that are open to reselling SAP software and cloud hosting and managed services providers looking to deliver Software-as-a-Service.
But Gilroy said SAP's -- and the channel's -- approach to partner recruitment in the past was fatally flawed because it concentrated too much on technical pedigrees and revenue growth but overlooked a key area: the balance sheet. The biggest change in SAP's new recruitment approach, he said, was putting more focus on the solution provider's balance sheet rather than its P&L and growth rates.
Why is the balance sheet so important to SAP's recruitment drive? And what are the major challenges for finding the right partners? Gilroy discusses those topics and more in an exclusive interview with CRN about SAP's "Moneyball"-esque recruitment plan.
CRN: Why are balance sheets so important to your recruitment drive?
Gilroy: It's an indicator of their ability to invest ahead of revenue. If they don't have the working capital to invest ahead of revenue, they won't make the move to the cloud and they'll have to wait for revenue before they make investments.
CRN: You mentioned in one of your sessions that this wasn't something you looked at before with SAP or even in previous roles with other vendors.
Gilroy: No, it really wasn't. We looked more at margins and profit.
CRN: So what prompted this change? Were you finding too many VARs going out of business?
Gilroy: No, not going out of business -- we were seeing the capital dry up. And also, for a company like SAP where you're seeing 30 [percent] to 40 percent channel growth rates in certain regions around the world and double-digit growth rates pretty much everywhere in the world, you start to ask, 'OK, if this guy is growing at 30 [percent] or 40 percent, why is this guy only growing at 7 percent?' You start looking for root cause issues.
Why is the growth for certain guys below the mean? And we usually see it in two buckets. The first bucket is, they don't have the working capital to grow. And you know, the industry has done this to the channel for the 30 years I've been in the business -- you can grow a partner right out of business. If they don't have the proper working capital, you can grow them too fast and put them into bankruptcy.