Pop quiz: Which is more important--top- or bottom-line revenue? Top-line, or gross, revenue reflects the relative size of a company. Bottom-line revenue, or net profit, reflects a company's relative health. So, profitability almost always trumps gross revenue. No surprise that profitability--or profit opportunity--is one of the most critical factors affecting the symbiotic relationship between vendors and solution providers.
Solution providers seek hardware and software vendors that deliver both products and programs that open up profit opportunities. Vendors seek profitable solution providers that have the marketing, technical and sales infrastructure to channel systems to market.
It's no surprise that some vendors are helping solution providers build profitable businesses more than others. According to the 2007 VARBusiness 500, vendors with more mature programs, entrenched leadership and channel commitment, and diverse product offerings are best positioned to be in the black.
Microsoft--with the largest and one of the oldest channel programs in the business--topped the list of vendors driving partner profitability. Nearly 65 percent of the VARBusiness 500 said the software giant helps improve their bottom lines.
Under the leadership of channel chief Allison Watson, Microsoft has made partner profitability an imperative. Last year, it developed a comprehensive set of metrics based on key performance indicators to help solution providers better understand the underlying currents in their businesses and make adjustments that drive higher efficiencies and profits. Microsoft has trained scores of solution providers on how to use the metrics. "Microsoft is helping me be a better businessperson," one VAR says.
"Our key things are for our partners to extend their market reach and to reduce costs through readiness programs that allow them to increase profitability," says Robert Deshaies, vice president of Microsoft's U.S. Partner Group.
Partnership profitability is often tied to the diversity of a vendor's product lines. Manufacturers with more products to sell--either different technologies or products scaled for different-sized environments--have a higher propensity to drive solution provider profitability. The more products available, the more opportunity to sell goods and services.
Vendors with broad product portfolios will reward solution providers with deeper discounts, high rebates and other incentives for cross-selling products across multiple technology lines. Hewlett-Packard's PartnerONE attachment program, for example, offers incentives that lead with and upsell HP products. Nearly 55 percent of the VARBusiness 500 said HP helped them drive profitability.
"We offer a wide variety that fits into their business models. A partner invests with us, and we invest with them. Our deep portfolio lets partners drive profitability of their own companies," says Tom LaRocca, HP's vice president of partner development and programs, Solution Partners Organization, Americas. "They can choose how they go about making money."
At Inacom (VARBusiness 500 No. 319), a longtime HP reseller and Gold Partner, success boils down to an ability to offer a solution to customers that's based on a relationship, not a one-time fix, says CEO Laurie Benson.
"A major focus for us is to go deep by better understanding customers' businesses," Benson says. "Because of its broad offering of products, HP helps us go deeper into accounts, brings reliability, storage and security to our customers. And that helps us help our customers be more profitable."
Likewise, Symantec's strategy is product-centric. Despite recent troubles with its partner portal and ordering system--and complaints about the declining quality of its flagship Symantec Enterprise Antivirus product--it's been able to maintain its reputation as a profitability engine. More than one-third of the VARBusiness 500 said the vendor helps drive their profitability.
"What differentiates you is not the programs you offer, but the technology," says Julie Parrish, vice president of Symantec's Global Channel Office. "That's what you need to focus on as a vendor, and that's what will carry you."
NEXT: Strong programs, bigger profits.