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Riding The Software Train
Major software vendors, including IBM, Microsoft and Oracle, have taken steps in the past year that, while not requiring solution providers to work exclusively with them, effectively requires them to devote scarce resources to one or a limited number of IT vendors. Take IBM and the certification requirements it set last year under the “Software Value Plus” program for the approximately 100,000 channel partners that resell its software, eliminating the open distribution model it had previously followed.
While many IBM software partners said that certification would help them stand out in a competitive market, there’s no disputing the fact that resellers have to devote more time and money to getting their engineers and sales representatives trained and tested.
Oracle, for its part, overhauled the Oracle PartnerNetwork program to put more emphasis on training and certifying resellers for their expertise in specific Oracle technologies and vertical industries. Those “specializations,” as Oracle calls them, aren’t required (unless a partner is seeking Platinum status), but Oracle has made it clear that certified partners would be given preference in competitive sales situations.
Microsoft has likewise altered the focus of its channel program so that partners are certified and ranked according to their business and technology “solution competencies.” And Microsoft is asking the 10,000 resellers of its Dynamics ERP and CRM applications to commit to developing extended expertise in specific vertical industries -- or step back and accept referral fees for Dynamics sales opportunities. To be fair, many smaller solution providers work exclusively with a single software vendor -- or, at most, one vendor in each product category -- so it can develop deep expertise in that vendor’s technology.
For many solution providers, such expertise is their raison d’etre and their competitive edge.
“We intentionally work with one vendor in each [technology] area,” said Ronnie Parisella, CTO of Primary Support, a New York-based solution provider that works mainly with Microsoft. “It’s very, very difficult for our people to stay up-to-date with multiple vendors,” he said, noting that just keeping on top of Microsoft’s software updates, hot fixes, Service Packs and licensing is a full-time job. Still, vendors do apply subtle and not-so-subtle pressure to try to convince solution providers to work only with them, according to Parisella.
“Vendors are always playing up their competitive differentiators,” he said, noting that SonicWall, the Internet security software vendor Primary Support works with, is big on developing spec sheets for resellers emphasizing the superiority of its products over competing products.
Said Mike Chadwick, executive vice president at Prolifics, a New York solution provider that works almost exclusively with IBM software: “We don’t feel that we could be legitimately effective in a lot of different technologies. We dedicate ourselves to one vendor and get good at it.” The pressure can be even higher at the field level when the solution provider is working on a deal with a vendor’s sales force. “They want assurances you’re not going to flip and sell competing product lines,” he said. “That’s where as a VAR you have to set the parameters up front. The solution provider must be a trusted adviser and offer [customers] the power of choice.”
For his part, Perficient President and CEO Jeffrey Davis doesn’t believe IT vendors are pushing for VAR exclusivity as much as they were, say, 10 years ago. Microsoft back then tended to work with smaller, regional resellers that exclusively sold Microsoft products, he said, and the vendor more often expected such exclusive relationships. Today Perficient works with software products from IBM, Microsoft, TIBCO, Oracle, EMC and other vendors. “They’ve accepted by necessity that a lot of their partners are not going to work exclusively with them,” Davis said. “We’ve got a bunch of clients, including some big customers, and we have some influence.”
And then there are vendors that are so confident about their products that they encourage channel partners to carry products from competitors.
NetSuite CEO Zach Nelson, during a recent earnings call, was asked by an analyst whether some newly recruited VARs had switched away from selling software from Microsoft Dynamics GP, formerly Great Plains software, to exclusively carry NetSuite. Nelson nixed that idea. “I would love for [resellers] to demonstrate NetSuite side by side with Great Plains,” he said. —Rick Whiting
NEXT: No Microsoft Muscle?