Checkup Time: Channel Chiefs Examine The Financial Health Of Partners


Do you see them having any issues trying to get access to capital at this point? Is it tough for MSPs and cloud services guys that don't carry a lot of product to use as assets?

Vitagliano: There's really not a magic formula. All of the third-party finance companies use the same sort of formula. I think what ends up getting looked at [today] is not so much the asset, but the business model and what's being driven in the business model. How much cash are they driving with the model? So if it's a small business and sort of they're struggling, then yes, sometimes there will be issues with that. But for the most part, most of the partners I'm dealing with have sources of capital. So I can help them, for example, with a full planning option where we sort of subsidize it a little bit. But for the most part, they're not looking to me for that. They're looking to their banking sources that provide that. 

Peres: We do help with extended terms, give them extra cash flow. But most of the time that cash flow is what they're using to invest back into the business, so it's less because they're trying to survive. If I'm a VAR, now I have 30 days worth of cash flow that I can invest back in the business. And that's what we try to stimulate.

Rauch: I think the bigger issue, though, is going to monthly revenue versus getting it all at once. All of a sudden, these guys that have built their businesses in the last 15 years selling a big mainframe, they get a bunch of margin, and that's how you run your business. Now all of a sudden it's coming in dribs and drabs. And what we're trying to do right now is just be able to give them year one, rather than giving it to them on a monthly basis. If they go with our hybrid cloud, we'll pay them on year one rather than pay them monthly. That helps. 

So are you changing the metrics of your channel program? What kind of recurring revenue are we getting from our guys, and is it going fast enough? 

Chavez: We certainly look at reoccurring revenue, and we definitely measure our partners on recurrent revenue for that. We're looking at models where, for service providers that are providing cloud offerings, we actually started paying some of our people on some of their reoccurring revenue so that we can incent that overall behavior, so that it's not just compensation based on infrastructure, but compensation based on the reoccurring revenue of these partners that we go to market with. So those are models that we're taking a look at right now and piloting.

Peres: We do pay our salespeople on Cisco-powered, cloud-based services that are initiated by a provider in the marketplace on a Cisco platform. We call that 'Cisco-powered.' Our salespeople get paid if a Cisco-powered service is sold. So we do that. One of the areas that we've seen the fastest growth from partners over the last three to five years has been managed services -- not necessarily cloud services, but managed services. And moving more of those managed services into a recurring revenue-based model is what we see a lot of them starting to do, because that locks their customers on a managed services [model] over a longer period of time, and they get paid over that period of time. So four- or five-year contracts are not uncommon today. We encourage that because we want to see more of the partners' revenue to have a higher percentage coming from recurring revenues. More and more of their business is moving that way. The biggest challenge we see from partners is they do have a cash-flow [problem] if they move too fast. So the key is to transition on a predictable basis, so they manage their cash flow in a process. 

We do have a program that is a managed-services and cloud-based program that tries to motivate partners to move in that direction. But I think they're doing that naturally. Once they understand the value of managed services and the fact that it's more profitable and you lock your customers in a longer period of time, they want to go there. So we're seeing actually a faster growth in these managed services than necessarily in the cloud-based services to be honest. 

NEXT: Are You Changing The Metrics Of Your Channel Program?