Match Made In Heaven? MDF Programs Only Work When The Commitment Goes Both Ways

As solution providers look to ramp up their investments in marketing, many of them say they are finding that vendor MDF programs are not matching up with their needs.

The problem, they say, is that some vendors haven't updated their MDF programs to match the industry's move toward services.

"It just seems to me like they're just set up the way they're set up, and they don't change it," said Kyle Cebull, CMO of Fort Myers, Fla.-based Entech. "I see an opportunity for us and I see an opportunity for them to do more within the MDF. They just keep doing more of what they've done," he said.

One recurring complaint from solution providers is that the typical quarterly structure of MDF programs, where solution providers are given one quarter to prove return on investment, simply isn't enough time to demonstrate value from their programs, often a condition of receiving the funds.

Paul Edwards, director of infrastructure channels research at IDC, said he has seen partners asking for more time to prove MDF value. Depending on the product, he said, the sales cycle can be much longer than three months.

"The partners would want more time and I think vendors are starting to give that to them, but I think at the same time that's tempered by the fact that vendors want them to use that MDF to generate business," Edwards said.

Ron Dupler, CEO of Kittery, Maine-based GreenPages Technology Solutions, said he sees many vendor programs tending to be "old school," where strict program parameters can "stifle innovation" in marketing.

"What they're looking for in terms of ROI might be a big shortsighted," Dupler said.

Vendors agreed on the need to adjust their timetables, saying at a roundtable at the 2015 XChange Solution Provider conference earlier this month that they were either looking into, or had already, made changes to their MDF programs.

"We're definitely seeing vast changes in what the needs are," Richard Vaughn, director of channel sales, business solutions division, Toshiba America Information Systems, said at the roundtable. "It can't be by quarter any longer. It has to be an annualized-type program." To accommodate that, Vaughn said Toshiba has abandoned national scope programs in favor of custom MDF programs for partners based around mutual goals.

Mike Valentine, senior vice president of worldwide sales at Sophos, agreed, saying that Sophos has "radically changed" its MDF program in recent years, keeping some "old school" quarter-by-quarter MDF and adding a growing percentage of investment funding toward a business plan program for partners around headcount, general training and more. Valentine said partners still have to prove return on investment, but the expectations are more flexible and if value is proven then Sophos will "double down on it."

"What we're seeing is really a lot of creativity and really good return on our money," Valentine said of the results of the shift.

Frank Rauch, vice president of the Americas Partner Organization at VMware, said VMware has also changed its programs to six-month and annual MDF programs. The key for VMware, he said at the roundtable, is not building a "program du jour," but building a long-term partner relationship with key partners.

Frank Vitagliano, vice president of Global Partner Strategy and Programs at Dell, said he sees building a strategic relationship as a key part of MDF, especially if the vendor wants a partner to lead with its product instead of just having it as part of its line card. A major factor in that strategic relationship is consistency, he said, meaning vendors have to be careful to not "move the dials too dramatically" every quarter.

"You absolutely have to have that level of consistency where the partner understands where you're going, what you're willing to put into it, and then signal when you're going to make a shift ... and give them enough time so they know where you're going and can make some tweaks and tunes. That's a partnership," Vitagliano said.

Jed Ayres, CMO of Cleveland-based MCPc, agreed, saying MCPc has seen the most out of MDF efforts when the vendor and partner agreed on a common business goal. Ayres said the best programs he has worked with are holistic programs that include an overall business plan, targets, technical certifications, sales training, demand generation methods and more. The "nirvana" with MDF, he said, is when the vendor brings marketing, technical and business managers to the table.

"Where we've gotten the best growth is in situations where we've really aligned, we decided we want to grow the business faster than market rates and that's going to take a special sequence of investments on both sides," Ayres said.

That's a trend that's happening with many solution providers, IDC's Edwards said. Edwards said the scope of what partners are looking for and what they are receiving is starting to change, especially as many solution providers struggle through a changing business model. Edwards said he sees vendors broadening their engagement to include help with business transformation, technical competencies and business development.

"I think what you're seeing more than anything is that MDF is being reduced and that additional funding is going into technical training or competency areas," Edwards said.

As solution providers look for more help with marketing as a whole, they are turning to their vendors and distributors for aid, Edwards said. He said he sees partners eager for more "hand-holding" around big-picture business planning and very detailed marketing discussions, rather than the campaigns themselves, from their vendor account managers.

"I don't think that's happening as much as it could be within the industry. That is something the partners really will look for, at least in the short term," Edwards said.

However, not all vendors are answering partners' calls for better communication beyond the amount of money they receive based on their sales, Entech's Cebull said. While he said many of his peers have seen success with various MDF programs, Cebull said many vendor programs on the market are still too complicated and lack transparency as to what the vendor's end goal is. Without knowledge of what a vendor is interested in investing in, Cebull said he has found it difficult to come up with new programs and gain access to funds.

"In general, I'm a little bit disenchanted with the MDF programs I've been working with because they're too rigid," Cebull said. "The vendors could learn a lot more about our industry and I think that would go a long way to putting together more specific programs to allow us to both be more successful together," he said.

IDC's Edwards said he has seen vendors becoming more restrictive with what a partner is able to spend MDF on, as well as more interested in being able to track the value driven by the funds. A part of that, he said, is a shift from vendors reducing the amount of overall MDF available, but raising it for partners with the best-performing marketing programs.

The amount of money has also changed over time, Edwards said, with vendors more recently opting for what he called "co-op" programs vs. MDF, where partners pitch a campaign around a product to receive funding instead of a general percentage of funding based on their sales. Vendors also used to pay 100 percent of some campaigns, but Edwards said he sees vendors moving away from that as they ask for partners to have "more skin in the game."

GreenPages' Dupler said one reason vendors might be driven in that direction is because of poor past performance from solution providers with MDF.

"I think ISVs and OEMs are driven in that direction because of some bad behavior on the part of some channel partners not using the funds the way they wanted. I'm a big fan of accountability to performance," Dupler said.

What all the changes come down to, Ayres said, is that solution providers are going to have to make some big bets on their key vendors to make the most out of MDF. He said vendors are "thirsty" for partners willing to make a whole-hearted commitment and also have the business strength and capacity internally to execute on that commitment.

"I think solution providers have to make some bets," Ayres said. "They can't be representing everything to everyone, unless you're the billion-dollar reseller. You have to make these bigger, more sustained commitment and bet with specific partners, and it has to go both ways. If you make those investments and you show you have a sustained set of initiatives, the sky is the limit."