CRN Interview: D-Link CEO Targets VARs To Build SMB Business

Networking vendor D-Link earlier this month celebrated its 20-year anniversary. Steven Joe, president and CEO of D-Link Systems, the North American arm of D-Link, recently spoke with CRN Infrastructure Editor Jennifer Hagendorf Follett about the company's push into the SMB market and the role channel partners will play in that effort. Edited excerpts of the conversation follow:

CRN: What's the biggest difference when you look at the market today vs. what it was 20 years ago?

Joe: Speed, time to market. The product cycles used to last somewhere around three years. Now the product cycles are much quicker. Product development and the complexity of products are much more complicated than it was 20 years ago.

CRN: What kind of shift does a legacy D-Link partner need to make to keep up with your SMB strategy?

Joe: I think right now we do examine the market quite a bit and look for what solutions have viability in the marketplace, so I would say it's a two-way street: D-Link is improving its ability to communicate with the channel, and the channel needs to see what D-Link can offer. Right now we're very much attuned to work with VARs on systems integration and development, to help them build the solutions that they see in the market. What we've done probably better is listen to the channel our business arena has grown quite a bit because our product line is tuned to what the SMB is looking for. Now, we haven't reached up into the enterprise level yet, but I would say that at least in the SMB realm, that is our prime focus, and we're really tuning our infrastructure, strategy and product line to meet that demand by really listening to that VAR.

CRN: Is a push up into the enterprise on the road map?

Joe: No comment at this time.

CRN: What is the product area your business customers are most excited about right now?

Joe: Right now we really see a lot of people focus on us in storage, xStack storage or iSCSI. ISCSI is considered really the next revolution in storage technology, and with the need for greater storage, it's really the ability to take back from a proprietary standard into something all IS managers understand, and we think that's IP storage under iSCSI.

CRN: Is that the area you're seeing the most growth in?

Joe: Well that's a featured growth area. We see the most growth right now for us in switching. Right now if you look at one side, moving into 10-[Gigabit Ethernet] storage, on the other side of that, you have to connect it to switching, so we have 10-Gig switching. So our switching xStack series is doing quite well. That's our largest growth right now.

NEXT: Joe talks channel strategy.

CRN: You recently brought in a new channel management team, including Van Andrews, vice president of channel sales, and Paul McCauley, associate vice president of distribution sales. Can you talk a bit about the channel strategy, where it sits right now and what you'd like to see out of the channel over the rest of the year?

Joe: Right now we have about 2,500 qualified VARs in our solutions program, and probably around another 7,500 VARs who actively purchase D-Link products, so we're looking probably at an expansion of another 500 to 750 highly qualified VARs in the next 12 to 18 months. Even though we're known in the consumer realm, we think the business category is something we have a lot of strength in. We've been around 20 years now, we're a solid organization, financially strong, and I think our product line is quite broad, with the support teams on both the sales and service side that I think is constantly getting better year over year.

CRN: You spoke with CRN about a year ago on your efforts to push in to the SMB market. Has there been progress made on that front, and what's different about it now vs. what you were trying to do a year ago?

Joe: Well, a year ago basically the product line got stronger. We took that time, the last couple of years, to focus on building the infrastructure and build the product line. As a company, we've been selling the VAR, enterprise-based products overseas for all of these years, so it's not like we haven't done it. We've done it in other areas of the world. In the U.S., we've started really from the bottom up and really started to build our brand from the consumer realm and now moving back into the enterprise side, or at least the SMB side. ... [Since last year] we've doubled our VAR count and built all of these programs. In the last 12 months ... we've seen probably 100 percent growth in the business sector, so I think where we are now vs. where we were before is continually going forward, and if you look at the products, they are constantly getting better, moving into Layer 3, 10Gig, Power over Ethernet for example, and storage. Those were all talked about then but actually starting to be delivered now.

CRN: Is there tangible evidence you're seeing in terms of market share shifts to show that you're making progress into this SMB market in the U.S.?

Joe: Right now, I what we're seeing for our organization is triple-digit growth, so what it used to be in the past was probably half of what it is now. I would say looking more to the end of the year and measuring more by market share you will see more of a shift in the switching side. You'll see more IP surveillance or IP telephony and those are all brand new markets, and of course, storage. I think you'll see something there. That's a product we're just starting to deliver, but that was actually a three year development [process].

NEXT: Integration skills needed

CRN: How is the SMB customer different today than it was, say, 10 years ago?

Joe: I would say they are much more demanding, with the market needs they have now: financing, different technologies, integration, and the fact that there are so many different types of technologies. Networking before used to be one catch-phrase. Today networking is divided into many divisions, wired, wireless, IP telephony, storage, different types of integration, so I would say a VAR today needs to be much more knowledgeable in many different areas of integration. Before networking was really three or four devices. Now you're talking about hundreds of different devices that need to be integrated together, for everything from surveillance to communications, wireless, VoIP. I would say it's a very complicated market now for a VAR, and only a few manufacturers really provide the end-to-end solutions to support them. I believe D-Link is one.

CRN: So the need for those integration skills is growing within your channel strategy?

Joe: Quite a bit, because now we need them solutions-oriented. If you go back and ask about 20 years ago, you go back in the past, people were buying pieces. 'I need a NIC card or I need this hub.' But actually, today, everyone needs solutions selling, whether it's the transition of analog into digital All of this move to content, it's all going to have to be high-speed and digital, so that would mean storage, high-speed access, both wired and wireless, so these are things I think fall right into D-Link's arena. ... There are a lot of the pieces end-to-end that D-Link produces today that we did not produce years ago.

CRN: How do you approach channel partners now, because it seems like you're looking for a much broader range of expertise than you have in the past, as soon as you start talking about things like storage, IP telephony and IP surveillance, things they maybe haven't been touching in the past?

Joe: Well, right now for our organization, we're looking end-to-end. The issue is that most of the products in the VAR channel are really about systems integration, taking pieces of our technology and building and entire system. Law enforcement, for example, is looking for 3G into their automobiles with IP cameras in the front and the rear so they can have live access, not just record. ... You're going to see things in the government and education realm from D-Link, you're going to see more in the storage arena, also more switches at the edge. In some areas we are a direct competitor, but in other areas, we complement Cisco, so a lot of the core business is still theirs but on the edge there is a lot of improvement on what they do now, and that's where D-Link comes into play.

NEXT: Assessing the competition.

CRN: As you look at your competitors in the SMB space, Hewlett-Packard's ProCurve division, 3Com and Cisco, what are the weaknesses you see there? What's going to open up this opportunity for D-Link?

Joe: D-Link's strength right now is SMB. SMB is a new growth market for companies such as those. They're good companies, and they have to work their way down and move away from just focusing on a few customers to focusing on a larger [group] of people. D-Link's strength is that we're used to focusing on, quite honestly, millions of people because of the consumer realm, and now moving to focus on maybe a hundred thousand, where it's easier for us to focus on that kind of volume and meet the needs of an SMB customer. ... For them, they have to come down and make their products meet the SMB arena. I think that is a different type of play since they are already multibillion dollar corporations that, at least in our view, consider people as numbers. We still consider customers people, and I think that as solutions go forward, D-Link offers programs, training and incentives really focused to the VAR as our priority customer. For us, the VAR community is the No. 1 focus for all of our business products.

CRN: Let me ask you the same question about your peers like Netgear and Cisco's Linksys division, because they are also talking to CRN about their desires to have a stronger play in the SMB market.

Joe: For them, there are going to be some different factors. Where does Cisco end and where does Linksys begin in the SMB/consumer realm? If you go back in the past, that is the reason why Netgear broke off from Nortel. [It was] because of channel conflict [over] who handles what part of the community. For Netgear, that organization is going to have to look at going upstream. Their SMB really is unmanaged; they don't have strength in managed products. Their organization is going to have to look at building that managed solution. If you really compare the product lines for D-Link vs. a Cisco/Linksys vs. a Netgear, and you look at everything in switching, now you go to 10Gig, 10Gig managed, PoE, those types of products D-Link leads all of our competitors in those kinds of categories. You go to IP telephony, not a Vonage-type product or a Skype, you're really talking a real business solution that covers an IP-PBX for example. D-Link offers that already. IP surveillance not just the one you find in consumer retail but the upper-end side and then you go iSCSI, xStack storage. We're not talking a two-unit home storage device, which D-Link does make also. We're talking a 15-bay high-performance 10Gig iSCSI solution for $15,000. That is not a consumer-based product. I think if you look across that board, we dwarf the competition in terms of product lifecycle and the ability to go end-to-end.