What's The Deal

Chances are, some vendor has approached you lately with the proposition: "Let's REGISTER a deal."

In the past month alone, two vendors, Symantec and Network Associates, have joined a slew of others in adopting deal-registration policies. These increasingly popular programs encourage solution providers to register new prospects in order to qualify as the solution provider of record and become eligible for special pricing and rebates. While vendors can't prevent other solution providers from going after a deal once it is registered, the solution provider of record owns pricing and rebate advantages that all but exclude others from eleventh-hour lowball bids.

Rob Wolfe, president of AvcomEast, switched vendors and products when one vendor refused to honor a deal he had registered.

In fact, so crucial are deal-registration programs in preserving solution provider margins that poorly crafted and not-well-enforced programs can cost vendors business.

Rob Wolfe, president of AvcomEast, Silver Spring, Md., recounts an experience selling a tape backup solution into an enterprise security company with big East Coast and West Coast presences. As his team got deeper into the selling cycle, Wolfe moved to register the prospective deal, only to find that a West Coast solution provider had registered the vendor's same product within the same company. Although the first solution provider typically didn't do business in AvcomEast's region, the vendor refused to authorize AvcomEast's registration. To serve his customer, Wolfe ended up taking drastic measures: His company ultimately switched to a different product from a different vendor.

"We've come across several registration programs that are customer-based, not project-based," he said. "In a big distributed company, that is really good or really bad."

Attitudes toward deal-registration programs run the gamut. Some solution providers say they will not work with a vendor that doesn't offer deal-registration programs; others say they're too time-consuming to manage or that registering deals brings competitors out of the woodwork. For most solution providers, the growing popularity of these programs is forcing them to weigh the protection offered against the internal resources needed to administer the process.

Wolfe and other solution providers who use the programs extensively say that despite any drawbacks, they can earn substantial margin by playing the game. Although the amount varies by program, some of the more effective ones offer rebates from 8 percent to 15 percent on the price of the products, they say.

Wolfe points to Sun Microsystems' Target Account Rebate Program (TARP) as an example of a well-structured program. On average, said Wolfe, the program has helped AvcomEast triple the gross margin related specifically to server hardware included in a registered solution.

None of this is lost on vendors seeking to shore up the profits of solution providers helping them grow market share. IBM and Hewlett-Packard have for years championed deal-registration plans for solution providers plying the often margin-bloody waters of enterprise accounts.

IBM, Armonk, N.Y., is moving to expand what it refers to as its "opportunity management system." Late last month, IBM added rebate protection for solution providers that register deals in its SMB Advantage Program. "In the past, Business Partners would register an opportunity in the SMB Advantage Program and what that said was the customer was eligible for an SMB bonus [solution provider rebate]," said Mike Borman, IBM's general manager of Global Business Partners. "Before, any [solution provider] could get it. Now, what we've done is said the partner that has done all the work and closed the deal gets the SMB Advantage rebate."

Borman also said IBM is moving to plug a gap in its program by extending deal-registration protection to xSeries blade servers. Currently, the xSeries is open-sourced and is not part of the opportunity management protection plan. But solution providers point out that blade servers are invading the enterprise and deserve the same protection offered to other enterprise-class products.

"Blades are going to be 42 percent of our xSeries business this quarter," said Kirk Zaranti, executive vice president of STI, an IBM Business Partner based in Indianapolis. "This is a complex solution that has to be architected, and currently it can just go to the street to be bid."

Palo Alto, Calif.-based HP, for its part, last month expanded its New Business Opportunity Tool to include industry-standard ProLiant servers. Under the plan, solution providers that register and close business new to HP receive an extra 4 percent rebate, said Dan Smith, HP's director of U.S. partner programs. "We've expanded the program to include the ProLiant because it's our bread-and-butter product in the enterprise, and we are asking partners to grow and expand share," he said. Smith said HP realizes that there is an additional cost in selling industry-standard servers in the enterprise, so it wanted to provide partners with "some additional air cover."

That sentiment on the part of vendors is helping drive the recent surge in deal-registration plans. And on the channel side, deal registration makes it less painful when, after spending months nurturing a prospective account, a solution provider is being price-shopped by a corporate procurement department.

"It is beyond huge," said Andrew Reese, national director of security consulting at Dyntek, a Symantec enterprise security partner in Irvine, Calif. "By me registering the product, I get additional margin that allows me to be competitive against [a corporate department]. It allows me to go in there and beat their price because I'm the one who sold it, I'm the one who has the knowledge and I'm the one who can make it work."

Rick Crane, president and CEO of West Coast Technology, said his company won't work with vendors that don't support some sort of deal registration. West Coast Technology, a $10 million-plus storage solution integrator based in Aliso Viejo, Calif., last year nailed a major SAN implementation deal at the Venetian Hotel in Las Vegas against the direct-sales efforts of HP, EMC, Dell and StorageTek. Crane said that without the rebates he was able to negotiate with his key vendors"which included Computer Associates International, StoreAge, Nexsan and Qlogic"he would not have been able to win the business. "With cooperation from each of the vendors, we were successful in completing the solution within the budget that the Venetian set forth," Crane said.

John DeRocker, senior vice president of sales and marketing at Nexus Information Systems, Plymouth, Minn., said his sales team has been trained to register every single deal, even those that involve just a single product. "It has to be there; it will hold your margin," he said. In the storage market, DeRocker said solution providers can make anywhere from 5 percent to 20 percent extra margin.

But it isn't always that simple. Douglas McReaken, vice president of sales and marketing at Software Decisions, an enterprise solution provider in Houston, recalled a situation in which his sales team worked on an account for almost three months before discovering that it had been registered to another solution provider. "Unfortunately, our sales force was not aware we had to register the opportunity until we approached them for pricing, after the bid was public on the streets. Funny thing is, we won the bid regardless," McReaken said. His conclusion? "I'm sure registering has its advantages, but from our experiences to date, we have only seen administrative, time-consuming efforts exhausted in our internal sales department."

There's also another factor solution providers find they often need to consider: How closely are they allied with their vendor's local sales teams since the teams inevitably become part of the selling process after a deal is registered?

Marlene Brill, president of Digitask, a New York-based enterprise integrator that works closely with HP, said she dislikes putting the fate of an account in the hands of someone she may not have met, adding that a solution provider could have difficulty if it doesn't know all the right people at the field level. "I'm in a few accounts where essentially these accounts haven't seen an HP rep or VAR, basically ever," Brill said. "The minute I register it, all of a sudden other people show up."

Some vendors, such as Cupertino, Calif.-based Symantec, do centralize the approval process so that at least on paper it is less subjective, but the follow-up then defaults to the field level.

Leonard Iventosch, senior director of worldwide channel sales at Network Appliance, said the company is using its deal-registration program, now being rolled out to all partners, to make itself more attractive to the channel than its competition, offering a margin uplift to solution providers willing to share account information. This also has given NetApp, Sunnyvale, Calif., much better visibility into legitimate sales prospects, he said. "A nonregistered partner can still bid the deal, but they are already at an immediate disadvantage," he said.

Ross Brown, vice president of worldwide channels and operations at Citrix Systems, also emphasizes flexibility. The Citrix Solution Advisor Rewards Program pays margins of between 5 percent and 10 percent to partners that create and influence volume license sales of more than $10,000.

Brown said Fort Lauderdale, Fla.-based Citrix rewards partners for optimal selling behaviors, such as the ability to find an executive sponsor for the deal as well as construct a blueprint for future expansion. There is one thing he's firm about: The registration must happen at least 45 days before the close. "Deals never happen in less than 60 days. The whole idea is to reward anyone who creates a sale," Brown said.

Also joining the deal-registration movement is Cisco Systems, San Jose, Calif., which put its stake in the ground in February. Many partners viewed Cisco's program as a concession to the rampant price erosion prompted by carriers selling its equipment at a loss. Cisco says it aims to reward partners for new business created for some of its specialty technologies.

Chuck Robbins, vice president of U.S. channels for Cisco, said the vendor's program, which has been live for about 60 days, has been more successful than he anticipated. There are already "north of 1,000" opportunities representing business worth hundreds of millions of dollars listed under the program, which offers a front-end rebate for products in several specific areas, including commercial IP voice opportunities and the public sector.

Michael Fong, CEO of Calence, a Cisco Gold partner in Tempe, Ariz., said it's too early to comment about the effectiveness of Cisco's program, although it clearly makes sense from a strategic standpoint. "As with any program, it's going to take awhile to work out the kinks."

"Until it gets to be a consistent process, Cisco has to do a good job of policing the activity to make sure the registration is legitimate," Fong said.

After all is said and done, deal registration works, says Digitask's Brill. A little more than a year ago, another solution provider serving one of Brill's enterprise customers went out of business. The customer, having already paid the solution provider, got embroiled in a legal mess, which made it decide to go direct for all its technology product purchases. This was just as Digitask was getting ready to close an unrelated server deal with that customer. Suddenly, Digitask found itself facing the prospect of not making any money for all its work on the server deal.

Fortunately, Brill had registered the account, and after a year of "fuss and fight" her company received something for its efforts, albeit less than it originally expected. She was finally paid in March. Now, when she feels an enterprise prospect is legitimate, she makes sure to sign it up.

"After that, I decided to register deals, because it worked," she said.

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