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What price loyalty?
The industry is set for a showdown as more vendors seek stronger ties with partners they deem to be most loyal. Hewlett-Packard President and CEO Mark Hurd brought the issue to the forefront last month when he vowed to exercise an “iron fist” in teaming with solution providers. He told institutional investors at the Citigroup Global Technology Conference in New York that HP would “play twice as hard” with its most exclusive partners. But he warned: “To people who don’t [want to play with us], we are going to get them out of here.”
As part of this push, which begins Nov. 1, HP, Palo Alto, Calif., is expected to retool its PartnerOne program to offer more rebate incentives tied to attach rates and selling a complete HP solution. Also beginning Nov. 1, HP will reward close to 100 of its most loyal HP enterprise solution providers by integrating them into the vendor’s Technology Solutions Group end-user sales force.
Sun Microsystems, for its part, has had a long-standing Sun Only program in which solution providers that commit to not selling products from IBM, HP and EMC receive an extra 1 percent rebate on Sun sales. But solution providers say Santa Clara, Calif.-based Sun may have crossed the line by adding Network Appliance to its do-not-sell list after the recent introduction of its first NAS appliance.
“For customers with NetApp on the floor, you can’t just walk in and change them to Sun,” said Ed Gogol, director of enterprise systems at Solarcom, a Norcross, Ga.-based Sun solution provider. Any vendor that expects its partners to sell only its products is dreaming, he added. “It’s hard to find a customer with a homogeneous infrastructure,” he said.
Bill Cate, director of U.S. partner programs at Sun, said the company is looking at changing the Sun Only program so that it is less focused on whether partners sell competing products.
Hurd’s comments, the changes to Sun’s and HP’s channel programs, as well as the experiences of solution providers that find it difficult to work with IBM’s field-sales force if they aren’t exclusively IBM, all highlight the often-nervous dance between vendors’ wishes that their solution providers sell as much of their product as possible and the multivendor, solution-oriented reality of the market.
While the new channel programs appear to incent loyalty, the net effect is clear: Those solution providers that choose to cast their lot with a single vendor will reap significantly more financial rewards from that manufacturer than those that opt for a multivendor approach.
Nowhere is the battle for solution providers’ loyalty more fiercely fought than among system vendors Sun, HP and IBM. Many enterprise solution providers choose to represent more than one of those three, yet each manufacturer boasts a hardcore group of solution providers exclusive to their respective brands. As each vendor strives to reward its most loyal partners, solution providers must weigh the risks and rewards of exclusivity vs. independence.
“Obviously, every manufacturer would like in a perfect world to have all of their resellers sell only their products,” said John Orr, president of Stack Computer, a solution provider in Irvine, Calif. “But then they’d like their customers to buy only their products, and that’s not realistic either. [HP’s Hurd] is looking at his channel as staff augmentation and not value-add. If you’re selling nothing but 100 percent HP product, you’re nothing but staff augmentation and not a value-added integrator.”
As a result, Orr said he partners with vendors that have sound technology but don’t demand exclusivity. Orr, who says his business is about 70 percent storage related, counts EMC, Sun and Veritas as strategic vendor partners.
Orr said that Sun, for example, has told him that if he’s in an EMC account that doesn’t have any Sun products, it would be more than happy to get into the account via Stack’s EMC relationship. “Yes, they’d like for me to carry their entire product set, but if they have no visibility to a customer and I have a great relationship selling EMC storage and I can leverage that relationship to get a footprint, why wouldn’t they see that as good business?”
“For the financial health of resellers, you have to be able to sell other products that fit niches where you don’t think Sun fits,” said Michael Shook, president of Strategic Technologies, a solution provider in Cary, N.C.
“Sun does a great job in the NAS [and] SAN space, but there are some other people that can really bring you into [the] Microsoft world, such as [NetApp],” Shook said. “If you are a reseller that is certified in every major elite program for Sun, and have done massive training and demand creation around Sun, then because you carry third-party product that assures you have some degree of financial health the notion that you are less than Sun loyal is wrong.”
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