Talk Vs. Behavior

In our 8th annual Partner Programs Guide, we provide insights on prevailing program trends, which are easy to spot if you distinguish between stated objectives and actual behavior.

Consider Compaq. This year, Compaq's program for business partners includes a raft of what could be positive changes. For example, the company has set about to reduce complexity, emphasize solution selling and provide greater consistency to ensure improved predictability. Dan Vertrees, vice president of North America partner sales and marketing at Compaq, says the company will improve the small things, such as updating its databases more often, and more ambitious things, such as providing financial incentives for partners that develop and sell solutions around Windows 2000, Linux, VMS, Tru64 and Care Paq, or for those who sell to customers in specific fields, such as education and government.

Specifically, the new Compaq Business Partner Program will now recognize partners in five areas of specialization: reselling, service delivery, consulting and systems integration, development, and service provisioning.

"We want to be cognizant of recognizing our solution providers' entire value-add and make sure we update our profiles so that each of our databases, files and e-commerce initiatives let them truly get the most benefit of everything we have to offer," Vertrees says.

While promising, these changes are not likely to remedy what irritates Compaq partners most: channel conflict. The vendor, which once counted on the channel for more than 90 percent of its sales, is catering to more customers directly. For example, direct sales accounted for 55.9 percent of fourth-quarter 2001 revenue within the company's Industry Standard Server Group. That was nine points higher than in the third quarter. Although the figure includes direct-to-partner sales, the company concedes that direct-to-end-user sales are growing. CEO Michael Capellas has made it expressly clear that he wants this growth to continue, believing it will enable Compaq to better compete with Dell and IBM.

The strategy has frustrated certain partners, some of whom no longer regard the company as the channel's friend, especially after some of the steps taken by the Houston-based computer company late last year. For example, midway through the fourth quarter, Compaq reduced MDF rebates between 10 and 25 basis points. It also reduced certain warranty reimbursements to authorized service providers by as much as 60 percent. Those two moves alone had a direct impact on VAR profitability at a time when they felt victimized by the company's direct sales initiatives. When combined with ongoing confusion stemming from the vendor's proposed $26 billion merger with Hewlett-Packard, the moves have had a significant impact on Compaq's ability to strengthen ties to business partners, including Connecting Point Computer Center, Joplin, Mo.

After more than a decade of representing Compaq to customers in Missouri, Kansas and Oklahoma, the solution provider has moved from leading with Compaq, which, until recently, accounted for 90 percent of PCs and servers sold by the company. "Compaq is the only vendor we felt abandoned by," says Connecting Point co-owner Larry Hedin.

Like Compaq, Microsoft is having difficulty convincing partners that stated goals are not at odds with actual behavior. Partners remain frustrated over conflicts with Microsoft Consulting Services (MCS) and changes to software-licensing policies.

"I can't put my finger on exactly when, but Microsoft clearly stumbled after its Fusion partner event last July," says Dennis Daniel, president-elect of the International Association of Microsoft Certified Partners, who is confident Microsoft will fix its ills.

Microsoft tried to address its issues head-on in January when it published guidelines as to where MCS would focus. Prior to their arrival, however, Microsoft's vice president in charge of worldwide services, Robert McDowell, stepped down. After Michael Sinneck was named to replace him, the company finally released the details to its Services Partnership Framework, including specific names of the 1,000 accounts MCS intends to focus on.

According to Paul Bazley, vice president of enterprise and partner sales at Microsoft, MCS' core mission remains to establish first-mover references and deep architectural skills around Microsoft technology. Given its new mission, look for MCS to lead with customers, including Anheuser-Busch, Texaco and Dell. Despite its stated goal to handle those accounts directly, Microsoft believes there still will be opportunities for partners to work as subcontractors for MCS.

For accounts outside the top 1,000, Microsoft is comfortable with its existing plan of allowing partners to lead, though it will gladly lend a hand to drive architecture and technology adoption should a partner request it.

The approach to segmenting the market is similar to other vendors' programs that have "rules of engagements" and similar provisions for reducing conflict. That so many companies indicate precisely where and when a partner can expect to run into a vendor's direct sales arm, and what parties can do if tensions arise, is indicative of the level of conflict that exists in the channel today.

"The majority of changes [we are making are designed to address very serious concerns and issues that we have heard from our partners around licensing, MCS services and emerging opportunities around .NET," Bazley says. "While this is not all we plan to do to resolve these issues,and these are not the only issues we plan to address,we see these as a first step."

Ironically, those that have been down that path may actually be ahead of the curve for once. For example, Oracle has struggled with conflict for years. But this year, the company has created a bigger market opportunity for partners by increasing their designated territories in the general-business market to include sales up to $1 billion; originally, the threshold was less than half that. In addition, Oracle is encouraging partners to record their customer contacts in an online database registry that is expected to become fully automated in the next few months. The registry is Oracle's attempt to get on record who, by name, has influence in individual accounts. That should keep Oracle's direct sales force from poaching customers. Should direct salespeople close deals in those accounts, however, partners will still get compensated,actually more than in past years, says Oracle executive vice president George Roberts.

"Oracle has been a direct-sales organization," he says. "But that's not where our future is."

Novell is also trying to better define where partners can expect to run into its direct-sales efforts. Channel managers at the Provo, Utah-based networking software company say Novell understands how beefing up its own consulting capabilities and merging with consulting company Cambridge Technology Partners has caused confusion for solution providers that rely on Novell to propel tech sales. That's why it unveiled Clear Channel in November, which provides a guideline as to which client accounts and business partners it intends to put its weight behind.

The key to making the new strategy work, says Ladd Timpson, Novell's director of worldwide channel marketing, is proving clear revenue opportunities for partners. Among the objectives for this year are clarifying Novell's channel strategy, updating its channel programs to account for new business models, and defining investments across sales, marketing and services. With those goals in mind, Novell will introduce a new Platinum Integrator program for service-focused integration companies, reintroduce certification requirements for partners, increase tech support to partners, and reduce PartnerNet Program fees by 25 to 50 percent, depending on partner designation.

Novell insiders say the changes build on the momentum achieved last year with the release of NetWare 6 and the first-place award it received in the 2001 VARBusiness Annual Report Card survey. "We want to reward partners for their level of Novell expertise, which I think we kind of got out of last year," Timpson says. "Asking partners to raise their level of competence, we believe, will lead to their improved performance for both us and them."