Lion Of Loyalty

For the past nine years, Tim Spires has been a diehard Novell fan. His company, EST Group, boasts the largest Novell identity-management practice in the Southwest and generates about 60 percent of its overall IT business from Novell-related implementations and services. That's no coincidence. Spires vets and re-evaluates his vendor partners methodically. He can't speak highly enough about Novell, its channel perks and its executive leadership, and he characterizes the partnership as one built on consistent quid pro quo. So when Microsoft came knocking earlier this year, he needed a pretty good reason to consider dividing his loyalties.

"I told them I wasn't interested in becoming one of 300 Microsoft partners in the Dallas area," Spires says. "I was interested in being one of maybe two partners in Texas that fulfill a specific need for them."

Microsoft stepped up, winning Spires' allegiance by placing EST Group in a "fast-track" program aimed at cultivating partners qualified to provide specific technology solutions in regions where demand outstrips supply. In this case, EST Group is focusing on application-integration services around BizTalk Server, SharePoint Portal Server and single-sign-on technology.

Spires' loyalty to Novell hasn't dimmed, he says. And while Microsoft still has a way to go to match some of the benefits Novell provides its channel partners, the Redmond, Wash.-based software giant's willingness to meet his demands won his commitment.

"I would have declined to partner with them had it not been for that," he says.

Earning Allegiance
Stroll the halls of any solution-provider IT conference and you're sure to hear at least a few contentious gab sessions about partner loyalty: Is it a good thing? Are you better off aligning your company with just a few technology firms or shuffling the deck on a regular basis? Do market leaders, such as Microsoft, have the right to expect exclusivity from their channel partners? And so on.

In general, most solution providers don't like getting their arms twisted. Rather than having vendors demand their loyalty, they agree it should be earned through more personalized attention, superior sales and technical support, higher margins, favorable pricing, fruitful leads and marketing assistance. They want the whole carrot, not just the stick.

NEXT: Which vendors have figured that out better than others.

In the 2006 VARBusiness Annual Report Card (ARC) survey of partner satisfaction, companies such as Cisco, IBM, Intel, Hewlett-Packard and SonicWall garnered high Loyalty scores. The study asked solution providers about loyalty in several ways--namely, would they recommend a vendor's product to a customer, would they recommend it to a peer/friend, are they likely to remain a partner and does the vendor deserve their loyalty.

At the top of the heap is SonicWall, the scrappy security-appliance company that has become a darling to the channel. Partners responding to the ARC singled out SonicWall as the company they would most likely recommend to a peer/friend, as most deserving of loyalty and with which it plans to remain a partner. Its partners, on the whole, are the most loyal of any surveyed.

That's music to John DiLullo's ears. As SonicWall's vice president of worldwide sales, DiLullo has helped architect a business model that is as channel-friendly as they get. The company sells 100 percent of its products and services through its 12,000 partners by way of distributors. It offers better-than-average margins on product sales, as well as recurring revenue opportunities through its security-update subscription service. There are no sales quotas, and the certification costs are manageable, according to partners.

DiLullo himself gets a weekly update from SonicWall's sales and tech-support teams on their interactions with partners; he personally monitors and tracks the data, looking for problem areas or weaknesses that could damage partner satisfaction.

"One of our big tenets is that we never compete with our channel," he says. "We don't take second-year maintenance contracts direct, we don't put direct sales on the largest accounts, and we don't use certification and training as a profit sanctuary."

From where Marc Harrison sits, SonicWall also runs the best partner conference of any technology provider. Harrison, president of Silicon East in Manalapan, N.J., lauds the company for focusing intently and equally on partners like him that are selling into the SMB market. The annual SonicWall Peak Performance conference puts SMB partners front and center.

For example, SonicWall's vertical-market solutions are highly granular and SMB-specific, Harrison says. Where Microsoft zeros in on the financial-industry vertical--appealing to the JPMorganChase banks of the world--SonicWall gives its partners an attractive package of products and services to sell to local doctors' offices in a particular state.

Because of its approach to verticals, SonicWall is able to deliver much more fruitful leads to the average SMB partner, Harrison says.

"There are vendors you need to partner with and those that you want to partner with," he says. "With SonicWall, you have an opportunity to make some serious money and see recurring revenue."

Harrison, who also partners with HP, Intel, Lexmark, Microsoft and 3Com, parlayed his vendor loyalty into a spot on prime-time television in September. Silicon East was selected to be the technology coordinator for the hit show, "Extreme Makeover: Home Edition," which airs each week and features the construction of a brand-new, high-tech home for people in need.

This particular installment featured a family whose members were all blind, deaf or suffering from cancer, Harrison says. His task was to outfit the new home with the latest and greatest technology, from a high-speed wireless network to security systems.

He approached several vendor partners for donations. SonicWall provided a Pro 4060 appliance, along with the wireless access points needed in the home. Microsoft made its accessibility team of employees available to Harrison and donated both money and equipment.

"I've been loyal to those vendors, and they did much more than we even asked for this project," he says. Today, Harrison uses the SonicWall product to get direct access to the home's technology so that he can monitor and provide services as needed.

NEXT: How Cisco is getting things right.

SonicWall's larger rival, Cisco, earned terrific Loyalty scores as well. As the market leader, one would expect that. In the total worldwide market for security appliances, Cisco holds the lead with 29 percent market share, followed by Juniper with 12 percent and Nokia with 6 percent, according to IDC's quarterly tracking.

In the Firewall and VPN appliances space, Cisco, Juniper and Nokia remain the top three, while in IDSes, Cisco leads a field that includes Internet Security Systems and Tipping Point. In the UTM submarket, SonicWall takes the No. 1 spot, followed by Fortinet and Symantec, according to IDC.

Interestingly enough, what's driving allegiance to Cisco is its perceived continual product innovation, according to partners surveyed for this year's ARC. Many cited Cisco's investment in research and development, the breadth of its product portfolio and the consistent availability of its technology to its partners.

Chuck Robbins, vice president of U.S. channels for Cisco, says he looks at partners as an extension of the Cisco salesforce, but that the key to maintaining their loyalty lies in basic economics--making sure partners remain profitable--and in treating them as equals.

To that end, Cisco has begun including partner input much earlier in product-development cycles, bringing engineers from its channel into the room with Cisco engineers.The company has tried to alleviate some of the classic partner pain points, including the expense of going to market, by developing working-capital programs to offset long sales cycles and reducing certification fees.

Robbins says there's been a cultural shift at Cisco. "I think the big thing is that the respect for the channel and its DNA is woven throughout the company now," he says. "The entire company lives it, no matter where that partner engages with us."

One of the challenges for solution providers today is hiring qualified people. Companies like Cisco, IBM and Microsoft--all with loyal partner bases--are trying to alleviate the IT skills shortages that are contributing to the hiring headache. Of course, it's not all altruistic--more skilled partners means more technology sales--but by taking a genuine interest in the business issues of the channel, these vendors earn the loyalty of their partners, according to those surveyed.

Run As Fast As You Can
So what discourages loyalty? There are some obvious things such as channel conflict. As DiLullo puts it, "At some level, the channel is always afraid that a vendor is going to take some business away."

But then there's the sheer difficulty of doing business with some vendors. Consider this anonymous comment from one of the respondents to the ARC survey, a frustrated McAfee partner:

"They must contact me. We've been trying to contact them to change our address and phone number...almost impossible. We also need software to show people."

It's the personal touch that most solution providers are looking for. EST Group's Spires says he needs to see value returned to him from the vendor if he delivers strong value for them to the customer. And yes, he wants to be recognized as different for that value.

"We choose our partnerships very carefully," he says. "If I'm not the first person that they think of calling, it's not going to work for me."