Solution Providers: Customers Or Partners?

The reality, though, is somewhat different. Solution providers purchase goods and services from their vendors (or, as some would call, manufacturers) to resell to their customers. The more products a solution provider buys, the steeper the discounts and greater the reselling margins.

While slightly simplistic, the difference between the definition of a partner and the reality of the channel got me thinking: Are solution providers really partners with their vendors, or are they actually customers?

"Sometimes I don't feel like either," says Mike Cox, chairman of Logicalis, No. 83 on the VARBusiness 500. "I would say I'm a partner because I can't exist without the vendor. However, they can exist without me, so that makes me a customer. I need them to make products, and I need all of that marketing that comes through [market development funds]."

In developing Channel 2.0 -- a research project that will delve into what the IT reseller channel will look like in 2013, I asked a number of vendor channel chiefs, leading solution providers and distributors this partner/customer question. Their answers were shocking: Nine times out of 10, they agreed solution providers are vendors' customers.

So, what is the job of a vendor channel chief? Vendors often tout terms like "partner enablement" and "channel strategy" for growing indirect revenue. A somewhat cynical view would say that partner enablement is merely a means through which the vendor gets solution providers to take more products off their hands. You see, vendors can only recognize revenue when it's sold; selling to a "partner" counts as a sale. In this context, the job of a channel chief is really to move as many products as quickly as possible off his company's books and onto the books of his solution providers. Once it's on their books, it's their problem. Hence the phrase "stuffing the channel."

But vendors don't take these relationships for granted. If they disengaged after the initial sale to solution providers, they could be faced with returns and refunds, as well as losing recurring business. Partner enablement is the means by which vendors ensure they have a steady stream of products moving through the channel.

"They're absolutely customers," says Jeff Volpe, vice president of marketing for the Americas at ViewSonic. "No one can forget that we have to treat [solution providers] with white gloves."

Not every vendor agrees with that premise. IBM, often credited with being one of the founders of the channel, steadfastly calls its VARs "business partners." In fact, the blue suits are quick to correct you when you refer to their resellers as anything but business partners. While solution providers buy products from Big Blue, the vendor views the path to market as a series of steps that only concludes with the end customer. Since the solution provider is in the chain to the final sale, IBM considers them a partner in the entire process.

"The heart of getting productivity out of partners as a chain is very important because ultimately you need a business model that continuously improves," explains Ravi Marwaha, general manager of IBM's Global Business Partners.

As the channel continues to evolve, most vendors and solution providers agree it will continue to be the best route to markets that vendors simply cannot scale to reach with direct models.

"Without the partner, we don't have a relationship with smaller and midmarket customers," says David Roberts, vice president of Americas sales at Websense. "You have to have the right mix of direct and indirect, and the right mix of partners to reach each segment of the market. If you don't have the right mix, you're going to get squashed."

What do you think of the relationship between vendors and solution providers? Are you a customer or a partner? Send your vendor relation stories to me. All responses will be kept confidential unless otherwise noted.