Vendors Wrestle With Channel Issues

In conjunction with VARBusiness partner The Institute for Partner Development and Education (IPED), we recently hosted a roundtable discussion in Chicago for the leaders of channel and partner programs at BMC, Cisco, Citrix, Computer Associates, EMC, Fujitsu, Microsoft, Oracle and others. There, we asked top vendor executives about their efforts to address the above topics, plus several others, including partner enablement and program simplification. The latter topic alone occupies the hearts of minds of many executives daily becuase of the number of solution-provider partners who grumble about the cost and complexity of programs today.

Following is a snapshot of what some of the leading vendors in IT are planning and doing as they prepare for 2005.

Midmarket Strategies
To help its partners, Oracle is investing in more field people to help allies, increase demand generation and improve technical support. But none of that matters without the right product set and product capabilities, says Oracle vice president Rauline Ochs. A veteran of IBM and BEA, she has run Oracle's partner program for more than a year. What companies need to do to better penetrate the midmarket, she says, is get their product sets right.

"We have to reduce the complexity for midmarket customers and their solution providers," she says. "Installation has to be reduced to a day, for example."

George Kafkarkou, CA's senior vice president of worldwide channel operations, says vendors are realizing that simplifying large enterprise packages for midmarket companies is only half the battle; the other half is engineering products for customers of that size from the ground up. "It has taken us 27 years to realize this at CA, but we're really getting it," he says. "We nixed adding things to both programs and products because of the complexity they have added."

Allison Watson, Microsoft's vice president of worldwide partner marketing and sales, says her company stepped up its investments in midmarket strategies during the past three years because, according to its own research, the 250,000-plus midmarket companies in the United States represent more than two dozen opportunities for each of Microsoft's 10,000 or so U.S. partners. The focus of these efforts: establishing business solutions as an anchor tenant in addressing midmarket customer needs, Watson says. "There is a huge opportunity for companies between 100 to 1000 employees. This segment is growing 9 percent worldwide with growth in the U.S. expected at 8.2 percent," she adds.

In addition to the traditional seats/revenue classification, Microsoft also characterizes midsize businesses as those with minimal IT staff, but big business problems. "These companies procure IT in the most highly 'verticalized and/or industry-specific' way as they don't simplify problems like small business and can't abstract IT problems like big biz," Watson says.

ISV Recruitment And Management
If one theme came out of this year's roundtable discussion with channel program executives, it was the need for simplification. Frank Vitagliano, IBM's vice president of worldwide distribution channels with IBM's Global Business Partners, Sales and Distribution business, notes with pride how IBM has reduced complexity by streamlining PartnerWorld from four-track communities into a single, integrated business partner program with consistent offerings and benefits.

Another thing IBM did to improve its programs this year: It brought more ISVs into the fold. In less than one year, for example, the company's ISV Advantage program has attracted more than 200 companies that are committed to leading to lead with IBM software.

Microsoft, too, has recognized that many ISVs need better oversight and assistance. That's why in July it launched a new initiative, the ISV Royalty Program, to help partners get more rewards for embedding Microsoft products into their solutions so they could more easily be packaged for resale.

Partner Enablement
Helping partners prepare to sell new innovations has never been as important as it is today. The complexity and diverse nature of software solutions today stretches partner capabilities to their limits. That why Veritas, Microsoft and others are investing a great deal in partner enablement. Microsoft's Watson says she's spending a bundle on her company's Partner Learning Center, a Web site where partners can not only interface with Microsoft, but also creates unique training programs for every employee in a partner's company. Veritas, meantime, has launched a free online sales training effort that ties partner rewards together with Veritas promotions. That has helped Veritas step up its communication with partners.

Partner Profitability
Cisco has invested heavily to help partner improve their profitability. Special uplift programs including rebates and other financial support have helped to lift partner profitability there by 10 percent for companies that have followed Cisco's advice, says Chuck Robbins, vice president of U.S. channels at the San Jose, Calif.-based networking giant. In all, the company has conducted more than 100 different engagements with partners to determine their profitability. Cisco measures individual partners to determine what their return on invested capital is and shows them ways they can improve their overall profitabity in key areas.

Others are taking a different look at the issue. EMC, for example, is just now building out its base of partners, trying to get a sense of just how many partners it will need to assertively go after the midmarket. Today, the company counts as many as 300 actively engaged and fully certified partners and as many as another 600 loosely affiliated allies. John Koury, vice president of channels marketing, says the company needs more partners to address all of the opportunities to sell Clariion products before it, but acknowledges he needs a proper balance so as not to destroy margins for all.

"I know I could go out and recruit scores of new partners, and we will certainly add many more, but what we want is a situation where three or four partners sit around every opportunity and conduct a reverse auction," he says.

Deal Registration
One of the more controversial topics that channel-program executives face today is what to do about deal-registration programs. On their face, these programs have been designed to protect partners and give them some sort of exclusivity in accounts where they hold sway. What's controversial about these programs is that partners remain worried about the customer information they hand over to vendors and how that information might be used. They also worry how other partners can misuse a deal-registration system to try to break into an account where they have no longstanding history.

Thus far, the likes of Novell, Citrix, Cisco and others have enjoyed success with their programs. Citrix vice president of partner management Ross Brown, for example, says the company has registered more than 1,500 deals. Thanks to that, the average return a partner has received for closing a deal on behalf of Citrix has risen to 50 percent, up from 18 percent in just two years.