Citrix Direct Move Ruffles VARs' Feathers

In a memo to partners dated July 28 which was obtained by CRN, Citrix announced it will be processing Subscription Advantage license renewals directly with customers and is transitioning its partners to an agency fee model. Subscription Advantage is Citrix's licensing program. The changes and new online renewal process took effect Aug. 1.

As part of the revised program, Citrix laid out a new adviser compensation model. Under the new terms, partners are eligible for a 15 percent commission for influencing renewals, but they must cite renewal quotes at 100 percent list price for their "assigned" customers.

Citrix claims eliminating discounts will reduce customer confusion over pricing and increase partner profitability.

In an interview with CRN, a Citrix executive said the company is trying to level the playing field for partners that truly influence renewals and product sales.

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"We want to make sure the right influencing partner is rewarded for subscription revenue," said Thomas Eacobacci, vice president of services, North America at Citrix.

He said the company had a similar model four years ago. He insisted that Citrix is not going direct and that the new policies going into effect this month will drive more renewal business through the channel.

For example, Eacobacci said, Citrix also enacted a new compensation neutral policy Aug. 1 that no longer rewards Citrix sales reps with a higher percentage for getting renewals direct from customers, a change that favors partners.

Still, some Citrix partners maintain the new policy ultimately will reduce their margins, which can run as high as 20 percent, and erode customer account control, since customers likely will order directly from Citrix over time.

"I don't see any benefits at all," said Tracy Butler, CEO of Acropolis Technology Group, a St Louis VAR that generates $100,000 per year on Citrix Subscription Advantage renewals. "Citrix is not [a VAR] and shouldn't be dealing direct with clients. This is a step in the wrong direction. We've always been the Citrix badge to the client, but now they're backtracking. It undermines us in our clients' eyes."

Eacobacci said there is confusion in the channel over the new policy and that Citrix has dramatically increased the percentage of Subscription Advantage renewal business going though the channel—to 65 percent from an average of 25 percent two years ago—and the goal is to get that to 75 percent in 2007.

Citrix posted $99.8 million in second-quarter 2006 revenue and $331.1 million in fiscal year 2005 from license updates globally. Citrix rolled out a Solution Advisor Renewal Tool partners must use to "proactively" engage with customers on quotes, but those renewals are processed online directly with Citrix.

Another Citrix partner said it gives Fort Lauderdale, Fla.-based Citrix a direct reach to customers.

"Apparently, having resellers lose control over how customers renew their Subscription Advantage is 'great news,' " said one partner, who requested anonymity. The partner was referring to the e-mail, sent with the subject line "Great news from Citrix," about the renewal change that the vendor sent to partners.

"I wouldn't term it that way," the partner said. "Not being able to give discounts to customers and having to wait on Citrix's internal customer support for payment is also not great news."

Eacobacci claimed it is a positive move because the new commission is set at 15 percent, while on average partners earn between eight and 10 points on renewal deals. He noted that Citrix won't require customers to get quotes through partners, but customers have always had the option of buying direct from Citrix.

"Citrix will be your sole source for Subscription Advantage and hardware warranty renewals," the company wrote in a letter sent to customers Aug. 1 that was provided to partners. "With this change, your Citrix Authorized Solution Advisor can provide you with renewal quotes, but payments will be made directly to Citrix."

Acropolis Technology's Butler maintains there's no price war going on that justifies Citrix's intervention. He predicts partners likely will be cut out of the transaction over time and could lose account control—in addition to their renewal margins—to Citrix.

"If a client needs to renew, will they think of us to handle the renewal? I hope so, but I think not. I have a good feeling where that margin will go, and I don't think it's client-focused," Butler said. "They're positioning it [like] they're leveling the playing field. Before they left it to a free-market economy and let partners price it where it makes sense for the client. Now, the client sets something up with Citrix and pays by credit card or financing."

As Citrix prepares version 4.5 of its flagship product, Presentation Server, for release this fall, the vendor is doing some discounting of its own.

In the letter to customers, Citrix also announced a promotion that entitles customers that renew, reinstate or recover any Citrix Subscription Advantage membership to buy a 25-user license for Citrix Presentation Server 4.0 (any edition) for the cost of 20 users—which represents a 20 percent discount.