Vendor Exclusivity Doesn't Pay, VARs Say

That's the word from solution providers who say chaining their fate to a single technology provider is folly. They say the benefits of specialization in one vendor's technology are more than offset by the lack of flexibility such exclusivity yields.

The exclusivity question arose anew recently as Infor, a $2 billion provider of ERP and supply chain applications garnered via complex acquisitions, told solution providers affiliated with its latest buyout that they would have to be exclusive to Infor or leave.

The deadline, as previously reported, was Dec. 1. Several of these partners talked to CRN in advance of that date about their quandary. A couple characterized themselves as "lifestyle" solution providers, able to make good money supporting legacy accounts on older technology now owned by Infor, but also wanting to offer newer products such as SAP Business One, Microsoft Axapta or Navision.

Infor says only 17 partners were affected by this mandate, and of those, only two decided not to re-up.

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One of the affected partners weighed the move and stuck with Infor, but now has his regrets. "Every partner goes through these things, and it's gut-wrenching. On the other hand, you got to do what you got to do," the partner said.

Several other Infor partners did not return calls for comment.

Many vendors have tried to demand partner exclusivity over the years, and it hasn't worked out, partners say. Even now, technology vendors that do not require exclusivity favor partners who put more time and resources into their offerings over competitive wares.

That's a no-brainer, according to solution providers, but does it ever make sense to be true blue to only one vendor?

NEXT: VARs weigh exclusivity pros and cons. "It does if you want to narrow your options," said Richard Warren, CTO of Channel Blade Technologies, a Virginia Beach, Va.-based e-commerce specialist that works with Sun Microsystems and EMC as its major tech providers, but also with Oracle and others.

Exclusivity "reduces the collateral value that comes with knowing how to do something more than one way, including the integration capabilities, migration capabilities. You become pigeonholed as only a provider of 'this,' and even if you do a great job of 'that,' you're viewed with disdain by the vendor because that's all you can do," Warren said. A lot of Infor's business remains on the venerable IBM iSeries (AS/400) platform. Infor CEO Jim Schaper said the company, which fields what some call a bewildering array of offerings, is building a service-oriented architecture framework to ensure interoperability and continues to invest in all of its products.

"My pre-sales guy did a count, and we think [Infor has] 64 ERP products now," said Jim Ethell, president of Level Eight Systems, an Irvine, Calif., ERP solution provider.

Obviously, Schaper does not agree that exclusivity is bad for partners. Atlanta-based Infor now fields products from Baan, Datastream, SSA Global, Extensity, Systems Union, MAPICS and Epiphany and claims to be the third-largest business applications player after Oracle and SAP.

Schaper argues that since Infor treats its partners as its own salespeople, it cannot afford to share insider information with those who are not fully committed.

Infor solution providers attend sales meetings and participate fully in strategy sessions, sales incentives and trips. Infor, in return, protects their businesses, he says.

"We don't historically sign multiple partners selling the same product in the same geography. I've had a channel and direct [sales] background and I understand the theory of large numbers. Resellers don't make any money if they don't have some sort of exclusivity in their region," Schaper told CRN in a recent interview.

Generally, sales into companies with less than $75 million in annual revenue go through partners. Above that line the sale tends to be direct, although there are exceptions, he said.

Schaper also said existing ERP or supply chain management partners have good upsell and cross-sell opportunities with Infor's growing line of product extensions into asset management and CRM.

"Vendors used to require a lot of exclusivity in the late '90s and VARs pitched a fit so they really backed off," said Jonathan Edmett, vice president of Solutions Consulting Group, San Diego. He cited Epicor as an example.

David Roper, vice president of Level Eight, said a vendor's approach to partnering depends on its DNA. "If [the vendor] grew out of open systems, out of the Windows or Unix arena, there's flexibility and not a lot of lock-in. If it comes out of the old minicomputer or midrange world, it tends to be more closed off," in terms of partner strategies, he noted.

NEXT: Vendor M&As turn exclusivity upside down. Edmett himself straddles the exclusivity line: Solutions Consulting Group offers several Microsoft Dynamics applications, especially Great Plains (or Dynamics GP) and CRM. This, he said, lets him offer choices to customers.

"I would traditionally answer 'no' to whether exclusivity is a good idea, but on the flip side as a Microsoft reseller, they have four ERP packages with three versions of each. You might argue that gives us coverage," he noted. "[But] there's a catch-22. It can be bad business to rep just one product. It narrows your scope."

Level Eight has survived the exclusivity wars, starting out with Point.Man, a product from Pivot Point, which was bought by MAPICS. MAPICS was, in turn, bought by Infor. Level Eight also used to work with SyteLine, another MAPICS product. The solution provider stuck with those products even after it became clear that MAPICS was not committed to them.

"When MAPICS bought Pivot Point, it caused huge problems for us. MAPICS didn't deliver on promises to the product and then killed it off. We were sitting there with more expertise on the product than MAPICS had, but no product to sell," Level Eight's Ethell said. By the time Infor entered the picture, it was pretty clear that Level Eight had to chart a new course.

In theory, Ethell believes it can make sense to be exclusive if there is a good and stable customer base and if the product in question remains a priority for the vendor. In a world of mergers and acquisitions running amok, however, many of these products get lost in the shuffle.

Level Eight now represents SAP Business One, IFS North America and Visibility.

Mitchell Cannady, president of Spinnaker Networks, Irvine, said most vendors know by now that stringent partner exclusive requirements do not work.

"Every company that I've ever known that's gone exclusive has regretted it," he noted. "Pivotal went that way, Siebel did, but it doesn't work. From a vendor perspective, it's the worst thing you can do because it creates animosity."

Spinnaker used to be exclusive with SalesLogix, now part of Sage Software, but not because of any vendor-induced requirement. "We were small and didn't have the resources to be product-agnostic," Cannady noted.

Now Spinnaker, which has 17 employees, does the majority of its business in the Microsoft camp, but it continues a healthy SalesLogix business as well. Spinnaker also offers an array of add-ins for both SalesLogix and Microsoft CRM, things like Scribe and C360, which lets them add more value to the solution and boost margins for itself.

Ken Farmer, CRM practice manager at Collins Computing, Mission Viejo, Calif., does a lot of work with Microsoft products, but said it is "crazy" to go exclusive.

"We have very deep relationships with the vendors we choose, Microsoft included, but the challenge is we're not here for the vendor, we're here for the customer, and we have to address those customer needs in a very rapid way," Farmer said. "We don't believe in partnering with everybody; we partner where it makes sense and focus on what it takes to get the job done."

Collins Computing, like Spinnaker and other partners, looks for good complementary technologies to go with its base product offerings. For example, it just signed a partnership pact with Neocase Software, which builds higher-level call center functionality onto Microsoft CRM solutions.

"We have good personal relationships with Neocase execs, and we liked their product and where they were going," Farmer said. "It was a good fit for us strategically and provides our customers with better solutions."