Checkup Time: Channel Chiefs Examine The Financial Health Of Partners

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Vitagliano: The vast majority of our partners that I talk to are growing. But that's not necessarily the only indication of whether it's a healthy channel or not. But having watched this for a long time and watched the various cycles, I would tell you that we went through that 2008, 2009 period and it was scary. It was scary because they were not well capitalized. They couldn't get money. The payment cycles from their customers were getting extended and stretched significantly, and they were struggling to keep the business going from a cash-flow standpoint. I do not see any of that now. And a lot of that has to do with either lessons learned over those periods of time, or the fact that the economy is in a much better place than it was, and that they're able to invest and grow their business.

There is always some hesitation, however, on the part of a lot of them, and that's one of the reasons we're having these discussions relative to how do I really make a major change? In other words, how do I make a major transition and drive my business from 25 to 30 percent services to 50 to 60 percent services because that's the only way I'm going to get seven-and-a-half to eight times EBITA, which is at minimum what everybody's looking for. To Edison's [Peres] point, the good ones that differentiated themselves, where they've got some unique cloud-based offerings and some unique services, are approaching eight, nine, 10 times EBITA. With the other guys that are running around still in the old model, it's significantly less. But, overall, from my perspective I think it's very healthy, and the only discussion we're having is how we can help them continue to grow.

Bates: The vast majority of the partners I talk to are seeing strong growth. The interesting thing is though I think more than any time in my history in the channel, the spread of our partners in their evolution is the widest. So if you look at the partners and our data, we say about 13 percent are fully cloud-transformed. That's companies like Nimbo, who are Azure-focused and doubling their business, and Palmetto [Technology Group], an Office 365 partner that's off the charts with growth as well. Those guys have figured the model out, and they've got rockets on them.

Rauch: There’s a lot of money in the channel right now. There's definitely a lot of money. I'm looking at the same things these guys are looking at. Valuations are great. There's a lot of cash. There's lots of opportunity. But I agree with the comments made earlier about the lifestyle guys. They are probably not going to survive. You're not going to survive today without a demand engine.  You're not going to survive if you don't do the right type of marketing. I believe that it's our stewardship and our charter to be able to help them do that. We're not going to be able to do it for them. But we need to be able to get better use of MDF. We need to be able to get them better campaigns. We need to be able to give them better install-based data to be able to go after the market.

NEXT: Is It Tough For Partners To Gain Access To Capital?

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