Channel Chiefs: We're Changing Our MDF Approach

Solution providers are calling for changes in the way their vendor partners structure MDF. From extending the timeline to prove ROI from a quarter to six months or more, to rolling in business development and technical certification help, solution providers are asking for some serious changes, and vendors are starting to listen. This month, at a roundtable held at 2015 XChange Solution Provider in Dallas, channel chiefs discussed how they are changing their MDF programs to better fit partner needs in a changing marketplace.

The roundtable featured Frank Vitagliano, Dell vice president, Global Partner Strategy and Programs; Frank Rauch, VMware vice president, Americas Partner Organization; Craig West, NetSuite vice president of channel sales; Mike Valentine, Sophos senior vice president, worldwide sales; and Richard Vaughn, Toshiba America Information Systems director of channel sales, business solutions division.

Following are excerpts of the roundtable discussion.

[Related: Channel Chiefs: Our Biggest MDF Investments]

CRN: Many vendors fund MDF programs on a quarterly basis, but many partners are asking for six to nine months to prove value. Do you see that? Are you changing your programs?

Richard Vaughn: Absolutely. We agree 100 percent. We've kind of abandoned the national-scope-type programs. We really have got custom programs now, where our sales teams are sitting down with the partners to come up with mutually agreed upon goals. A lot more of it is being paid on performance, and we're trying to eliminate a lot of the reporting that goes on. That's always been problematic in the past. We're simply paying off of whether the partner buys from us directly, or if the partner buys through distribution and using that reporting as that mechanism.

But, we're definitely seeing vast changes in what the needs are. Internally at Toshiba we talk about consistency in programs. It can't be a quarter any longer. It has to be an annualized-type program.

Mike Valentine: We've radically changed the way the MDF is done. We actually look at it from two different perspectives. There's a level that we feel that we have to continue to spend the old school way. But we ... took about almost 40 percent of last year's, and it's going to be probably 60 percent of this year's MDF budget, and it's an investment where the expectations are different. The amount of work, and the plan that has to come to me is different. I don't want an order in 90 days. But ... ROI has to be clear. And, you know what? It's open. It could be heads, it could be funds just to do general training, anything.

But if you do this, we do this. And we'll check in in nine months. And if it does [cause sales growth], I'll double down on it. So it's almost like an investment, why don't we act a little like a bank? I'll take a little bit of a risk on you right now. And if you can give me that rate of return, great. So what we're seeing is really a lot of creativity, and really good return on our money.

Frank Vitagliano: In our case, we're adding a pretty significant amount of investment into the channel this year. We added $125 million into the channel in a bunch of different areas. Now, at some point you can turn the dials a little bit if you've got a couple of points on an ongoing basis on a certain set of products, maybe it goes from two to one and three quarters. And that quarter point that you just took out just generated $20 [million], $30 million that you can then take and put a program in place to do some of the other things that we're talking about.

One of the things that I think is a big risk [as an investment] ... is lack of skills. Is there something we can do to go help that? That to me would be an idea of taking some dollars and doing something creative to ultimately make a difference. Now, how I measure my return on that? I don't know.

Frank Rauch: I think your point is the right point. We've tried to get away from the quarter-by-quarter stuff. So we have six-month plans now, we have annual plans ... clearly depicting the year out, understanding what exactly that investment is, what it's going to be, what we're going to get for that investment. But, I think the biggest thing we're doing right now is we're not jumping left and right ... so, in other words, it's not program du jour.

We told the channel eight months, nine months ago, that we're going to have power plays. We told them we're going to announce every single half. We're going to have enablement, we're going to have collateral, we're going to have margin accelerators. We're going to have end user promo. That's going to give development funds, to be able to fund demand generation.

Vitagliano: You have to do that. Because at the end of the day, if you don't have a level of consistency ... because if you really are developing a strategic relationship, if we're a line card, it's a different conversation. Right? Yeah, I'll sell you when somebody asks for it, but if it's a strategic relationship where people are leading with your product, then you're developing a business plan with them. They're building their business on the assumption that what you have in place will stay in place.

So for the partners, or the vendors that are out there jerking those programs around quarter by quarter, moving the dials too dramatically, you're impacting your solution providers' business. You can't do that. You, as a vendor, you won't survive. You absolutely have to have that level of consistency where the partner understands where you're going, what you're willing to put into it, and then signal when you're going to make a shift, or when you're going to make a change, give them enough time so that they know where you're going, and they can make some tweaks and tunes. That's a partnership.

This article originally appeared as an exclusive on the CRN Tech News App for iOS and Windows 8.