Zyxel Triples Partner Margins Around New Product Line, Launches 'Affordable' Licensing Models

Networking vendor Zyxel Communications has been busy this year bolstering its channel programs, licensing models and product margin opportunity -- all aimed at increasing partner profitability.

In 2016, Zyxel tripled the amount of margins offered to partners through a new product line, doubled its channel sales staff and revamped its partner program, said Matthew Dargis, vice president of channel sales for North America. The company, based in Taiwan with North American headquarters in Anaheim, Calif., also launched a reseller Trade-In program and created new "affordable" licensing models for partners targeting the SMB market, he said.

"I came into a situation here that had a very unorganized channel and we weren't putting our partners first," said Dargis, who joined Zyxel in January. "We had a 1,000-plus partner base that were loyal, but we weren’t investing in them. … We re-engineered from pricing to partner programs to our sales organization to marketing and built what we feel is now a partner-centric organization."

[Related: CRN Exclusive: HPE's Aruba Networks Is Building A Networking Product Line For SMBs Aimed At Competing With Cisco]

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The launch of an up-front "affordable" licensing model for partners, dubbed Zyxel UFL, was one of 2016's highlights, according to Dargis. He said the current licensing model for resellers in the SMB market is "extremely painful for small businesses" and channel partners are forced to "eat those annual fees."

"Any partner you talk to is very frustrated with the enterprise guys' licensing … it's unaffordable," said Dargis.

Zyxel UFL doesn't have hidden annual fees, includes free support and helps ease the burden of CapEx spending by only having a small up-front cost that is built into the product price, according to Dargis.

"It's just a very small amount up front, but it's built into the product cost and is for a pre-determined period of time," he said. "For a very small amount of money, you write the check and you're done. That solves our partners' cash-flow problems and that solves our end-user customers’ budget problems. … We're disruptive and [I believe] the first to do that and we're certainly the first to bring this to the SMB."

Mark Wentzlaff, president of Resort Internet, a Frisco, Colo.-based solution provider and Zyxel partner, said the new licensing model is going to save his company time and money.

"You always have the up-front cost in buying the product, but then you have the licensing and ongoing support. I feel a lot of companies take advantage of you in support contracts and you end up paying multiple times the price of the product just through the support obligation – that's not going to be the case here," said Wentzlaff.

The revamped channel focus comes as Zyxel launched a cloud-based network infrastructure product line, dubbed Nebula, targeting the SMB market, which Dargis said will triple channel partner margins.

The new Nebula product line, launched in November, includes high-performance wireless access points, analytics features, security gateways and managed Ethernet switches that allow customers to deploy multiple networks that can be centrally managed via a single dashboard.

"We've tripled partner margin on this product line," said Dargis. "From a margin percentage perspective, we increased it 300 percent. … So if you do business with Zyxel today, you may make 'X' percent. On Nebula and future projects starting Nov. 1, we've added a new component to our partner program and it is triple the existing margins for partners."

The new Trade-In program, meanwhile, provides partners with "substantial" savings on Zyxel products when trading in competitors' products to upgrade existing network infrastructure with Zyxel offerings, he said. The savings come in the areas of managed switches, security gateways, VPN firewalls and wireless access points.

Resort Internet’s Wentzlaff said Zyxel’s new channel initiatives over the past year have been "extremely encouraging."

"They're stepping up their [partner support] and are having people come in and actually talking to us," said Wentzlaff. "Too often corporations drink their own Kool-Aid and start looking at themselves through their own examination, and there can be a drift that can take place with their channel partners. In Zyxel's case, it's the exact opposite."