Juniper Cuts Margins

The margin reduction, confirmed by Juniper as an effort to get payouts on maintenance deals in line with competitors, in many cases was as dramatic as 20 percentage points, cutting margins to 10 percent from 30 percent.

Susan Crinnian, president of CCI Security Group, Phoenix, was so angered by the move that she vowed to sever all ties to Juniper and instead resell products and maintenance from a competing vendor.

"The maintenance margins they were giving us was what kept us in the NetScreen business all this time," Crinnian said, noting that she has been a NetScreen reseller for at least four years. "At 10 percent, it's not even worth it to process a [maintenance] order."

Oli Thordarson, CEO of Alvaka Networks, Huntington Beach, Calif., agreed, likening the move to a "big bait-and-switch" that promises one thing but delivers another.

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"I hate it when I hear stuff like this," Thordarson said. "As a reseller, you make the investment to sell a product and build a revenue stream around maintenance, thinking you'll get a certain percent. After you've done all the work, to turn around and hear that they're cutting the margin in half--it's just not right."

Juniper officials firmly defended the margin reductions, noting that the changes are part of a larger effort first communicated to channel partners on Feb. 27 to minimize benefits for those selling only maintenance deals and to maximize benefits for solution providers that are adding value in other ways.

Russell Sheehan, Americas corporate channel marketing manager at Juniper, said NetScreen's standard 25 percent to 30 percent margin on maintenance deals was "generous" and totally out of line with the margins that have become standard in the industry for the same kind of deal.

At Conqwest, a Juniper reseller in Hollister, Mass., CEO Michelle Drolet tried to put the margin reductions into perspective by calling them "understandable" given the realities of the marketplace. While Drolet noted that she is not happy with the reductions, she said her firm is compensating by reselling more support contracts and more product.

"So long as you work at it, you can still bring your overall margins back up to 20 [percent] or 25 percent," she said. "If you're only selling maintenance, you shouldn't expect to earn that much anyway."