Palo Alto Networks Formalizes Distribution Program, Mulls New Rebate Incentives For Partners

Palo Alto Networks is formalizing a distribution program and taking a hard look at back-end rebate opportunities to reward consistent performance from partners, according to Ron Myers, vice president of worldwide channel sales.

The Santa Clara, Calif., company held a meeting with its top 10 worldwide distributors in April to unveil a formalized distribution strategy and solicit better ways to provide support. Palo Alto Networks' NextWave Partners Program doesn't have a formal mechanism for distributors to provide specific incentives, training and product marketing initiatives, said Myers.

Myers, a 15-year channel veteran, was hired in September following a four-year run as senior vice president of global channels for videoconferencing vendor Polycom. His assessment of Palo Alto Networks' distribution strategy was that it was a "very fragmented approach to serving partners."

"We need to provide the right incentives that will drive [distributors'] behavior with us," Myers told CRN in a recent interview. "We heard [in the meeting] a lot around training and a lot around go-to-market, especially around products."

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Palo Alto partners, meanwhile, tell CRN they are doubling their business with the network security appliance maker, despite strong competition from Check Point Software Technologies, Dell SonicWall and Fortinet. Palo Alto Networks' channel marketing and partner sales and support efforts have been very well executed, said J.D. Butt, vice president of solutions at Chicago-based solution provider, Nexum. The marketing has been disruptive and helped foster engagement with customers, Butt said.

"I didn't think five years ago that there would be something exciting to talk about with firewalls," he said. "Their messaging has been very consistent and clear as to how to sell the product."

In an interview last month at the Palo Alto Networks Ignite 2014 user conference, Myers said he is adjusting the company's channel program, potentially adding rebate levers on the back end to reward achievement. The company has been successful in building out its 100 percent channel strategy, with a solid deal registration program that results in incredibly loyal partners, Myers said, but it is time to provide more training and ramp up program compliance efforts.

"We don't have or offer any back-end incentives, which typically become routine margin opportunity for partners and we are evaluating that," Myers said.

The goal is to get the company more exposure on partner executive teams, Myers said. There are different ways to drive performance and achieve goals, he said, adding that his team is considering a reward based on achievement. Rewards could be volume-driven from a rebate perspective, a certain product mix, attach rates or services competency.

"Rebates provide a way to provide that top-line profitability," Myers said. "When they see that net margin it translates into pushing stronger programs from the top down to their sales teams."

NEXT: Palo Alto Networks' Services Push

The company also is evaluating ways to bolster the services competency of its partners by introducing rewards for becoming an Authorized Service Center (ASC) provider.

"We are in a typical state right now where there's still too much frontline support that comes into us, and that is a cost center for us," Myers said. "We do have additional discounts for partners that become ASC-authorized, but we're evaluating whether we're making it compelling enough to make them become profoundly expert in it."

Partners want to work with a company that fully embraces the channel, said Andrew Warren, vice president of security solutions at distributor Westcon Group, Tarrytown, N.Y. Palo Alto Networks is adding the right mix of technology alliances and has remained committed to its channel approach, he said.

"They are a channel-centric company and have the leading technology, and that is a big part of what we look at," Warren said. "If we're going to be marketing a manufacturer to our security integrator base, we want to make sure they are a channel company and are committed to the channel."

Palo Alto Networks has been outpacing competitors in the firewall market, said Adam Mansour, chief technology officer at Spyders, a Toronto-based network and information security consultancy. Spyders became a Palo Alto Networks partner in 2010 and the company is currently its only firewall vendor partner.

"It's one of the strongest partnerships we've had," Mansour said. "We've found great value with them and have been pleased with their efforts."