McAfee's New Channel Chief: Man With A Plan

David Roberts, McAfee's recently appointed senior vice president of North American channels, has a plan to quickly transform the security vendor into a more channel-friendly sales organization. In this candid, exclusive interview with CRN Editor in Chief Michael Vizard and Senior Editor Dan Neel, Roberts spells out some of the details of his plan.

CRN: One place to start would be the ASP/MSP model, but half the vendors seem to want to do it themselves and the other half want to do it through the channels. We're kind of curious about where McAfee's going to fall in that.

Roberts: Well, we're running par. You know, six months ago we were probably trying to do some sales. We ran a pilot program kind of by accident, down in Australia where we had one of our guys take our product and set up a model where the security reports would be delivered to the VAR vs. to the end user. And he changed the business model, and he started targeting small VARs going to small companies. And in some cases the VARs were charging a fee for the security port delivered monthly, just like you get your checking account statement or your Bank of America investment statement, right? The VAR would go in and talk to the company about what the environment was like, how many attacks they had, and the response from the customers was just pretty overwhelming. Very positive. Because if you're a small-business owner, first of all if you get the report you don't have time to read it. And so we talked to Ingram a couple of weeks ago, and to about 56 companies that came in and sat down with us and about that type of a business model. And the feedback that we've gotten has been just pretty overwhelming. They feel like it enhances their relationship with their customer, there's a monthly recurring revenue stream, and so that's the model that we're going to move toward in North America as well.

We do think some people will buy direct from us, but from a managed services standpoint, we see that type of business model just being a big win for the VARs and for the end user.

CRN: So you'll have both? You'll sell your MSP service to end customers and through VARs?

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Roberts: Yes, but we're really targeted at that VAR community and how we make it work there.

CRN: What about assisting with the capital expenditure a smaller VAR has to come up with to get the MSP play off the ground?

Roberts: You know, I'm not close enough to what they're doing in that space to comment on it.

CRN: How's the competition?

Roberts: When I look at Symantec there's a couple of things that bother me from a competitive standpoint. You know, first of all they've got a much broader partner set, right? They just hit a lot more VARs and a lot more resellers. They've been at it longer. The channel means something to them. And, they've got this open distribution model where anybody can sell anything. So when I look at my product up against Symantec and CDW, that bothers me. When I look at just their reach into the VAR community, that bothers me. So one thing we're doing starting Oct. 1 is we put a key metric in the business beyond a revenue goal for SMB and enterprise, and it revolves around a depth-and-breadth number for VARs. When we took the revenue out from the national accounts, and you looked at what revenue was left over, it was very concerning to me that we just didn't have a broad enough set of partners that were selling our products. So, you know, you had business development goals and those are nice things, right? We can go out and we can sign people up into the partner program or we can do those business development things to fight Symantec. But at the end of the day you've got to have something to measure that against. So on our management team we've put in a depth-and-breadth goal to quadruple, if you will, the amount of VARs that represent 65 percent of our revenues between now and the end of 2005. So we think that that metric alone will help us within that space.

CRN: Are you converting VARs from Symantec?

Roberts: Well, there's been some fits and starts. McAfee's done a poor job in the channel and there's been a couple of things that have driven that. One, it's just been an inconsistent sales model. Right? But we've been able to say, 'We have a channel, here we are, blah, blah, blah.' The other thing that's been a big impact is executive turnover. And there was a lot of momentum that took place with my predecessor [Donna Troy] and then when she left the company there were a lot of ideas there and the company was really in limbo for several months because people quit implementing what they were doing.

So I look at the 5,000 people that are over there in the Symantec and the Cisco courts and that bothers me. But it's not like I've got a lot of marketing dollars put behind a competitive partner recruiting program. I think that there's a lot of green field out there certainly, you know, through 2005, where we can go in and just recruit guys to get on our staff, to have an alternative to add to their portfolio.

CRN: Is There any opportunity for you guys in terms of how Cisco and Symantec handle their certification strategies, their costs associated with that, the cost that's put back on the channel? Are you guys doing anything particularly for that kind of thing?

Roberts: Well, we invested several million dollars in online training over the last six months. We're in 11 languages and focused on how do [we] get a McAfee product fluency out in the marketplace. And we've got a set of requirements. Now some of the feedback that we're getting is that it's great to learn about the McAfee products, but if I'm already a Symantec- or a Cisco-certified security VAR, I've already taken the Security 101 test, right? So what I really need to do is I need to get to fluency on your product set and not spend my engineer's time away from that.

So we're looking at that really hard and in the first quarter of next year as we launch this partner program, we're paying particular attention to how we [can] opt people out, if you will, of the Security 101 class and get them on our stuff.

The other thing that we've done is we've adjusted field sales resources into the channel group here just in the past week to make sure that we have enough feet on the street where we can go in and we can get to the super VARs within the Ingram network. And we've gone out there and we've shaken hands, we've knocked on doors. There's just a big group of companies that we haven't gotten to. As revenue begins to get more and more focused on the renewal business, the same thing happened to [Symantec's and Cisco's] channel. Right? It was just the channel players that were focused on that renewal business, so it became very, very unhealthy. So as we go out there to expand that, we're super-sensitive to what they're saying around certifications. With Symantec out there with a complete vendor-neutral certification—now that's, in my mind, that's a clear attempt to go after the Cisco partner asset. We're paying particularly close attention to that. We're not going to not be with someone because our certifications and stuff is too expensive.

CRN: So these new feet on the street that you talk about, are they going into enterprise accounts specifically? Or are they aiming a little lower in the SMB markets?

Roberts: These feet on the street are really targeted at the VAR community. Look, I reorganized this past week. The company didn't have a lot of fluency around channels as a whole. The product groups, the operations team, the finance team, the marketing teams, it was all really built around the direct-sales model. So it's one thing to come out with a channel program, but at least from what I can tell over the last couple of years, they had a channel executive over here and then they had a sales executive. One dynamic that changed a lot is now I report to the sales executive. So I'm on the team with the sales guys, and that has really changed the dynamic of the company.

CRN: How have you changed the compensation strategy for the direct-sales guys to incent them to get the proper behavior in the channels?

Roberts: Well, we've been working on that a lot. We thought about things like just a penalty if it went direct vs. going through the channel. We thought about incentives. If it went through the channel vs. if it went direct. And then we got into discussions with the direct guys, who said, 'If you pay us an incentive, essentially the quota will just go up.' So we looked at all that stuff, and things like, how do we get our field sales guys to give us capacity in the channel and go recruit VARs? Because that's really what we need, right? We need the entire direct field-sales force thinking about the partner as they go into the process. So in Q4 we're just paying a big spif. We've got a very aggressive program that we're rolling out to our field-sales force that says, 'You know, if you go help us sign up this location in Atlanta, take time out of your week to go do that, then, you know, we'll pay you a spiff for enrollment.'

CRN: So you expect to see real change in the channel at a certain point, and in the very near term?

Roberts: Absolutely. We've set up a channel team that's focused on SMB. We've broken the distribution groups out into their own groups and we've moved the functional teams all into one group so we can measure the business based on head count, rebates, spifs. And then we've moved over 100 inside salespeople into a group that's focused on going out there doing partner recruiting and selling our program into the partners in addition to selling into the SMB space.

CRN: So would it be fair to say the internal changes are taking place in McAfee now, and come January the channel will get the program details?

Roberts: We're rolling out that channel program on Oct. 25. And we have a lot of infrastructure that's going online that'll greatly enhance the VAR's ability to do business with us. One of the issues is we've just been too expensive to do business with. It's been difficult. Just a simple process of looking up a grant ID number or the process of a VAR being able to look up his or her renewals with our customers, it's just been a big issue. And so one of the feedbacks that we got from the reseller community was, 'We need to see our renewals with our customers before our customers see them.' And now you have the ability to do that. So if you're a local VAR in Dallas, Texas, you can go in, you can search on the new Web site, by month, or by your name. You can see where your renewals are up against that. You can be proactive for one of those customers.

That has been a huge issue for us. One big problem that McAfee has had is just poor operations. And when I look at the simple things that you can do, it's amazing. For example, we've had a policy of doing drop-ship for inventory and we haven't carried inventory in the channel. So if you're the CDW rep and you're sitting at your terminal, you call up the Symantec product and call up the Cisco product, it all ships in 24 hours. You come to the McAfee product and it ships in three weeks. Even though we can ship in 24 hours because you don't have inventory within the CDW system, there's a big impact. Other things that we've done that have just been not channel-friendly is our pricing schemes, where we price separately for software and we price separately for hardware. So when you think about that model or you think about people especially in those volume places getting out, it's just been difficult and confusing to just understand what's the blended margin on your products? So we're working hard to fix those types of things.

CRN: The channel will be glad to hear that.

Roberts: When you talk about shooting yourself in the foot, the big issue for us is how do we grow in the SMB space? And I look at CompUSA's business and they're sitting there with 22 percent of their revenue in their SMB space. They've defined SMB as a hundred nodes or below within a 10-mile radius of the store and they've got 195 stores and 875 sales reps, and no one from McAfee had walked across the aisle to talk to them.

Finally, our rep literally walked across the aisle and introduced herself and we were featured on the front page of their flyer that went out last month. I guess it goes out to about 65,000 customers. And that was literally somebody just walking across the aisle. So we looked at where are we just missing segments and where can we just do better. And those are the things we've been focused on.

CRN: There's this recent class of intrusion-protection products, and then there's the antivirus business. How do you bring those together and leverage them with each other, because it feels very much like the antivirus client business is one segment of the security space, and then the intrusion-protection firewall stuff is a higher level of guys that are more specialists.

Roberts: We agree with that completely. In our products we had some intrusion protection within the client. But what we see in the marketplace, if you take our intrusion-protection stuff and put it on top of that client, unless you've done a really good job talking to the VAR and talking to the integrator and talking to the reseller about what that means to the customer, you could end up selling a bunch of stuff to the customer that they really don't need. So we're working on what's the value proposition and the right solution to be selling into that space.

CRN: You mentioned some other possible changes in distribution. What are they?

Roberts: So we've got this closed distribution model. When we go out and you talk to the VARs about this closed distribution model compared to what my competition's doing, they tell me, "Don't open this thing up to CDW." We've got a lot of people that really seem to appreciate that model and we're getting a lot of bounce from that. Our issue is how do I scale it and get enough velocity quickly? But our stuff—our boxes at the high end will bring down a network if you don't know what you're doing. Right? We don't have the support capability or the services capability to be in that space. So we're very dependent upon that value-added network.

CRN: But you're open around the antivirus products and closed around the IDS and higher end?

Roberts: That's exactly where we are today. We've had the high-end stuff going through MOCA and through GE Access. Now we also have got some great relationships with the TechSelect group and we're developing the relationships with the VTN group and we're exploring the possibility of how do we go to Tech Data and Ingram and take the high-end stuff and open it up to those select people. Still maintain a closed distribution model, take advantage of a broader set of dealers.

CRN: And even the specialty distributors.

Roberts: Absolutely. I would just articulate that as a strategy, it's one other reason why I might want to line up with you vs. Symantec, which is, you know, is available anywhere and everywhere. I just don't think it's viable to continue to not have that product available to take to Tech Data or into Ingram.

CRN: Donna Troy told us earlier this year that customer satisfaction surveys wouldn't take place until 2005. Have they been pushed further out?

Roberts: We just did customer satisfaction surveys in October. And honestly, I can't go reinvent the wheel, and I'm not big enough to go out there and do a Microsoft-sized partner survey. So when we look at what we need to do to be successful, we really are going to try to leverage relationships to make things work. The only thing I know to do is to tie my personal compensation to that, my managers to that, and just kind of close our eyes and take one for the Gipper. I mean that's what it's going to be like. You know, the first go-round. But until you get some credibility built up there, we think that that's real important.

But we're out there. We're out there doing that and we're coming from far back and there's really the inconsistent piece, the executive turnover, lack of credibility, you know? I've got to earn the right to be with the guys to say I'm here to stay. I mean because if you're a VAR and you've heard this from one guy and you've heard it from the next guy and then you haven't seen the measurements and that place in the field, why are you going to go invest resources in your business to make it happen?

We've been out getting feedback from guys and they're saying our prices are inconsistent. Some of that's being driven by a direct-sales force, quite frankly, where they'll go out and quote a deal and then it passes. So we're working on those problems. But we're focused on the profitability. When we look at what resources do we have available to help them in their business, to cut the cost of doing business with us and show what we have available, show them our organization, where can they get support? And we're working hard on doing those types of things.

CRN: What are your thoughts on maybe an antivirus product with some kind of channel program for the white-box builder community, thereby end-running Symantec in 35 percent of the market?

Roberts: I don't have our OEM business today. That's run by Todd Gephardt. We do have a white-box program that's in Canada, and I'd have to get with Todd to get you some more information on that.

CRN: That's another opportunity to walk across the aisle and change your game.

Roberts: Yeah, we see that as being a big opportunity.

CRN: More acquisitions are still an option for you guys?

Roberts: Yeah. I'm sure it is. I'm not the acquisition guy, but George and Gene and those guys look at things daily. We're excited about the Foundstone acquisition and we're working hard to get that integrated, get those sales teams integrated. But [Foundstone's sales force] has been a direct-sales force. There's been about 20 guys in that so we looked at compensation issues for the next year with those guys. We're going to pay them on gross and not net so we avoid all channel conflict with those guys. We hope to have MOCA and GE Access distributing that product by the end of the year.

CRN: Are you expecting changes in licensing?

Roberts: We hope to have everything rolled out in 1Q. We're looking at all of that right now. We've had the software model and this hardware model and that's been difficult to do. So we're looking at all of those types of things. You know, on the low end of the spectrum we haven't had a five-note multipack available in the right channels. And so we're working on that spectrum. So we're looking at all of that right now within our overall re-engineering of the business of our core order process to make that work. And we won't see significant changes until the first quarter, maybe second quarter of next year.

The things that I've seen from the analysis of the business is there's been a lot of focus on MSRP and where are you competitive. But there hasn't been enough focus on what's the channel margin. And what is it to the distributor, what is it to the VAR? What's going to make that work? So we're spending a lot of time on street pricing, what's going on, getting competitive feedback to make sure that we're in alignment from a channel standpoint. Everything from a proxy standpoint has been really driven off the direct-sales model. And that'll kill you. And we probably had an eight-point disadvantage in some places in our business because we hadn't gotten the channel piece straight. So we've been unraveling those problems here over the last few weeks.

CRN: McAfee earlier this year re-tiered the partner scheme. How's that going? Because what we see with the tiered model is the first and second tiers wind up stepping on each other. When there are three tiers a lot more of this happens.

Roberts: Well, that's been an impact on the business. That [partner scheme] was rolled out in May and there was a lot of anticipation on that. And from my point of view, that was something that shouldn't have gone ahead of the partner program. And the company was literally waiting on the partner program to launch before the pricing model was launched. And what they did was it caused this huge vacuum for people to go out and have a sell-in model, or in the interim period to go out and recruit people. And that's been an impact. So about a month ago we went ahead and we implemented that and that's where you're seeing this huge flood of partner contracts come in because we got people out there saying here's our model and do you want to sign up with that. I hear what you're saying about tier one and tier two and even tier three. I look at the sophistication of some of those volume players and their ability to take rebates all those different kinds of things that they do to affect pricing.

So, we just started it and the only thing I can tell you is that we're going to look at it and monitor it and get feedback from people and make adjustments as needed.

CRN: Well, the other guys have it, but their ability to police it is different. We sometimes compare it to looking at a cruise ship where there are first-class passengers and second-class passengers and third-class passengers, but when your boat leaves port, all the second-class passengers are up in the first-class area and no one's actually policing anything so it winds up being this out-of-control party boat where the guy who paid the least has the same amount of benefit as the guy who's paying the most.

Roberts: I think that's a fair comment. One nice thing about it is, we are in the infancy of this thing, and we hope to develop good strong relationships through partner advisory councils and in conjunction with our distributors to make sure that we've got it right. We desperately want that high-end security VAR to be able to invest on our product and be successful and profitable on our product because we've got to have the services capacity. And on the transactional side of the business, if we haven't got that right then we're going to impact our ability to do that and they'll default to the market leader. So, we're going to work hard to make that work.

CRN: Talk to us about the changes in the partner Web site.

Roberts: The Web site. Well, from kind of the outside looking in, it was a disaster. I guess there were about 10 different systems that a partner had to go to in order to do business with us. You probably had to have 10 different logon IDs.

I was at McAfee for a couple of days and I said, 'Just explain to me what the ecosystem's like for a partner trying to communicate with McAfee.' And they sat down with me and it was just a very painful process. So the new partner portal that'll launch here next week is a great improvement, and we've got a couple more phases to go that we will have completed by third quarter of 2005. And we'll get better. But for a partner to log in to the Web site and go out and have a consistent place to get collateral that's co-branded, to understand where to get training resources, to understand where to find renewal information about their customers—not our customers, if you will. All of that's available now and that wasn't available until then.

But for right now, it scares me that if I don't have a broad enough distribution, I'll miss out on some piece because you never want to be in a position where you don't let somebody sell your product. And so you've got to go figure that out to make that work That's the next phase here as we move into 2005. We've got a lot of work to do between now and the end of the year.