A Turnaround In the Making

Money and innovation help vendors improve satisfaction

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If IT vendor-partner programs left you feeling a bit dissatisfied in past years, chances are you're feeling more satisfied this year. The grades VARs and solution providers gave to key vendors in the 2005 VARBusiness Annual Report Card (ARC) improved this year, reversing a five-year slide.

"From Microsoft to Symantec to elsewhere, vendors are adopting best practices and competitive policies, which is leading to our improved satisfaction [rating]," says Sean Burke, president of GovPlace (No. 474 in the 2005 VARBusiness 500), one of the nation's more influential integrators focused on the government market.

For this ARC, VARBusiness polled 5,400 solution providers across 19 different product categories. More than 80 different vendor-partner programs were measured against 15 different criteria, such as Product Quality/Reliability; Presales and Postsales Support; Technical Innovation; Sales Partnering; Ease of Doing Business; and Loyalty. It's the largest partner-satisfaction study of its kind in the IT industry.

In this special edition of VARBusiness, part of the magazine's Business Intelligence series, you will find articles that analyze the results of this year's study and a complete ranking of all companies participating in the 2005 ARC. In "5 Winning Ways," on page 38, read about the vendor initiatives that capture and retain partner loyalty. Then turn to "10 Bright Ideas," on page 44 for a description of the 10 most important trends shaping the channel today. VARBusiness also presents an assessment of why some vendors come up short at report card time in "Falling Down," on page 50.

In addition, VARBusiness has amassed an analysis of all 19 measured product categories, zeroing in on the key trends and market conditions that are shaping the areas of technology that most solution providers find appealing--everything from Security Management Software to Advanced Desktops & Workstations to Network Storage.

VARBusiness refined several categories this year, improving descriptions and sharpening criteria. We also added a new category: Business Software. The net-net of these changes is the single largest and most comprehensive edition of the VARBusiness ARC study ever completed. For additional insights and information, log onto varbusiness.com, which hosts exclusive content on vendor-partner programs.

What's interesting to note from this year's study is the level of competition in each category. Virtually none of the industry's market leaders took home top honors in the categories in which they dominate. (Intel was the exception, but it had only one other competitor to beat out--AMD.) Microsoft, for example, lost to Novell in Server Operating Systems. Likewise, Cisco Systems came up short against Hewlett-Packard's ProCurve in the Networking Infrastructure/Data Networking category.

The same is true for Oracle, Dell, HP and EMC; each lost to another company in the categories in which they dominate--Data Management Software, Entry-Level Servers, Network Color Laser Printers and Network Storage.

One explanation: The nation's solution providers simply have higher expectations for market leaders than they do vendors whose revenue they appreciate, but do not necessarily depend on. For upstart vendors, that means unprecedented opportunity. Clearly, VARs and solution providers are responding to the opportunity to sell and represent alternative vendors in categories where entrenched leaders were thought to be untouchable.

That's not to say the largest IT vendors came up short in the ARC. Several major IT companies took home honors in multiple categories, including Microsoft, Cisco and IBM. Their efforts to curry favor with partners in key emerging-technology categories are paying off and winning allies. Cisco, for example, has found that the uplifts it pays VARs and systems integrators for selling its advanced technologies are valuable incentives and is ponying up even more investment dollars for driving sales of security, VoIP and advanced-switching products next year.

"While we're disappointed at our loss in data networking, we are very pleased that the market is responding to how serious and committed we are to advanced technology categories," says Chuck Robbins, Cisco's vice president of U.S. channels.

From a sheer standpoint of excellence, no vendor can top Samsung. As it has done in each of the two previous years, the Korean technology giant achieved the single highest ARC score this year, sweeping top honors in the Display Technology category.

In addition to the product categories, Steve Dallman of Intel was named Channel Executive of the Year by the CMP Channel Group, which represents not only VARBusiness, but CRN, The Institute for Partner Education & Development (IPED) and the XChange Conference Group. (In his own words, Dallman provides an assessment of the State of the Channel in "My View: Where Things Stand")

Vendors are generally doing better when it comes to partner satisfaction. No wonder: IT vendors are spending more on selling through and collaborating with partners than ever before. Microsoft alone upped its partner-related spending in fiscal 2005 by $200 million to $1.7 billion and expects to spend as much as $300 million more in fiscal 2006, bringing its annual spending on partner activities and initiatives to an astounding $2 billion. That's more money than what all but a dozen U.S.-based ISVs rack up in revenue each year.

Not only are IT vendors investing more to help make partners more successful, but they're engaging more than before. ViewSonic, for instance, has increased its partner base by 20 percent in one year. SAP, likewise, has added several hundred partners to its base of allies.

What's driving the change to add partners after years of winnowing the number of solution providers on their rosters is new, corporatewide initiatives designed to increase share in key verticals and improve influence among midsize customers. This simply means vendors must recruit additional partners to go after all of the opportunities.

"We want more business from SMBs, but to get it means we need to have tighter relationships with the companies that cater to these customers, which are the local VARs, IT consultants and resellers," says Xerox CEO Ann Mulcahy. Although known principally as a top supplier to the nation's largest enterprise customers, Xerox, like others, has designed products specifically for small and midsize customers, and is on the verge of a business transformation as a result. Beating Dell, HP and others in this space is doable, Mulcahy says, and that explains why Xerox has poured more money than ever before into partner programs.

Xerox also has done some things that are unprecedented in the company's history. For the first time, for example, Xerox has put all customer-facing channels--direct and indirect--into one organization, called Xerox North America. The move essentially puts Xerox's previously modest indirect business on par with its vaunted direct-sales arm. The resulting action has led not only to an increase in revenue--sales of desktop multifunction devices through the channel increased 43 percent last year--but also kept Xerox at the top of the hearts and minds of its reseller partners. For the fourth year in a row, Xerox took home top honors in the ARC's Network Color Laser Printers category.

Xerox and the other winners can take pride in a job well done. But they should take note: The footsteps they hear is the sound of their rivals sneaking up on them, meaning next year, nothing is a given.

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