My View: Where Things Stand

Editor's Note: For the first time this year, the CMP Channel Group, which includes VARBusiness, CRN, the Xchange Conference Group and the Institute for Partner Education & Development (IPED), together recognized a single person as the IT industry's most effective channel executive. The award was created to honor an individual working for a product or service vendor whose support of and commitment to business partners is unrivaled. After evaluating scores of candidates, the CMP Channel Group chose Steve Dallman, director of Americas distribution and channel marketing at Intel, as its 2005 Channel Executive of the Year.

For more than 20 years, Dallman has developed programs to benefit systems builders, and has built awareness and appreciation of the channel inside Intel. This year, his tireless efforts were rewarded when the company elevated channel products to its list of five strategic corporate platforms.

Dallman follows in the footsteps of other VARBusiness Channel Executives of the Year, who have studied the channel as both an intellectual pursuit and a professional obligation. That includes Allyson Seelinger of Symantec, Kevin Gilroy of Hewlett-Packard and Allison Watson of Microsoft. As VARBusiness did last year with Watson, we invited Dallman to write about the state of the channel. Dallman focuses on partners and their business models, arguing, in particular, against harvesting--when vendors rely on partners to sell products, but fail to appropriately reward them.

Although there are many great partners, there are aspects of the channel that aren't optimally healthy. And I'm concerned, given the industry's dependence on and investment in third-party business allies, that the market is shifting in many directions at once, which could negatively impact channel health. We're doing fine in our segments as an industry, but we often overlook the total addressable market (TAM). Recently, I've become more disturbed about the lack of channel growth and profitability. We are not attracting a great number of new vendors into our channel, and too many existing vendors are focused only on decreasing costs while increasing market segment share (MSS). Many suppliers are too focused on MSS and not on market development or TAM growth.

In the long run, that lack of focus reduces the channel's opportunities to grow both top-line revenue and bottom-line profits. Essentially, we are not investing in the channel's ability to deliver both hardware solutions and service solutions as an integral part of our business strategies. Take managed services, for example. Managed services should not be the only answer to the question: "How do we make money on your products?" It drives me crazy when vendors say the answer to the profit question is, "Sell services." That's not sufficient. Services should be incremental business for the channel that adds profit and growth, and not just a substitute for reduced growth and opportunity in our historic business models. Services should be driven by new technologies and capabilities that increasing performance can bring to the market. It should not be an alternative to hardware profit, and it should not be the sole alternative the industry offers to the channel for real, meaningful growth.

Within the Intel Channels Organization, we're proofing the concept of "managed solutions"--not just managed services. We're positioning the new hardware benefits being introduced at a platform level as technologies driving partners' services businesses. Platforms that provide technology, such as Intel's Virtualization Technology, Advanced Management Technology and Multicore Technology, are not just CPU performance enhancements, but solution platforms driving services that can't be offered today because of cost and capability limitations.

Of course, we don't have all the answers, but we do have the right intent at Intel to support "channel health." And it has to come from vendors. Distributors help, but their margins are too thin to find answers to what ails VARs and solution providers, despite great intentions.

Vendors need to be innovative with channel partners. We need to embrace and invest in the channel, not just to service today's markets, but to support, service and drive new areas of opportunity. Solution providers and systems builders are systemic to our new business and product strategy, and not just tactical adjuncts to the launch of new products.

That is important because it will be difficult for companies like Accenture and IBM Global Services to service small and midsize businesses without the ability to leverage the thousands of solution providers. Without resellers to enable them, small business will be far behind in productivity, and our industry will lose the ability to effectively access and refresh these customers. This would not only be bad for our industry, but our country, too.

Finally, the industry must look hard at its strategies. It's time to invest in the channel and pay for the value that partners provide us in launching, selling and communicating our products' benefits. We need to develop hardware solutions that enable services that afford a new level of user expectation and measurable benefit. Doing this at the hardware level alone is old-school; doing it based on the services we have today falls short and doesn't provide a pull for the technology we're developing.

Only when technology, platforms and services are conceived and integrated holistically can we create the dynamic that accelerates refresh of existing systems, innovation and new TAM growth. This is one solution that the channel can thrive on.

Title: Dir. of N.A. Dist. and Channel Sales & Marketing

Company/Division: Intel, Sales and Marketing Group

No. of years with company: 26

No. of years in channel organization: 16

Channel philosophy: The channel is where the early adopters are. True innovation and the "next big thing" come from the channel. Therefore, it is critical that we service these customers in a way that makes it easy not just to do business with Intel, but to do business themselves so that as they grow, they want to grow with us.