What Determines A Winner Most

When the time came earlier this year to secure support from the vendor community, company vice president Mike Howard flew to New Orleans to show would-be allies his company's work. That's when he received a quick lesson about how different vendors approach partner satisfaction.

After a few minutes of pitching IBM on the application, Howard got nothing but yawns and polite nods. Despite describing how his software could take advantage of IBM hardware, "you'd have thought I was telling them a bedtime story," Howard says.

Conversely, a meeting--if you could call it that--with Microsoft, went very differently. Pip Marlow, director of Microsoft's U.S. partner enablement team, listened intently as Howard outlined how his company's offering could provide additional functionality on top of Microsoft's CRM application. "She did this while trying to get on an elevator," Howard recalls. But follow up she did--with phone calls, introductions and offers of support.

So which company is Horizon Datacom Solutions now tightly aligned with? You guessed it. Microsoft, the vendor that provided developer support, marketing assistance and technical help to bring the VAR's software project to life. The same Microsoft that will invest upward of $1.5 billion this year on partner-related activities--roughly as much money as Check Point and Network Associates generate in total revenue each year. Combined.

Ironically, courting small, independent developers like Horizon Datacom Solutions is expressly what IBM hoped to do this year. At IBM PartnerWorld in February, Buell Duncan, general manager of IBM developer relations, told VARBusiness that his company was making the recruitment of software programmers a top priority for 2003 and beyond. "Whoever wins the battle for the hearts and minds of small, independent developers the world over will ultimately be in a position to rule software," he said.

To help you distinguish talk from action, VARBusiness offers our 18th Annual Report Card (ARC), one of the industry's most trusted assessments of partners' satisfaction with their IT vendors' programs. Like nothing else we do, this annual evaluation honors vendors' achievements and commitments to partners. This year, we studied 75 vendor programs across 18 product categories. In all, we polled nearly 5,000 solution providers about the companies whose products they represent. We asked them to rate vendors on criteria divided into four subcategories: product innovation, support, partnership and loyalty. From these measures, we were able to produce a ranking of vendors in different categories, plus a report card on each company.

What solution providers shared with us cuts through the rhetoric and hyperbole that vendors often serve up. Take IBM, for example. Although it stated it wanted to embrace Web developers by giving them the support they needed, it came up a bit short among Web application integration tools companies studied in this year's survey. Among its peers, IBM finished third in that category, behind Microsoft and Macromedia. Particularly disappointing is that VARs faulted IBM for being difficult to work with. In fact, when it came to ease of doing business, IBM came within a single point of last place. Think the fellas who overlooked Howard of Horizon Datacom Solutions had anything to do with that kind of performance? You can bet they did. Companies that proved to be difficult to work with consistently finished at the back of the pack in this year's ARC study.

But don't feel too sorry for IBM; it's not like it performed badly across the board. Quite the opposite. In fact, for the second consecutive year, IBM took home more awards this year in the ARC study than any other company. Furthermore, we honored Frank Vitagliano, vice president of distribution channels management for the IBM Personal Computing Division, with the 2003 VARBusiness Lifetime Achievement Award for his years of dedication to partner concerns. (See "Lessons of a Lifetime," page 56.) Vitagliano is a 30-year IBM veteran who has dedicated more than half his career to channels. And while his colleagues in Web software did not receive top scores this year, his counterparts who manage partner relations for IBM's iSeries computers, Tivoli software and network storage products did themselves proud in 2003. Solution providers rated IBM tops in partner satisfaction in each of those product categories, plus mobile computing systems, too.

In fact, this is the fifth year in a row that the IBM iSeries computing platform has finished on top in our midrange server category. According to our survey, the IBM iSeries also enjoys the absolute highest loyalty among partners of any of the vendor products that we studied. That's noteworthy because 83 percent of the vendors that finished tops in loyalty went on to win an overall ARC product category award.

The Top-Score Equation
Winners in this year's study come in all shapes and sizes. Some newcomers scored high marks in their first year in the survey. For example, Alcatel beat Cisco to win the overall communications networking solutions category. And Intel beat AMD in desktop and server processors--a new product category for 2003. Different though they may be, however, all of this year's winning companies share one thing in common: superb product quality and reliability.

And when married with quality technical support, top scores often resulted. That certainly was the case in the midrange servers, wireless LANs and network color printers categories. In the last, Xerox actually took home top honors, even though it came in dead last for ease of doing business; partners, nonetheless, rated Xerox tops in loyalty. One reason is Xerox's unflagging field support and communication skills. Partners gave Xerox top marks when it came to sales partnering and for relaying timely and accurate information to them.

Symantec is another company that won, in part, based on its ability to communicate effectively with its business partners. "You can build the greatest program in the world, but it won't do a bit of good unless you can communicate its benefits," says Allyson Seelinger, vice president of North America Enterprise and Consumer Channels at Symantec.

In the end, many partners simply want a company that's easy to work with. But only a handful of vendors can bring world-class, reliable product innovations to market and be easy to do business with. Western Digital did it in the desktop disk drives category. So did Samsung, which not only swept the display technology category, but also wound up with the highest scores in the entire survey this year. HP also managed the accomplishment in the entry-level servers category--a bit of a surprise given the fact that HP has endured great upheaval since its merger with Compaq one-and-a-half years ago. However, the company has demonstrated greater stability and predictability in the year since it unveiled PartnerOne, its unified partner program that combined some 40 different partner vehicles managed by the merged companies over the years.

Among other things, PartnerOne paved the way for HP to shift from an entitlement-based model to a rewards-based program, which gave more favorable treatment to partners that made larger investments in developing new business for HP and to partners that achieved top results. That sent partner satisfaction among HP loyalists through the roof. The company also scored big when it established new business controls designed to reduce gray-marketing activity and to maintain a fair playing field in the channel. While hardly perfect, the efforts drew praise from partners.

"They're working to make things better," says Tommy Wald, founder and president of Riata Systems, an Austin, Texas-based HP solution provider.

For HP, improving partner satisfaction has hinged on streamlining and simplifying HP programs, says Dan Vertrees, vice president and general manager for HP Americas enterprise partners.

"Partners are a critical component of HP's go-to-market strategy," he says. "Two-thirds of HP's revenue worldwide goes through our channel partners. They augment HP's capabilities in the form of applications, systems integration, services or other third-party solution components that enable HP to offer a complete solution to the customer."

The Impact of ROI
Where HP demonstrated leadership in the ROI that partners get from working with its products, it prevailed. HP rated tops in revenue/profit potential in both the entry-level server and the advanced desktops and workstations categories. In several categories where it did not win--i.e., enterprise operating systems, network color printers, communications networking solutions and midrange servers--HP's scores in revenue and profit potential were below those of the overall category winners.

One company that has taken ROI seriously is Sun, which finished a close second to HP in entry-level servers and advanced desktops and workstations. Gary Grimes, vice president of U.S. channels at Sun, says the Mountain View, Calif.-based company has spent an enormous amount of money rearchitecting its channel. This year, for example, it changed the way it rewarded partners. First, it cut in half the amount of money that it previously provided to all partners. That effectively took SunFund rewards on sales down to 2 percent from 4 percent. With the savings, the company created new incentive vehicles that rewarded partners for specific activities, such as landing strategic accounts and selling specific products. In all, Sun has paid out more than $20 million to 150 partners.

Another thing Sun did this year was upgrade the quality of its partner base. It cut ties to underperforming partners while recruiting new allies. In all, the company trimmed 100 underperformers from its ranks. Although some complained, the overall revenue hit to Sun was only $1 million. But what it did for partner satisfaction was significant, Grimes says.

"Our channel is a lot healthier than it was a year ago," he says. "All that we have done has been well-received."

That, of course, brings us back to Microsoft, which spends as much per partner as nearly any vendor in the industry. Microsoft took home top honors in three categories this year: enterprise operating systems, database software and, for the first time, Web application integration software. For Allison Watson, vice president of Microsoft worldwide partner efforts, the victories seem like an embarrassment of riches for someone who has only been on the job a year. But, as she points out, she has followed a string of colleagues who have put partner matters before the company's executive management team. More than anything, she says Microsoft is achieving high marks in partner satisfaction because it recognizes the need "to conduct business with partners in the way in which they want to be engaged."

"That's not easy for a company of our size," she says. Nonetheless, the company managed to get the highest scores for ease of doing business in each of the three categories in which it won overall.

Falling Down
On the flip side, try as they might, a number of companies simply came up short when it came to pleasing partners this year. The worst: Dell, which had a stunning fall from grace compared with one year ago. Last year, Dell won the entry-level servers category. This year, solution providers gave it the lowest partner-satisfaction scores for that product category. Same thing in the advanced desktops and workstations and mobile computing categories. In fact, its 57-point showing in mobile was the single lowest partner satisfaction score across the entire ARC.

Why so bad? Well, partners this year appear to have grown wary of Dell's ambivalence toward them. We recently profiled several VARs who were upset that the company won't even allow them to call themselves "authorized partners." That's even after selling millions of dollars worth of Dell products. No wonder the company came in last in loyalty in each of the three product categories in which it competed.

One company that has acknowledged its problems and vowed to do something about it is Computer Associates, which finished last in this year's ARC study in the security management software and storage management software categories. George Kafkarkou, senior vice president of worldwide channel operations at CA, has been brought over from Europe to see if he can create programs and policies that will improve partner satisfaction. A 20-year CA veteran, Kafkarkou has helped to create the "channel-preferred sales model," which ensures that 100 percent of CA's resources, including CA's direct sales teams, are working to create a conflict-free channel environment.

More recently, the company introduced a new partner program that will open the door for all channel partners to participate in CA's aggressive rebate initiative, dubbed the "Margin Builder Rebate Program." The company has also put more than 400 certified product experts in place to create and qualify leads for solution providers. These opportunities are delivered to partners in real time via an exclusive partner-lead portal. In addition, CA implemented an unlimited, no-charge phone-based technical support system for all channel partners, and allocated huge sums internally to provide no-charge training and certification to CA partners.

Kafkarkou knows these benefits came too late to help his company improve its partner satisfaction this year. But he's counting on winning awards come 2004.

"Every year is a new competition," he says.

Amen to that.