When Plans Fail, Vendors Come Up Short

Now for the bad news: The rest of sub-par performers from 2003 did little or nothing to improve their standing among solution providers; a few are even worse off than they were last year.

And what of the pledges and promises to fix what was wrong, remedy what went awry and pay attention to what needed to be done?

Sony, for example, increased its marketing support score slightly, but it replaced that demerit with equally low scores for quality of technical support and partner loyalty for its display technology. Sony, of course, has a wide array of products it sells to many different markets, but displays are one of its key inroads to solution providers; and with new display competitors popping up seemingly every week, it has chosen an inopportune time to be frittering away partner loyalty.

Other companies that struggled in last year's survey--including BEA, Dell, Hewlett-Packard, Oracle and SCO--continued to do so. They've been joined this year by aggressively bad numbers from AT&T and Qwest, a sign of how much the carrier sector has been disappointing partners.

How Low Can They Go?
The theme of frustrated partners is prominent this year. Last year's ARC survey produced low scores that primarily hovered in the 50s, occasionally dropping into the 40s. But, this year, category-low scores in the 40s were commonplace, and AT&T and Oracle even snuck in a few scores in the 30s--a level of partner dissatisfaction that's nothing short of stunning.

In past surveys, partners have often been reluctant to hammer their vendors too much, unwilling to bite the hands that feed them and genuinely wanting to give the raft of new partner programs a chance to prove their worth. But if 2003 was the year that many partner programs got an extreme makeover, 2004 is the time for them to show results. And if the ARC numbers are any indication, partners aren't impressed and they're no longer pulling their punches.

"A lot of partners were weakened after the dot-com bust, and now people's nerves are just frayed," says Ken Batorski, president of Woods Network Services, a network integrator in Farmington, Conn. "A lot of my colleagues are fed up; they're frustrated with the direction of the market and with their inability to make money."

Another possible explanation for the unusually low scores is that they're reactions to vendor consolidation--fallout from partners that went from being big fish in small ponds to one of many semi-anonymous resellers in the acquiring company's large partner network. That's what happened to Tom Shaw, president of Wide Area Management Services, a network integrator based in Santa Clara, Calif. Shaw went from being a prominent partner of Neoteris to an almost forgotten partner in Juniper's network after NetScreen bought Neoteris last year before being acquired by Juniper.

Although Shaw has gotten his company certified according to Juniper's terms, he says he has not been contacted by a partner liaison from the vendor in six months. "I was on a first-name basis with the old account rep, but he doesn't handle our account anymore," he says. "We've invested the time and lab resources to get to the required level of certification with the smaller company, but that's no longer relevant because they reorganized after the acquisition."

Shaw says that scenario is becoming increasingly common throughout the industry, as sector after sector winnows itself into a handful of dominant companies surrounded by satellite also-rans. "As best-of-breed companies get acquired by larger ones, partners' visibility and support within the channel programs has declined," says Shaw, who also partners with Cisco. "It's very disruptive because of the noncontinuity between channel personnel. That's where the anger comes from."

Indeed, most of the lowest ARC scores were handed out for support and partnership-related criteria, such as marketing, sales and technical support, managing channel conflict and communication. This year's scores are telling vendors that regardless of whatever adjustments vendors have made to their partner programs, the honeymoon's over, especially for a select few unfortunates.

Once again, Dell and Oracle have set the pace for partner derision, with Dell's products and programs showing up a whopping 32 times among the lowest criteria ARC scores, and Oracle's ringing up 29 such mentions, when the bottom low scores for each criterion are compared. To be fair, there's plenty of overlap in the rankings, so if one product is particularly troubled, it's likely to tally numerous low scores.

On the other hand, Dell and Oracle were head and shoulders above the other underachievers; the next-closest vendors on the dissatisfaction index were HP, with 16 mentions, and SCO, with 14. Dell's biggest offenders are its Precision and Dimension workstations, its Inspiron and Latitude notebook computers and its PowerEdge entry-level servers, all of which showed up repeatedly on the list of lowest category scores.

The reasons for Dell's dismal rankings are pretty clear. Between its primary business model--direct Internet sales--a white-box business that still has many partners wondering if it's a threat or an opportunity, and its frequently dodgy relations with the channel, it's no wonder solution providers have remained critical of the company. But while Dell frequently placed last in its respective categories, many of those low scores were in the 60s, which means the company was less abjectly horrible than simply coming up short relative to its competition. (Dell officials did not respond to requests for comment.)

Many of Dell's partners are currently between a rock and a hard place. The company tolerates the channel but does not come close to embracing it, a condition that figures to continue as long as its direct-sales model remains successful. But if that begins to change--say, if the consumer market dries up and the company wants to expand further into the enterprise or SMB space--Dell might find that it needs a strong channel to make such inroads. That's where the ARC rankings could come back to haunt the company.

Issues At Oracle
If Dell has somewhat defensible reasons for the channel's dim view of its operations, what's Oracle's excuse? For the past year or more, the company has tried to put its legacy of channel neglect behind it to rebuild its operations with unprecedented consideration for its partners. So far, those efforts have fallen mostly on deaf ears. Oracle had the overall lowest score--regardless of sector--for eight different criteria, including compatibility and ease of integration and all aspects of support, specifically in the data-management software category. The company's 9i data-management software received the lowest overall score of any product, with a 50, getting a shocking 39 for presales support, 36 for marketing support and 34 for sales partnering, which is tied for the lowest number in any category.

The obvious reason for those horrible numbers is that this year's survey was based on the older version of the company's software, which has since been replaced by grid-computing flagship 10g. Also, this summer Oracle initiated new rules of engagement for its partners, designed to drive ROI and profitability and minimize channel conflict.

Oracle's Rauline Ochs, group vice president for North America alliance and channels, says she has seen marked improvement in her year with the company. "We like to hear the voices of partners via the ARC study; it's a critical indicator of how we're doing with them," she says. "In general, we're making improvements with our partner program. We've increased our head count and our budget, and we have commitments to the program from our senior-most executives."

She adds that she expects partners to view the company more favorably as 10g gains momentum. "With 10g, you get a new product line and grid capabilities that bring a new price point, TCO and ease of use to partners and customers, especially in the SMB space," she says.

Other prominent vendors received disappointing scores from ARC respondents. HP's midrange AlphaServer and ProLiant servers and its SureStore and StorageWorks network storage products received consistently low marks, primarily for a lack of richness of features/functionality and technical innovation. And BEA continued to tread water, getting mediocre scores across the board for its WebLogic infrastructure software.

Open-source operating system vendor SCO had a particularly troubling year, finishing last overall in three product innovation-related criteria and second-to-last overall (thank you, Oracle) in five other criteria. After spending most of the past several years embroiled in a never-ending series of intellectual property lawsuits and countersuits, the ARC numbers suggest that maybe it's time for the company to start focusing more attention on its partner relationships than on its legal situation.

"There's a lot of partner resentment about SCO," says John Freres, president of Meridian IT Solutions, a solution provider in Schaumburg, Ill. "They want partners to go make markets for them, but they don't have the corresponding support."

In the carrier space, Qwest garnered negative reviews across the board for its business-class communications services, finishing among the lowest scores in nine of the product-innovation and support criteria when comparing the lowest 10 criteria scores. But this ineffective run made it only the second-worst carrier in partners' eyes. That ignominious distinction went to AT&T and its own line of business-class communications services, which finished in third place overall for 10 different criteria, including worst overall in communication, managing channel conflict, partnership overall and ease of doing business (the survey's other lowest score of 34).

Shaw says there has been so much turmoil at the company, it's no longer clear who's running the store.

"AT&T invented the telephone, but they didn't invent the network; they're trying to be a jack-of-all-trades, but they don't have the expertise to do it," he says. "They've gone through a big head count reduction, firing sales and support staff, 80 percent of whom were the people we rely on internally."

AT&T is merely the worst example of a trend that's occurring throughout the carrier sector. With the explosion of demand for broadband and network services, carriers are trying to leverage their voice practices to gain traction in the data market, but so far they've been unprepared for the demands of the space.

"All they've got is a pricing advantage," Shaw says. "They can't design, do presales and deliver a product consistently. They claim they can do everything, but they're overcommitting and underdelivering."

It is predicaments like these that vendors will want to avoid as they move forward, because even though vendors still hold the keys to the success of the channel, it's clear that after all the headaches and broken promises of the past several years, their partners are mad as hell and not going to take it anymore.