Channel Chiefs Talk Compensation Models, New Partner Types

How can vendor compensation models aid service providers?

How can vendors encourage channel partners and their own sales forces to sell more services and cloud offerings? During a roundtable discussion hosted by CRN at XChange 2014, top channel chiefs from Cisco Systems, Dell, Hewlett-Packard, IBM and Rackspace discussed compensation models for solution providers and their own staff, attempts by traditional VARs to adapt to a changing landscape, partners with unusual backgrounds or areas of focus, and the software-defined data center.

Bruce Klein, SVP, Worldwide Partner Organization, Cisco

I know we've kind of matured to the point of how do we pay our own sales rep on selling cloud services from our partners, and this next year, we're actually going to be separating out and our reps [are] going to have cloud quotas for selling with and through our partners. … They want to know that we're in it with them and we have a field sales force that's compensated to sell their services. In the past, they could sell whatever and make their quota; now, they're going to have a cloud compensation part of their compensation model, which I think is really big for the VARs.

Bruce Klein, Cisco

I think we're going to be in a world where a partner's not going to be able to do it alone. They're really going to have connect with consulting partners, they're going to have to connect with ISVs and software players, app developers if they don't want that to be their core competency, and we, as a vendor community, need to make those connections clean for them.

Stephen DiFranco, VP, Enterprise Group Channels, HP

It would be interesting for you guys to figure out how much consulting VARs have given away in the last 50 years in the IT business, and they've done it because there was enough profit in the hardware to get away with it. In the future, can you give that consulting away? Is there going to be enough money in the hardware? Is there going to be enough money in the off-prem services? I don't know, but I think those conversations are very deep and long.

Stephen DiFranco, HP

SAP now has a channel team. You have distributors now who are reselling SAP; the software-driven application-driven hardware sale is the future. People are going to buy hardware based on the platform they're running, not a piece of hardware to run some software. The application workload is going to end up driving the selling process, and that's going to be a big change.

Tami Duncan, VP, North American Channels, IBM

Right now, a lot of our initial SoftLayer success is with software-only partners and it's reversed. They never wanted to sell hardware, they never wanted the complication of selling hardware. They're super excited to sell SoftLayer. …They're picking that up because they don't have the baggage that a lot of our traditional hardware sellers have in terms of culture, compensation systems.

Tami Duncan, IBM

We see the most successful partners are the ones that carve out something dedicated. You've got to separate that $300,000 decision today vs. x amount monthly recurring revenue. You have to put a little bit of a Chinese wall in the middle there to make sure that you're starting to get that mix of both because, left to their own, a coin-operated sales guy is going to take the point product sale every time.

Frank Vitagliano, VP, Channel Sales, Dell

For a long time, we sort of struggled with this whole on-prem/off-prem and how you treated a certain partner. In some cases, we were treating partners like end users, right, and when you do that obviously … it's a whole different level of support. You're not providing them the level of support they need to help drive their business into the marketplace. You're either with MDF funds or things like that.

Frank Vitagliano, Dell

When things are going well, you have to make the investment in those changes and the smart ones are trying to figure that out. … Rather than squirreling more away, how do I reinvest it into transforming the business so that I still have a business in the next downturn because it's coming. …That's why we should have a sense of urgency because now is the time to make the investment to make those changes because, if you wait and let it play out for two or three or four years, it'll be on us and then it'll be a whole different set of conversations.

Will Knight, VP, Channel Partner Sales, Rackspace

We're seeing a burst of new types of partners and really nontraditional partners. Probably one of the best partners we have is in the emerging private equity and venture capital space ... where they have this portfolio set of companies and they're trying to run them more efficiently. We're talking about transitioning from an on-premise to an annuity-type model, and you think about valuations. What do they care about? They care about maximizing valuation.

Will Knight, Rackspace

We're seeing a completely new emergence of a very cloud-focused broker that says we need to understand the business solution you're trying to drive, play into that sales, marketing and IT person, and then engage and consult on the solution that you need, and so that's an exciting challenge. … I love seeing the new ones [solution providers] because they're pushing the business model, whether it be how to go to market or how to compensate, so we learn a lot from them.