AppViewX's New Channel Leader On Power Shift From Vendors To Partners And Solving The Common Mistakes In Channel Programs
Power Structure "Changing" Between Vendor And Channel
"My fundamental belief is that the power structure is changing from the vendor-strong, to the partner-strong," said Keith McManigal, AppViewX's new vice president of channel sales, who previously held top executive roles at Cisco and F5 Networks.
McManigal said vendors need to change the way they interact and go-to-market with channel partners to eliminate profitability issues between the two sides. He points at Seattle-based AppViewX's new partner program, Partner+, which includes a guaranteed margin program and access to dedicated inside channel teams for demand generation. This, he suggests, is the way programs need to be structured if a vendor truly wants to put the channel first.
In an interview with CRN, the 25-year industry veteran also talks about shifting to a 100 percent channel company and capitalizing on the power shift underway between vendors and its channel.
What's one glaring issue you have with a typical vendor's channel approach that hurts partner profitability?
We've done some analysis on partner margins and its eye-opening on how partners are paid versus how vendors are paid. Vendors are typically paid on revenue; partners are paid on margin.
If we look at how partners get paid and make money, it's not about the top line revenue of the opportunity, it's about the margin of the deal. A lot of vendors will go, 'Alright, we'll just take $10,000 off – hey partners, take $10,000 off [your deal].' Well that's $10,000 of profit taken out of the partner's pocket, which is a big deal.
What is AppViewX doing differently to help solve this problem?
We designed our new Partner Program (Partner+) from the base up, so we're putting guaranteed margin in upfront and we're putting in rebates so as we grow, it's not a big huge financial hit when we make changes.
What we've done is say, 'Hey if we're going to give discounts, we're still going to protect our partners from a margin perspective.' The margin they earn is variable based on the value that they add to the sale … We want to make it so that the partners know that if they invest, they're going to make 'X' dollars of margin and it's to their benefit to try to keep the price as high as possible so they can get the most dollars in.
Why aren't vendors making program changes to better align with how channel partners make money today?
Many of the programs were designed years ago and it's hard to, once you design a program, to redesign it and change it a lot. As an example, most partner programs – Cisco's, F5's, Palo Alto Networks', NetApp – are all based on discounts. I'm going to make up numbers: If you’re a Gold partner you get 42 percent off, and if you’re a Silver partner you get 35 percent off. There's nothing in there about margin and these are large corporations so if you say, 'We're going to guarantee margins out there of 10 percent or 11 percent' -- that could potentially effect the bottom line in the shareholders' value.
What else should vendors change?
Most [vendors] don't take the time to educate their sales people on the value of the channel and the value that partners can bring to the customer throughout the lifecycle of the solution.
A lot of the sales teams go, 'All the partners are doing is slowing the sales cycle down.' They don’t understand the value that can be brought to the table. I saw this at Cisco. I saw it at F5 and at other companies my friends are at. That's a real key differentiator that we're focused on. For me, I'm spending as much time talking to our channel partners about enablement and education as I am doing the exact same thing with our sales teams.
What are some highlights of AppViewX's new partner program that sets it apart from the competition?
We're giving qualified leads. We've got a good inside sales organization and they are handing out leads which is important to partners because that's our currency – leads.
We're giving MDF funds – no questions asked up front – and we're not telling you how to spend it. We're saying, 'What marketing programs work best for you and we want to customize the way we do marketing with you that benefits you and your customers.'
We also have a guaranteed minimum rebate for all the business that goes through you as a partner. Then on a quarterly basis we're putting sales spiff's on top of that, as well as incremental rebates depending on the product we're trying to go after.
Is the power structure changing between manufactures and channel partners in this new cloud era?
My fundamental belief is that the power structure is changing from the vendor-strong, to the partner-strong. I came to that conclusion a couple of years ago because customers have bought all this technology and they're not getting the value out of it. With partners and vendors like AppViewX, we can help unlock that value and provide self-service to their users. Whether they want to put the apps in the cloud or data center, we really don’t care – we want to be able to automate and orchestrate that experience that the CIO has for their users. That's where I see the real opportunity out there for partners and it’s a greenfield.
How is your application-centric networking company changing to capitalize on this power shift from vendors to the channel?
We're taking our direct accounts and mapping them to our partners. We did about 60 percent of our business through partners and next year, it's going to be 100 percent – that's the way we're going from our CEO all the way through the entire organization.
How have you changed your channel go-to-market process to make partners more profitable?
I know partners are going through this issue, 'Oh my gosh. I used to sell $5 million dollars for the hardware and I got $500,000 in profit.' Today, people aren't buying as much of hardware, they're moving to the cloud and having to react to that new model, which is an annual or monthly subscription steams.
We have an annual subscription model; we're not a perpetual license. We want our partners to make money year after year in selling, not only subscription, but the services on top of that and help us expand that sale … With our model, we've got the best of both worlds. It's an upfront sale of a good amount and then every year it's an annual license. So, we need to be engagement. We can help the partners through that cash flow situation as well.
Why did you choose to become the channel leader at AppViewX?
I came here because there's a large opportunity. We've growth our revenue significantly year on year for the last couple of years because once we get into a customer and they see what we can do with our technology through automation, orchestration -- and our vendor and infrastructure-agnostic data centers – it's huge. Partners are a big part of that.
What market are you targeting in 2017?
We got a good size customer base and a revenue stream and we really want to come out in the US market and the European market in a big way.
It's about taking these old, legacy data centers that are out there and make them look a lot more like a cloud, or greenfield data center.