Todays Partnerships Focus on Give, Not Take

By eweek  |  Posted 2005-12-05

Todays Partnerships Focus on Give, Not Take

With 20-plus years of reselling enterprise software under his belt, Allen Beck knows a thing or two about the ups and downs of channel relationships.

According to Beck, all too often vendor partners will lend some marketing muscle, pass on a few sales leads and maybe even sponsor training, but once the honeymoon ends, the relationship ends up being one-sided.

Beck, president of Beck Consulting Group Inc., a 10-person reseller of enterprise software in Alameda, Calif., has seen this scenario play out in several of his vendor relationships. Things really start to sour, he said, when vendors attempt to call the shots on how products should be marketed and deployed without regard to how the other half conducts business.

"It doesnt indicate any interest in how we do business or what we need from a partnership," Beck said. "When everything is told to you, thats not my definition of a partnership."

Fortunately for Beck and countless other VARs, the definition of channel partnerships is undergoing a dramatic change.

Click here to read about HPs new commitment to its channel.

Many hardware and software vendors are actively looking beyond the enterprise to carve out a presence in the SMB (small and midsize business) market. Many are revamping their channel programs, and they are keeping an eye toward providing partners with more of what the partner needs.

Instead of dictating how VARs should sell their products, for example, many vendors are now soliciting input from them on everything from sales methods to future product road maps. In place of poaching the biggest orders, the growing trend is to cultivate lead-generation systems to pass on prospects, or even go so far as to match up multiple partners to win business.

Rather than emphasizing the sales of the vendors packaged hardware or off-the-shelf applications, partners are now encouraged—even rewarded—to market their own value-added services and vertical solutions.

IBM, SAP AG, EMC Corp. and Computer Associates International Inc., among others, are some of the heavyweights getting serious about courting SMB channel partners. But these vendors are not re-evaluating their partner relationships and making changes out of the goodness of their hearts, analysts and channel watchers say.

Rather, they are doing so out of necessity, taking the approach that to best meet the needs of the highly diverse SMB space, its incumbent to have a regionalized and highly specialized channel partner, complete with micro-vertical expertise in dozens of niche areas.

"Were now seeing all kinds of programs come out in full force because [vendors] are getting serious about going after midmarket customers," said Laurie McCabe, vice president for SMB solutions for AMI-Partners Inc., a market research company in New York. "In the past, partnerships have been more one-sided—toward the vendor. Were now seeing a lot more skin in the game from the vendors because theyre more invested in getting at this market."

Next Page: EMC Dantz builds in SMB space.

EMC Dantz Builds in

SMB Space">

Give and take

For EMC, having skin in the game means upholding and expanding many of the partner programs instituted by Dantz, a small storage and backup provider focused on the SMB space, which EMC acquired in October 2004.

Now named EMC Dantz, the company is building an ecosystem of partners around the SMB space, starting with providing products that can be easily fashioned into solutions by the channel along with a support and training infrastructure that can scale to assist VARs at all levels, said Larry Zulch, vice president and general manager of EMC Dantz, based in Walnut Creek, Calif.

"One way to look at small-business VARs is that they function as the IT staff to a distributed organization of 2,000 to 5,000 seats, split among all the companies they support," Zulch said. "Whatever you would do to keep an IT staff effective and happy in a 2,000- to 5,000-person company is what you have to provide to VAR partners."

Frank Ballatore, president of The New England Computer Group Inc., a VAR catering to businesses with an average of 20 to 30 PCs, has been on the receiving end of EMC Dantzs support. The New England Computer Group, which, by Ballatores admission, doesnt ring up significant annual sales with EMC Dantz, receives priority technical support from the company and obtains regular leads. It also enjoys all-around flexibility in terms of getting what it needs—whether its Web-based training or not-for-resale copies of up-and-coming products to test internally before approaching customers.

"From Day One, their partner program didnt differentiate between small resellers and large resellers—we got the same level of support," said Ballatore in Ridgefield, Conn.

Read more here about relations between vendors and channel partners in todays market.

Beyond delivering traditional support and the requisite marketing and training programs, many vendors targeting the SMB space are focusing new channel initiatives on providing platforms on which partners can deliver industry-specific solutions and managed services.

IBM, for one, has embraced that approach through its Express Portfolio, a set of 125 prepackaged solutions and services that partners can augment with their own solutions or private label and resell to customers, IBM officials said.

New industry additions to the Express Portfolio include medical imaging storage for health care, an RFID (radio-frequency identification) solution for retailers, a PLM (product lifecycle management) solution for manufacturers and a supply chain diagnostic solution for the industrial sector.

"What Express does is provide partners with an entree into the marketplace," said Elaine Case, IBMs director of SMB marketing, in Armonk, N.Y. "Weve done research into what their needs are as well as their business challenges and aligned our portfolio to those needs."

IBM has also taken numerous other steps to reach out to SMB partners. The reason? Business partners generate approximately half of IBMs revenue in the midmarket, which has averaged 10 percent growth per quarter for the last 10 quarters, Case said.

New IBM resources available to VAR partners include the Technology Assessment Tool, which helps prescribe the right blend of technologies to create on-demand infrastructures; the Seller Action Playbook, used to guide customers through real business scenarios; and SMB Infrastructure Insights, a collection of market intelligence and sales and marketing aids to help partners target resiliency and security opportunities.

For Digital Union Ltd., a Verticalnet Company that develops supply chain and supplier management applications for the midmarket, the most important piece of IBMs new SMB partner strategy is the Express Portfolio platform, according to Chris Mancuso, director for channel and program sales for the Buffalo, N.Y., company.

Express has enabled Digital Union to go to market quickly with its own solutions without expending huge development resources.

"Express helps keep our costs down and our profit margins up because we can develop our application on top of a platform thats already built," Mancuso said. "Without it, wed have to have a bigger development staff, which would mean a higher cost of doing business, and wed have less chances of winning in the SMB space."

Of course, Digital Union isnt the only one to benefit from the relationship, Mancuso said. IBM gets a solution that serves a particular vertical niche within the SMB space—something that wouldnt be possible without its partners.

"IBM doesnt make applications that solve business problems," Mancuso said. "We do."

Next Page: Local VARs do best with SMBs./ZIFFARTICLE>

Local VARs Do Best

with SMBs">

Close connection

Its the local and specialized VARs that are closest to SMB customers and thus have a handle on the kinds of specific applications they need to run their businesses, industry experts said.

ServiceConnection, a wholly owned subsidiary of PC Connection Inc. that is charged with providing services to the SMB market, realizes that it cant begin to market its new VOIP (voice over IP), managed security, network management and software migration services without a cherry-picked partner network to cover the bases on a national level, said Ken Driscoll, senior director of services for ServiceConnection, in Merrimack, N.H.

"The cost of building out a service infrastructure is huge," Driscoll said. "We can leverage the expertise that already exists and partner with what we call benchmark delivery partners on both a regional and national level to fulfill opportunities."

For their part, ServiceConnection partners get a built-in sales channel to drum up leads. ServiceConnection also promises its partners a level of commitment.

"Less is more," Driscoll said. "We have a fairly monogamous relationship—were not going to sign up 10 partners in their area so theyre exposed."

Instead, Driscoll said, ServiceConnection is handpicking between 30 and 40 tier-one players in major markets and with specific expertise.

SAP has embraced some of those same principles in its PartnerEdge Channel Partner Program announced in May. SAP officials said they place a high value on partners with micro-vertical expertise, as well as those with a track record of long-term customer satisfaction and retention. As a result, the PartnerEdge program recognizes and rewards partners for sales transactions (how much SAP software is sold) as well as for capability-building activities such as training and customer satisfaction.

"By placing a value and measuring the capability and skill set of the partners, SAP and prospects can have the confidence that their partner can manage an SAP solution in a way that delivers timely business results to the company," said Michael Sotnik, SAPs senior vice president of channel and SMB in North America, who is based in Newtown Square, Pa.

Its the micro-vertical expertise that is the partners most compelling asset, according to Brad Nicolaisen, president of Et Alia LLC ("et alia" is Latin for "and others"), a Milwaukee-based SAP business partner. His company markets Crew, a professional services application aimed at construction and project-based assembly SMB customers.

SAP, as a large organization, has to keep a broad focus, Nicolaisen said. The company may have best practices for professional service providers, for example, but partners such as Et Alia can go one step further and prepackage best practices specific to businesses doing such things as project-based assembly and fabrication.

"All we do are these industries," Nicolaisen said. "We eat where they eat. We talk where they talk. We get to know these people, and thats the value a partner can bring to SAP."

For its part, SAP helps the partner build out its micro-vertical expertise by furnishing marketing dollars to participate in industry trade shows and conferences. SAP has also opened up its product development labs to key partners, giving them access to future product road maps and new technologies that will help them fine-tune their own industry-specific solutions for the next generation of technology.

Beck, of Beck Consulting, said SAPs flexibility and attention to how partners do business make him optimistic about his new channel relationship with the software company. He said that, unlike past alliances, SAP has given his company the latitude to sell its SAP solutions without any directives. SAP has also given Beck the full complement of support services to best meet the needs of the companys smaller customers.

"The turnabout is that SAP seems willing to learn from us—from a best-practice model—to sell software through the channel in the SMB space," Beck said. "It really is more of a true partnership, in the sense that were people working together toward the same set of goals."

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