Another landmark channel U-turn came from Oracle. In March, CRN broke the news that the software giant was giving local partners access to thousands of “named accounts” that were previously the domain of its direct sales force.
At the time, John Walters, managing director of Nextgen Distribution, told CRN: “If they execute on it – and I have no reasons to expect they won’t – I think it will be good for the channel, both Avnet and ourselves, and really importantly, good for the channel partners and a better results for the end customers.”
But not every reseller is easily convinced that vendors can change their stripes. As Dell and other famously direct vendors pivot towards the channel, they face an uphill battle to convince some resellers that they have changed. The channel has a long memory and it can take time for vendors to change preconceptions.
The real test of channel first
So how does a vendor prove they are truly channel first? The real test is whether the vendor applies the consequences of breaking the rules of engagement, says Cam Wayland, director of Australian channel consultancy Channel Dynamics.
“If the vendor says, ‘We never give a price to a user’ then they do, what happens? The best practice is that there are consequences for whoever broke the rules and that those rules are enforced. There’s no point having rules if they’re not enforced,” Wayland says.
At a minimum, the punishment should be the internal sales rep losing the commission on the sale, with no target or quota retirement on that against their overall target. If they do it again, their manager should suffer the same penalty.
“If the rep is doing it and the manager doesn’t care then you’re reinforcing and condoning that behaviour,” Wayland says. “And if they continue to do it, it’s dismissal.”
Wayland, who advises vendors on their channel programs, says best practice also includes smartly dispensing leads. The vendor should direct to partners with the right specialty, aligned to their status in the channel program. A gold or platinum partner should expect more leads, not because they are bigger businesses but because they have more skills around that vendor’s technology.
The rise of cloud services has severely ruptured standard channel practices for some vendors. Business software is most acutely affected as vendors swing between delivering directly or selling through a channel. “Adobe is channel-first but a customer can still go to their website and buy full price Creative Cloud and it’s not supported. Renewals are done directly by the vendor and not by the channel,” Wayland offers as an example.
Speaking to CRN in April, City Software boss Lorenzo Coppa singled out Adobe for criticism. “We used to do over $4 million a year on Adobe and that has dropped by 80 percent – it’s the single biggest decrease I’ve ever seen in 23 years. Adobe completely changed the channel engagement partner programs, changed how they went to market... so there wasn’t anyone to talk with.”
But ‘cloud’ does not equal ‘direct’. Amazon Web Services was supposed to be a threat to resellers. However, the public cloud leader is rapidly ramping up its partner community in Australia: AWS has appointed massive trans-Tasman systems integrator Datacom as its top local MSP partner. The appointment is just one example of Amazon’s increasingly broad and deep partner base, which now includes everyone from web hosting firms like Bulletproof and Melbourne IT to outsourcers like ASG Group and Dialog IT to niche cloud integrators such as Base2services in Melbourne and Fronde, which was No.14 on the 2014 CRN Fast50.
While partners don’t make huge margins on AWS instances, there are plenty of opportunities in managing them. “Customers can buy directly from AWS but someone has to manage all the AWS services and make sure they’re the right services and that they are controlled and secured. That’s where there is value in the channel,” Wayland says.
Not everyone agrees, though. Never one to mince words, Syd Borg of veteran Australian reseller PCS Australia, says: “To me, cloud is bad f&#@ing weather. I’m not making money out of it.”
While ‘channel first’ is a mantra often repeated by vendors selling technology for mid and enterprise companies, it’s not often heard in SMB land. PCSA has supplied a range of office hardware to SMBs in Sydney for 30 years. The phrase ‘channel first’ is replaced with ‘dealer focused’ in his line of work, but Borg doesn’t believe the vendors truly mean it.
“I say to them, ‘When are you going to give me a deal? When are you going to put money on my table? You seem to give it to every other bastard.’ It’s a sore point for me.”
Vendors that call themselves dealer-focused and have direct accounts are clearly competing against their partners in high-volume, low-margin IT sales, Borg says. Acer, NEC, HP and Fuji Xerox all have direct sales arms that PCS competes with.
The problem is not just in SMB. HP negotiates government panel contracts directly, Borg claims. “HP will funnel it through a channel partner and give them a 2 percent rebate. So it seems to go through the channel but it’s not real channel business.”
Borg says the shift to BYOD has really hurt resellers like PCSA because the business has handed over purchasing decisions to its employees. Borg sees the vendors’ support for BYOD as nothing short of betrayal. “We have lost control. When you lose control you’re screwed. Anyone can buy anything from JB Hi-Fi or Dick Smiths,” Borg says.
“Most of the vendors are trying to refocus on SME but it’s dead in the water. These five- to 15-seat businesses are going to Harvey Norman, putting it on 36 months interest free. Retail has had a huge impact.”
BREAKOUT: Is your vendor channel friendly?
- Review the partner program: Understand the rules and benefits. With a channel-first company you will know where you fit and whether you can make money from the investments you need to make. Benefits could be discounts, marketing, joint engagement, etc.
- Review the distie: Can they support that vendor? What’s their investment and what’s the vendor getting the distie to do? Are they tightly integrated or is there a disconnect between what the distie’s doing and what the vendor wants?
- Crystal clear rules of engagement: Lots of detail about what happens in the case of a breach, accidental or otherwise.
- Look at reputation: Every now and then vendors, disties and partners stuff up and break the rules of engagement. Was the transgression intentional or accidental? If the rules of engagement are broken, the vendor must follow through with the consequences.
- Back it with money: The incentive structure for internal sales should clearly favour the channel. If not, the leads won’t flow in the right direction.
- Reps who understand: Reps need to know your market, your skill set, your preferred customer. The more effort they put into understanding your business, the better.
With contribution from Cam Wayland, Channel Dynamics
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