Netgear’s messages from the top

It is always interesting to hear what global CEOs think of their Australian subsidiaries. CRN recently spent some time with Netgear CEO Patrick Lo, and local managing director, Ryan Parker, to discuss how local business is going for the networking vendor.

CRN: How is Australia performing for Netgear in both a global and Asia-Pacific context?

Lo: Australia is our best performing country, bar none, in the world. This is in terms of per head of population, in terms of market share, in terms of our market awareness, and our relationship with the channel. We started our Australian operations very early. Netgear was established in 1996 and right after that we started in three markets: Australia, Japan and Germany. Japan is a tough market for anybody and Germany can be a hard market to figure out, but the Australian market is closer to the US. Because we are American, it is easier for us to pick the right partners [in Australia], as we speak the same language, the economies are alike and we think alike.

In Australia I think we hired the right country managers to begin with and we signed up the right distributors, too. That helped us to significantly penetrate the market. However from a product standpoint it [our approach] is the same around the world, which is providing the best enterprise technology to the SMB market, at an SMB market price. We work through the channel and the channel only. We never compete with the channel and we never go direct. We had a perfect example recently when the [Australian] Department of Education came to us and gave us a deal, but we will not do the deal direct. We will still go through our education VARs, who will then source the products from the distributors. That is the same formula we apply everywhere around the world.

Parker: The NSW [education body] went out to the market to look for a solution for its schools to provide additional storage to its server environment. What they wanted was a network attached storage (NAS) solution that met certain requirements where they could basically go to a school and say ‘this is what our preferred product is and here is the preferred program for purchasing it under’. You can just plug it into your network and you have increased storage.

Lo: The reason we were selected is the same reason some of our switches are used for the University of Canberra. Already NAS has the technology which is patent pending, which enables data to stay online. You don’t have any downtime. So that is a very unique enterprise technology which we have bought to the SMB. That is one example.

Smart switches is the same thing. About four, five years ago the big enterprise switch guys such as Cisco and HP said they wanted to incorporate the router in the switch too, that was pretty expensive though. Guess what? Two months ago we introduced our smart switch which does the same thing, but for a third of the price. That is another example of us taking enterprise technology and putting it into the SMB space.

From a channel program perspective we have also been pretty consistent [globally]. We have the PowerShift Partner Program around the world. Anyone can sign up as our partner and you don’t need to be certified, however, we have different levels. If you are more committed to Netgear, you get more co-operation, such as co-marketing, demo equipment concessions, joint seminars, recruitment efforts and lead generation.

We have managed to sign up a lot of VARs and distributors. For example, in Australia we have two big national distributors, Ingram Micro and Synnex, but we also have regional distributors in NSW, Victoria, South Australia and WA. The reason we do this is because there are small resellers who want to sell our products, but they hate to deal
with the big nationals with all the paperwork and hoops to jump through.

CRN: How do you manage potential conflict between your national Australian distributors and the regional distributors?

Parker: Ingram and Synnex have a broad product range and are very good at time to place shipments. The smaller guys have more of an education approach and can add value to what the reseller is doing.

Lo: A lot of our VARs around the world are servicing small businesses with 50 employees and below. Those VARs may typically have two or three employees. If they call Ingram and are asked about a balance sheet, they are not going to get credit. They need to call one of our regional distributors such as Dicker Data. Even in a big market such as the US, we do the same thing.

CRN: When we think of Netgear, we often think of the SMB market. Do you have much of an enterprise focus?

Lo: It depends on how you class an enterprise. If you define an enterprise as an installation that will require 200 to 500 nodes, we are definitely in that space. We are very active in working with branches of a huge company, for example all the KFC stores in China are equipped with our routers and Wi-Fi.
CRN: In Australia we recently had the launch of Netgear’s next generation wireless-n range. What are your hopes for this product line?

Lo: We certainly think that the first wave of implementation for those products will be with small businesses, as well as the home users. However, as the IEEE standard gets rectified next year, the products will move into medium businesses.

CRN: Are you witnessing any areas in particular where your Australian resellers are finding the most success?

Lo: I think Australia, in every single respect, has executed our corporate plan. Australia stacks up very well compared with other countries in terms of going out to the SMB. In terms of going out to the services providers such as Telstra, Optus and iiNet, [Netgear] Australia is probably a little bit behind some of the other countries in retail penetration. We are not number one in retail in Australia, we are number three. Generally in every country we are number one or number two, mostly number one. We have made good progress in Australia with Telstra on the cable side and have made good inroads with Optus on both the cable and DSL sides, plus some good inroads with iiNet, too. We now believe with our differentiated product range we will be able to capture more market share [in retail] moving forward.

CRN: How does the state of Australia’s broadband infrastructure affect your performance in the
local market?

Lo: If the broadband in Australia can reach a higher speed, that would help us to improve our business. I think it has two stages: penetration and then upping the speed. Both cases could help our business.

Parker: The penetration part is now in Australia, it is just the speed now. If you look at the US or Europe, the main difference in Australia is that people are still paying for downloads. The other part of that is we are a small population and there are a lot of underground connections that have to be paid for. Paying for data is probably going to inhibit the amount of services people will use. However, Telstra, Optus and iiNet are doing a lot of creative initiatives to bring more services to market.

CRN: What is Netgear’s take on the Green IT debate? What initiatives have you taken on?

Lo: We started Green IT 10 years ago. We were the first to say we needed to look at our packaging, to use recycled paper and to not use materials which cannot be recycled. For all of our products, we are now rolling out what we are calling low-energy chips. In the next 18 months you will see this and it will cut our energy usage by half.

Parker: We don’t stand up and beat our chests too much about what our Green initiatives are in Australia, but the fact is we have been doing it for so long, it is just part of what we do.

CRN: What do you believe the channel community thinks of the Green IT issue?

Lo: When we did our first wave of Green with the packaging that did not have a huge effect on the channel or end-users, as it is generally good for the environment. However, when we started using the switching power supply, then it had an impact as it uses less electricity. This means that end-users pay a smaller electricity bill and that has a direct impact. It will be for the VARs to help their end-user customers and steer their preference to energy-efficient products. The whole idea of a VAR is to gain the trust and loyalty of their clients.

CRN: Netgear acquired Infrant Technologies last year. How has the integration of that business gone and has your Australian channel seen any changes or benefits from the deal?

Lo: We bought that company because we had been listening to our channel partners who had been listening to end-users. This is all part of us bringing the enterprise technology to the SMB. It is pretty clear in the last five, six years that the hottest technology in the enterprise is NAS. However in the SMB we have been asked many times by our end customers and resellers: “Give us that technology”. We had been debating for two to three years about how we could get there. Then we finally made the decision that it would be much better to buy it [NAS technology], rather than trying to build it. Number one, building it would take too long. Number two, it will not be bulletproof, it takes a long time to make it bulletproof. Data is the most important asset of a company, we cannot fool around with that. At the moment for most of the SMB needs, we have pretty much a full solution. We have NAS, firewall routers, switching and wireless switching.

Are we there 100 percent? No. One area SMBs are crying out for is Unified Threat Management. However, we are better than anybody else in the SMB space now. If you look at our usual competitors: Linksys, D-Link, 3-Com and HP, nobody has that broad range of offerings spanning from switches, to routers, to firewalls, to wireless LAN switching, to NAS. We have the most complete offering today.

CRN: What messages would you leave with your Australian channel in terms of what they should aim to achieve over the next 12 months?

Lo: We believe there is a lot of opportunity out there for the Australian VARs to push two particular technologies to the end-users. The obvious one is NAS. It is important that VARs push this technology as it enables end-users to secure their data and business, and it also helps businesses improve their productively. The second opportunity for our VARs is to push what we call the gigabyte smart switches, because more and more the world is dealing with increased media files, in business as well as in the home. When you make new files and move them onto the NAS, you need gigabyte speed on the local Internet to get that done. It is time to transform the 100 megabyte switching to gigabyte switching. While you are doing that, you might as well use the smart switch technology, rather than having to pay more for a layer two.

If you are talking about customers with five or 10 seats, then a managed option will do. However once you go beyond that, then look at smart switches, which is not that much more expensive if you are talking about a 24-port or 48-port type of environment.
Those are the main two areas that the VARs can push to any business of any size as they all need it. The advantage is even with a five-person company or a 500-person company, we have the right product.