While most manufacturers are providing clear 'rules of engagement' on direct/indirect sales for their channel partners, account managers' egos and a lack of trust in the value dealers bring to the table is causing pain for channel partners.
At the same time, multinational vendors operating in Australia are confused about direct and indirect sales ratios and are often following the directive of their US-based mother companies, according to attendees at [ita]CRN[end]'s quarterly Channel Roundtable.
Frank Colli, managing director at one of HP's largest Australian resellers, Leading Solutions, puts it simply: 'HP has a set of engagement rules which are very good. The problem is that they are a large organisation which employs thousands of people and at the end of the day, some [vendor] salespeople don't have the integrity that the organisation has.'
He says a small proportion of vendor sales staff are often aware that a reseller has done six months' work on a deal, but close the deal direct anyway. 'Suddenly, this guy is a hero because he brought in a five million dollar piece of business [and] the fact that he screwed someone over in the process is almost irrelevant,' Colli says. Michael Bosnar, managing director at distributor Exeed and Colli's business partner, says local subsidiaries of international manufacturers are adopting the mother company's direct/indirect sales split which does not wash with Australian channel partners.
In this case, he provided the example of HP adopting a 50:50 split in direct and indirect sales in the US with the local subsidiary following suit. 'Then what happens is the [local HP] sales guys think: 'Well hang on a minute, we can do direct, and all of a sudden we've got this right to go direct and I've got to justify my job', he says. But smart vendor account managers are quickly realising that channel partners have better back end systems, he says. 'The smarter account managers are now looking at delivering it [fulfilment] back through the channel. The smarter ones are looking at their scenario because of the back-end issues that they have to contend with,' he says. Alstom IT general manager Chris Hale says the US-centric models of the multinational vendors is a big issue. 'There are a number of vendors in Australia who don't have centralised control because there's all the stove pipes going back into the States. If you've got an MD of a [multinational] vendor in Australia, his balls have got to be on the line,' he says.
Colli adds: 'If I look at HP, the rules of engagement are clear and understandable – but the problem is when you've got thousands [of staff] you are going to have a few people that are going to have [their own agenda] and you can't stop that. That is the problem where the model falls apart,' he says.
Logical managing director Stuart Hendry concurs. 'When there's a combination of direct and indirect business – who decides? When vendors let the account manager decide, that's the problem.'
Express Data managing director Ross Cochrane adds: 'It's almost a little bit like the statement – "We're a company with principles – if you don't like these ones we've got other ones",' he says.
All attendees at the roundtable agreed that once management at vendor organisations relinquish responsibility and all their sales teams to make policy decisions, the model falls apart. 'Every single issue I've had with a vendor goes back to that,' says Logical's Hendry.
On the flipside, however, vendor management must give their sales staff the authority to make these decisions. But vendors need to provide better incentives for their sales staff to engage the channel, according to Alstom IT's Hale. 'If the vendor said: 'OK, for every sale you get, if it goes through a channel partner, you'll get 110 percent of whatever the dollar value is. But if you take it direct, you won't get recognised [for the sale],' he says. 'That's the whole bloody problem. I understand that there are some deals that need to be taken direct – they've declared that it's their account and the partner can take their own risk going in there if they want,' he says. Express Data managing director Ross Cochrane, says the channel must accept that certain vendors will continue to sell direct. 'It's going to happen all the time, it doesn't matter what the rules are. That means it's going to be volatile and the rules will change as you go along,' he says.
Client egos will get in the way, as well as the belief that the customer can always get a better deal dealing direct with the manufacturer, says Leading Solutions' Colli. 'The sad thing is that 95 percent of the time once they [the customer] deals with them [the vendor] they hate them. The level of service the dealer gives is different.' Colli says vendors undercutting resellers and taking deals direct only happens 3 percent of the time, but becomes a big issue for the channel partner. 'In 97 percent of our business there is no conflict but 3 percent of the time it does happen and it has great exposure,' he says.
'I'd ask anybody who deals with a vendor that goes direct and more than 5 or 10 percent of your business is in conflict, then why are you dealing with that vendor? It is only a small percentage but the problem is that within your business it causes a lot of pain and stress,' Colli says.
Veritas' technical services manager, Jamie Pride, says vendors have the responsibility to have the right channel in place. 'Underlying this conversation is that vendors don't necessarily have faith or trust in their channel partners and so they're second guessing.
'One of the responsibilities of the vendors is to make sure we are confident in our channel partners. Not enough of that due diligence is done. The lack of trust on both sides certainly presents itself,' he says. 'Secondly, there's the exclusivity argument: "Are you going to push our products and only our products?"' he continues.
'If you're a systems integrator and you say you add value, then you need to push other products as well because that's where you add value, so that's a Catch 22. From a vendor's perspective, they want to own the deal,' he says. Express Data's Cochrane adds that vendors have not changed their respective strategies with the market. 'Very clearly in the growth days when the market was growing – the strategy for a vendor was coverage. Sign up as many Gold, Silver, Platinum, Bronze, Tin – get the coverage and you're going to be in every deal.
'Suddenly the market's changed and started to contract and vendors haven't changed their tune. Instead of driving change in the end user mind-set by delivering an argument that they should invest in technology – they have continued with the strategy for the growth market.
'All the margins have gone down – no-one's doing demand generation and what you've got is a channel that is today in a lot worse shape than it was two years ago,' Cochrane says.
He says very few resellers today have strong balance sheets and vendors have not changed their sales strategies in tune with the shrinking IT market and picked partners that are going to be in for the long haul. 'Let's not just let this level playing fie
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