Romancing the VARs

Channel programs, akin to piñatas from vendors, are a glittering reminder to resellers that rewards come with their own set of challenges.

The incentives can be bountiful for authorized and certified resellers, as those can attest who receive a shower of large rebates from tier-one vendors.

In some programs, including those offered by IBM, channel partners might earn double rebates for winning new business from their rivals’ accounts. In addition, many hardware and software vendors are revamping or boosting their channel programs to entice partners into their fold.

But rewards are also tough to earn, the paperwork tedious, and their management difficult. With so many channel programs, many players might wish for a program to manage their channel programs.

Help might be on the way as channel programs evolve, and companies continue to invest in the channel.

In the past year, Patricia Meta, partner development manager at Mississauga, Ont.-based Microsoft Canada, says the company has increased marketing and resource spending in the channel between 25 and 30 per cent. A large portion of that investment pays for inside sales representatives who work with partners, while other spending is for technical support and marketing tools.

One of its recently revamped tools is its Partner Direct online marketing program, which supports resellers, system builders and independent software vendors. ISVs, for example, who want to develop marketing brochures for their own products, can use Microsoft’s pre-approved guidelines and graphic images.

The software giant this month also announced it’s shaking up its criteria for entry to its programs. Among other things, the reseller, ISV or solution provider’s specialization or sales will weigh into the evaluation process that determines the partner level.

At last count, Microsoft Canada recognizes more than 1,000 Microsoft certified partners, more than 50 Gold certified partners, 2,000 VARs and 2,600 system builder partners.

Under its new program entry criteria, Microsoft will know where its partners specialize, Meta says.

Dave Walsh, vice-president (marketing), at Ingram Micro Canada, says the industry trend is target marketing.

“”The targeting requirements of marketing programs over the past five years has heightened tremendously,”” he says. “”There used to be a time when broad-based programs — as broad-based as Ingram’s product line could get out there with the right noise and the right messaging and be tremendously well accepted.””

But the market is driving change. Soft demand for IT products has made a dent, he suggests. As well, technology solutions in 2003 are unlike those in 1996 when most companies were just starting to put their infrastructures in place. Now they’re looking for more advanced solutions.

“”If you picture an archer’s target on the wall — the target used to be the entire target,”” he says. But now, vendors and their channel partners are focusing on inner rings alone, he says.

“”Targeting is imperative, whether it be a niche or vertical,”” says Walsh. “”It has to drive to a vendor’s objective.””

Gary Isaacs, director (business partners) of Markham, Ont.-based IBM Canada, says the company has increased its investment in channel programs in the past few years, and it doesn’t aim to have the most number of partners.

“”Our strategy is to have a relatively small number of partners who work closely with IBM and promote IBM,”” he says.

“”One of the things we’re trying to stress with our business partners is that we feel and I hope that they feel that out of all the manufacturers, we’ve been the most consistent with the channel.””

As for IBM’s future, he says, “”We’re not looking to do a sharp left turn or a sharp right turn one way or the other. Consistency will remain important for us.””

Education plays a very large role in IBM’s program makeup, he suggests, as well as SMB strategies.

Meanwhile, resellers are separating the glitter from the gold in channel programs.

Greg Larnder, Compugen’s vice-president (business development), says his preferred channel programs are designed by channel-friendly players.

“”The most effective are very much committed to the channel,”” says Larnder. “”So there’s no wiggle room. Their programs have meat behind them because there’s no other option for them. They must make it successful with the channel.””

On the other hand, Larnder says some vendors don’t want to fight the channel, but they don’t always want the channel to win because they’ve got their own direct sales. “”So you’ve got to keep the channel happy enough to participate and yet, always leave the back door open if you want to take the business direct.””

His solution?

“”I do not allow the vendors in front of my sales force to talk about their products. I seldom allow it. When I do allow it, it’s only vendors such as Toshiba or 3Com, who are committed to the channel. So they’re getting access to my entire sales force to explain why this product is best. Whereas the (others), there’s no benefit to me to train my sales force on their product line. There’s too much risk involved.””

Such vendors as 3Com and Toshiba depend on the channel for revenue because they don’t offer direct sales, like Dell.

3Com Canada’s Gavin Fick, national channel sales manager in Mississauga, Ont., describes his company as 100-per-cent channel player.

“”The programs are, I believe, the glue of our channel. It enables us to create a partnership with our channel partners, and I think it’s been very successful for us. It’s a major go-to-market strategy,”” he says.

3Com’s objectives this year include more authorization programs on products. The programs themselves typically include price discounts and tailored marketing information, promotions and targeted e-mail updates on product lines and the marketplace.

“”3Com products are scaling up in terms of the customer base that we address. In the past, we were an SMB player. We have just recently announced and begun shipping, in some cases, a whole new broad offering that will address the enterprise market. To address that market, we have to address it from a support standpoint.””

In his experience, Larnder says channel programs can prove difficult for resellers. It’s a lot of work to stay on top of them, and make sure the solution provider is getting the biggest bang for its buck. For example, he says, resellers might find they’re out of luck if they fail to cross all the T’s and dot the I’s.

“”If you make one mistake on a deal that could have been possible you lose money.””

It’s really a Catch-22 for resellers, he suggests. Resellers who don’t partner with vendors won’t operate with much success, and those that do can barely afford to play.

“”They help you in the marketplace — better dollars or better support — so managing these programs is enormously expensive for an organization such as ours,”” Lardner says.

In some cases, resellers might find they need an extra person on staff to try to manage the programs and track down the best incentive programs.

Michael Bongiovanni, senior vice-president (sales) at Accpac International, says his company has spent a lot of time refining its channel program to serve partners well. Typically, Accpac dedicates about one-third of its total marketing budget to support channel programs. That translates into millions of dollars in direct investment.

Dedicated staffing in tech support, channel sales and marketing and other areas are on top of that, and the investment continues to increase year over year, he says.

“”We know the investment for a VAR in bringing on a new product can be tough on business. Typically there are initial fees, training costs, and in most cases, pretty low margins because you don’t have

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