VAR agreement termination: How to avoid getting fired by your vendor

Vendors can (and sometimes do) fire their channel partners, for a variety of reasons. Find out how to avoid VAR agreement termination.

For the past 10 years, shifting dynamics in the IT industry have motivated many technology solution providers to reduce their dependence on product revenue, focusing instead on developing margin-rich services practices.

But most VARs, systems integrators and MSPs still align with specific technology vendors to develop and shape the focus of the solutions. So, it can be devastating when one of those partners decides to sever its authorization or relationship.

"You have to remember that manufacturers can, at will, remove your authorization if you're not living up to the terms of your agreement. Or even just because they perceive that you're not meeting some sort of expectation," said Marc Harrison, president of Silicon East Inc., a solution provider in Manalapan, N.J. "That's why we always have a second one in reserve."

Harrison relates the story of a situation in which he partnered with a new IP telephony solutions vendor, trained his team, bought a demonstration system and then slowly began developing his business. But because his team failed to meet its quota for the first year, it was summarily cut from the program.

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A technology solution provider might be fired for any number of reasons, usually because it isn't ramping up product sales volume as fast as the vendor would like. But a VAR agreement might be terminated for the sin of recommending competitive technologies or for failing to keep up with training requirements. Or a partner might find itself getting fired if a small vendor is bought by a much larger one that has a very different channel program philosophy -- something that probably happens more frequently than some of these other scenarios.

Silicon East overcame its situation by ramping up its business and commitment to another vendor, which sells a cloud-based solution, allowing its team to fill the gap more quickly than if it had found another hardware-based system.

How can a technology solution provider minimize the impact of being fired -- or avoid getting fired in the first place? It shouldn't surprise you to hear that there are two very distinct schools of thought among VARs, systems integrators, MSPs and other citizens of the IT channel.

School No. 1: Stay away from sales quotas

Some solution providers avoid the agreement termination scenario by staying away from business relationships that require sales quotas, although that's not to say they don't invest in training on technologies or products that are important to their clients.

"Our philosophy for our clients is not to recommend something that they don't need, so this helps keep us true to that," said Guy Baroan, founder and CEO of Baroan Technologies, a solution provider in Elmwood Park, N.J. "I don't have relationships with that sort of vendor on purpose."

That's not to say that Baroan doesn't have an opinion about which products are best, which is something that his company's engineering team tests for continually.

It's also why he has no qualms about recommending a product for which it might not receive any margin, but that might provide the foundation for a great ongoing services relationship, Baroan said.

School No. 2: Get as close to the vendor as possible

For every solution provider that strives to keep an arm's length, however, there's another that goes to the other extreme.

Atrion Communications Resources (ACR), a network integrator in Branchburg, N.J., conducts ongoing reviews to keep on top of which vendors are integral to its business. If they are "core," ACR invests in keeping certifications current, as you would expect.

It also spends considerable resources toward staying close to local contacts but also meeting with the vendor's key executives as far up the organizational chart as possible, said Pat Grillo, founder of the company. What's more, it often will commit to just one vendor in a specific product category, in order to build trust.

"I want to sell them on the value of my company. They need to understand why they need me," Grillo said.

That strategy can be effective if a solution provider's sales team is having trouble with a local contact. On the flip side, it also gives ACR an early warning sign if the relationship might be turning sour, which gives it a chance to plan proactively for a breakup.

I-Tech Support Inc also takes a similar approach to avoid VAR agreement termination, focusing on one major vendor in a given category. That helps it avoid being caught in the middle of fierce rivalries that can influence the sales team to make a shortsighted decision, said Richard Vaughn, vice president and principal for the Orlando, Fla.-based company.

While that might seem extreme and risky, it demonstrates to a vendor that your company is serious about the commitment. "It shows that we have loyalty. They know we're not going to bring anyone else into a scenario," he said.

Sometimes, that might mean stepping away from a sale where the customer's needs aren't well served. Then again, it could also become a springboard for launching new solutions or business lines that might not otherwise have been funded. Last year, i-Tech received an additional $65,000 in market development funds with one vendor alone. "In the long run, loyalty pays off," Vaughn said.

That said, i-Tech Support always keeps a short list of well-researched alternatives at the ready, should it find itself out in the cold, Vaughn said.

Heather Clancy is an award-winning business journalist in the New York City area with more than 20 years of experience. 

This was first published in February 2013

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