Less is more for Red Hat VAR program

As Red Hat moves into virtualization, middleware, it must add VARs, but its direct sales rep may hurt.

BOSTON -- Less may be more when it comes to Red Hat VARs.

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Many Red Hat Enterprise Linux (RHEL) partners beef that while they crave the Red Hat brand, which is huge in financial services and government accounts, they continually spar with Red Hat reps for services business -- and that channel conflict leaves a bad taste in their mouths.

The CEO of one New York metro area VAR said his company will keep its Red Hat badge but continue to lead with Novell Inc.'s SUSE Linux Enterprise Server, citing conflict with Red Hat over services and what he said was superior Novell support.

"Red Hat takes all enterprise sales and most service direct," he said. "That doesn't leave us much."

In recent years, Red Hat has expanded into the middleware and virtualization markets. And now, as Red Hat tries to reposition itself as a cloud power -- with enhancements to its cloud platform provider program, announced here at the Red Hat Summit -- the company faces a delicate balancing act: adding to its cadre of partners while remaining selective so existing partners can be profitable.

Red Hat fields six Premium partners, 39 Advanced partners and 1,397 Red Hat Ready partners in the U.S. Mark Enzweiler, Red Hat's vice president of global channel sales, said the company is more interested in quality than quantity when it comes to partners.

"We don't want to sign up anyone who can fog a mirror," he said. "We do selective recruiting. We like to optimize the partners we have."

All vendors must weigh good geographical and technology coverage from partners against recruiting so many partners that the individual VARs end up competing with each other and driving margins down.

But several Linux VARs interviewed said they could do brisk Red Hat business if only the vendor would stop competing with them both in sales and services.

One California solution provider who started down the path gave up, saying it was just too hard to be profitable as a Red Hat partner.

"You don't make money on the software," he said. "You have to have the services, and they have a big service arm."

Red Hat Cadillac partner program?

Red Hat's model brings the Cadillac of Linux distributions to market through a few Cadillac VARs and systems integrators.

That may work fine in the enterprise, but Red Hat could run into trouble penetrating small and medium-sized businesses (SMBs) where Novell, despite its well-documented problems, is a big player.

"We are a Red Hat partner, however our SUSE sales have doubled over the past year, so we have paid more attention to Novell/SUSE then Red Hat," said Gregg Rosenberg, CEO of RICIS, a Tinley Park, Ill. VAR.

On the other side of the coin, the select VARs that eat and drink Red Hat Enterprise Linux (RHEL) and its related products say they are the stronger for it.

DLT Solutions, based in Herndon, Va., is one such VAR. With a strong focus on government and education accounts, DLT does not sell Novell or other Linux flavors. Its other vendor partners include Oracle, Quest Software, Autodesk and Symantec. That selectivity helps it go deep with the partners it has, said Jim Propps, director of enterprise platforms.

Growing pains for Red Hat VARs

As Red Hat expands its portfolio -- by acquiring JBoss and its middleware, adding virtualization, etc. -- it has to see which Linux partners want to add middleware or virtualization to their bag of tricks. But it also must protect the current VARs.

"We don't want to force a JBoss partner into virtualization or RHEL," Enzweiler said.

Sirius Computer Solutions, a big IBM VAR out of San Antonio, Texas, came into Red Hat's fold after the acquisition of Qumranet, Inc. in September 2008. Before that, Red Hat had too much of a direct-sales focus, said Rex Russell, director of servers and alliances for Sirius.

"We had a relationship with Red Hat before but weren't real active," he said. "We'd fulfill if that was what the customer wanted, but there was no real differentiator between Red Hat and SUSE."

Russell said Red Hat's services capabilities are actually helpful for Sirius, but that may be because his company's business is just 10% to 20% services, not 80%. Sirius often calls on Red Hat to provide coverage it does not offer, he added.

JBoss VARs with strong middleware practices see more conflict than other Red Hat VARs -- a fact Enzweiler acknowledged. He also noted that Red Hat's virtualization push will add even more services opportunities for VARs.

When Red Hat purchased JBoss in 2006, many partners could fulfill services on JBoss paper and acted as subcontractors on a lot of work, said one partner who declined to use his name. But in 2008, Red Hat bought Amentra, a JBoss services specialist, and that caused quite a bit of concern, this partner said.

The Red Hat direct sales force gets paid on software deals whether they go direct or through a partner, but services sales are not similarly "compensation-neutral," Enzweiler said.

Red Hat sales reps do not get paid on partner services sales -- which Enzweiler said are mostly in middleware -- so there is bound to be competition for those sales between channel partners and Red Hat reps. If the partner registers the deal, however, "we will not quote any services on that deal," which should cut down on contention the field, Enzweiler said.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com, or follow us on twitter.

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