In the past year, Brocade Communications Systems Inc. has seen some big changes among its executive ranks. It named a new CEO, Lloyd Carney, to replace Mike Klayko, who left in August after overseeing the company's rise to the lead position in the Fibre Channel switch market but failing to reach hoped-for numbers in Ethernet switching. The networking vendor also appointed a new channel head, Regan McGrath, when its former channel chief, Barbara Spicek, moved to a European-based OEM business role at the company.
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The company is a relative newcomer to indirect sales. Prior to its purchase of Foundry Networks in December 2008, most of Brocade's sales of Fibre Channel-based products came through OEM relationships. When Brocade bought Foundry and its IP networking products, it changed that business to an indirect sales model, which remains today. On the Fibre Channel side of Brocade's business, about 95% of that revenue comes from its OEM relationships; the other 5% is fulfilled through distributors.
In a chat with SearchITChannel.com, McGrath, vice president of global channel sales and marketing, reflects on Brocade partner-related achievements and challenges of 2012, key channel initiatives for 2013, how it will help its partners transition to the cloud, hot-button issues for partners, and where partners fall short. Here is a condensed version of the interview.
What top goals did you set in place when you were appointed the vice president of global channel sales and marketing in May 2012, and how do you assess your success in meeting those goals?
Regan McGrath: My top three goals were to create excellent field engagement by having the Brocade sales team align and take ownership for the success of the channel; to leverage distribution and the skills they have in a more strategic fashion, even around the basics, such as recruitment, enablement and marketing; and to drive the back-end part of the business to make it really easy for our partners to do business with us.
One partner recently told me that this other vendor forgot that he is their customer as well as their partner. They're just not being treated properly.
vice president of global channel sales and marketing, Brocade Communications Systems Inc.
I've been with Brocade for 13 years, and for the past six years I ran the Americas sales organization, which has to do with anything that touches the customer, including the channel, so when I took over my current job I wanted to leverage where I came from to create strong field alignment with the sales team.
The team has done a great job; the field alignment is fantastic. When I talk to partners and they compare us to our competitors, they'll tell us that one of the best things about working with Brocade is the help they get from the field to help them fulfill, sell and win opportunities. The second goal, leveraging distribution, is one of the things I'm most proud of because it was a big change for our company to think of distribution in a different way, other than pick, pack and ship. Distributors can bring a huge amount of value to the table.
[Before we began leveraging distribution], we weren't stocking our products and didn't have a sophisticated or an effective way to keep the right SKUs on the shelf at our distributors. With the help of our distributors, we basically more than doubled our efficiency by having the right product on the shelf, compared to a year ago. That saves us a tremendous amount of money, and effective stocking is better for the channel and better for the marketplace. [Distribution] also helps us [with recruitment, training and marketing].
[Regarding] the last goal -- making it easy for our partners to do business with us, we've completely revamped our partner portal so [partners] can go to one partner relationship management system, based on Salesforce.com. It's one-stop shopping for our partners. It's where their business plan resides, they've got access to all our tools, they can look at their quotas, their VIP rebates, and our configuration tools, our marketing initiatives, for example. We rolled that out about three or four months ago.
We've also built an easy-to-use product configurator that allows partners to put in a competitive quote and what Brocade would recommend from a product standpoint. It's very simple to use. It replaces a complex tool that was OK for some of our expert partners to use, but too difficult for our casual partners.
We've also made it easy and cost-effective for our partners to cobrand with us on marketing and drive multi-touch demand generation campaigns. So, our partners are leveraging the tools that we give and pay for.
Which 2012 goals didn't you meet for the Brocade partner community?
McGrath: I'd say the one area we're really committed to focusing on is driving the enablement of partners and getting them more independent on our products and getting them to sell more independently. I guess this would be No. 4 on our 2012 list. We made good strides, but we can do more. We have Web-based tools, and we're working with our distributors to find a more elegant way to deliver training, especially overseas.
What are your top three initiatives for 2013?
McGrath: You never stop with alignment or distribution or making it easier to do business with. There are a couple of new ones, [such as] the opportunity around low-touch business around the low-end stack of our product line: the ICX low-end edge switches. We have a great product advantage and need to take advantage of that, so you'll see us have separate initiatives to help drive awareness.
The second initiative [is to take] advantage of some of the slip-ups of our competitors. I won't use any names, but if you look at the situation that our partners are in, they're making very low margins on most of their hardware relationships, and their relationships are getting strained because vendors are sometimes over-distributed and there [are] eight or 10 or 12 partners all bidding on the same piece of business. In some cases, vendors are telling them they're not allowed to bid in certain areas, so they're open to looking at second vendors.
One partner recently told me that this other vendor forgot that he is their customer as well as their partner. They're just not being treated properly. It's an awesome opening for Brocade to provide a better level of partnership and an alternative.
Partners tell us that what they like about us is that we're not telling them to stop selling what they're selling, which is what a lot of our competitors do. What we say is, we don't need all of your business; we understand that you may have an existing Cisco or HP customer base, but let's go work on complementary opportunities; or if there's a problem where you're selling a different product, let's go give them an alternative or let's go find those areas where those other vendors tell you that you can't sell.
The partners are getting bounded around their opportunity right now. They're getting dictated around where they can and can't sell, and that drives them a little crazy. So, we have a fantastic opportunity to be that other vendor.
What is your strategy for engaging partners in selling a cloud solution with your products incorporated?
McGrath: We have a unique financial offering -- Brocade Network Subscription [BNS] services -- a monthly subscription service acquisition option for network infrastructure, with no term commitment. It's a flexible model based on usage.
We offer BNS to our partners to build their own cloud infrastructure to offer services, or they can offer it to their customers.
Is Brocade planning to help partners transition to a cloud-based business model?
McGrath: Our biggest strategy is to help our partners out financially -- and that's BNS. Next is helping them leverage technology that's built for very fast provisioning, and that means automation, and our 'Ethernet fabrics' -- which is the perfect platform for cloud service providers.
The third area is helping partners plan for cloud -- using our expertise to help them with where and how they should focus and how they should architect, specifically, networking and cloud.
What would you say are the hot-button topics for the channel?
McGrath: No. 1 [is] margin. Partners are telling us that their growth and profit is going into software and services. Today, if a partner doesn't have 50% of revenue coming from services, I'd be surprised. Most of the successful partners have transitioned their model so they're less reliant on margins from hardware.
[Next is] distribution. All partners need to take a hard look at the distribution partners they use. There's a great amount of variation between the distributors, and depending on what business you're in and what you need, there are some very strategic offerings [that] distribution can offer partners.
[Then there's] technical expertise. Customers are asking more from partners. Partners now have to be experts in servers, storage, virtualization, VDI [virtual desktop infrastructure] -- you name it. The complexity that's coming at customers right now is getting transferred to our VARs. They're up against it to provide an increased level of service to their customers. So, a hot topic now is whom do they partner with, because rarely will they be able to deliver all the services that customers are looking for.
Finally, marketing. Partners have to be much more creative about getting customers to hear their story and our story. How do they optimize their MDF [market development funds] to get the right customers?
How big is Brocade's partner channel?
McGrath: There are about 300 to 350 managed partners -- that would be our premier and elite partners we have resources dedicated to and business plans associated with -- and a few thousand unmanaged partners worldwide. In the U.S. there are about 200 managed partners.
Four years ago when we purchased Foundry, we changed Foundry's go-to-market model, which was direct, into a channel-oriented model, or a two-tier distribution model, and we've been driving that with a more focused and predictable model in the last year and a half. And that is where we've directed our field organization, other than in very specific accounts, every piece of business goes through the channel -- about 75% of our business now, worldwide, goes through the channel on the IP side of the business.
What do your partners need the most?
McGrath: Technical competence and/or marketing competence. It depends on the partner, but very rarely are partners great at everything. We have some partners that are very technical but challenged on the marketing side. And others are great marketing-wise but not so great on the technical side.
That's natural. That's how these companies started and created an identity for themselves. Not unlike vendors trying to expand their capabilities, I think partners are trying to improve what they're not so good at.