This month, SearchITChannel caught up with NetApp's channel chief for the Americas, Regina Kunkle , to talk about her goals, challenges and how NetApp partners make money. A 10-year employee with the company, Kunkle has been serving in her current post as vice president for the Americas channel since August 2013.
According to Kunkle, 80% of NetApp revenue is through the channel -- a number that's increasing annually. About 95% of NetApp partners -- 750-plus -- are traditional resellers that go through distribution. Systems integrators and service providers add about 200 additional partners to the roster. NetApp has been shedding partners over the past couple of years after the number of partners in its partner program swelled. Kunkle explains why.
Talk a bit about NetApp partners and the company's Unified Partner Program.
Regina Kunkle: We're very dependent on the channel and rely heavily on our distributors Arrow and Avnet to help us streamline and be more efficient.
About three to four years ago, there was an exercise to sign up a lot of partners. We had come out with FlexPod, an integrated stack with NetApp and Cisco, and signed up a thousand or more partners. But what we found is that storage is a unique beast and it does require some sophistication. It's not a commodity product. So what we found was that the return we got for signing up all of these partners was very low.
We're really looking for a value play rather than a commodity play. And, like most vendors, we spend most of our time with the top 100 partners. And the rest are great. They bring in opportunities, and we work with them in different parts of the country from time to time.
Regina Kunklevice president for the Americas channel, NetApp
So we continue to add partners to our program and we let partners who are not active lapse. We look for gaps in our coverage and recruit partners for that, but we just don't take anyone who raises their hand and says they want to be a partner. If you have a sophisticated product where the average selling price is $150,000 to $200,000, you want your partners to be more enabled and trained, and, therefore, you're probably going to have fewer of them.
Last summer, we launched the Unified Partner Program. It's a worldwide program that unifies all partners under one agreement for terms and conditions. However, the program and requirements are different for partner types: VAR, service provider and system integrator.
This was a small change to our partner program. We're looking at doing a major relaunch of our program next year. For example, in our current program partners move up the tiers -- Gold, Platinum and Star -- based on volume. Next year, we'll probably shift to a volume:value ratio where certification and expertise will count toward a partner's status.
What are your top three goals?
Kunkle: Number one is … we have a tremendous flash offering and we had a huge [fourth quarter] in flash … and partners are really embracing our flash strategy and selling it in a big way. So we're doubling down on that, and we've got some special promotions and special pricing and other things we're working on with our partners to get our flash story out there. That's a big focus for me for this year, because I believe that this is going to grow exponentially for us.
The second goal is to continue to grow. We've doubled down in our investments as a company, and we've enjoyed growth and want to make it even stronger. So, as a company, we're looking at how we go to market. And if we focus on the right opportunities, we'll have faster growth. So, I'm focusing on those parts of the channel that can bring me more growth quickly.
The third goal, and one of my top priorities, is to have the best channel program in the industry. When I talk to partners, they really like the basic underpinnings of our program. It's a very profitable program. The good news about storage is [that] because it is a higher-end sell, it's a higher-margin sell, and that means higher margins for the manufacturer and higher margins for the partner.
We have a very well loved deal registration system that we honor and stand behind. Some of our competitors, you register a deal as a partner, get halfway through the engagement, and the vendor sees it as too good a deal and takes it direct. Or they look at the deal, don't like the way it's going and think, "We own it, and we're going to take it over." We never do that. We live by the sword, we die by the sword. Our deal registration system is paramount and our partners love it.
Our partners make a lot of money on the front end of the deal, and they make a lot of money on services that they add because we don't compete with them. When you look at NetApp, our services organization is small, and that's on purpose. We've kept it as small as we possibly can, because we want our partners to do most of that work. That's why we give them our tools, give them training and invite them to two to three week boot camps to learn everything about our technologies. There's a big service drive not only around our equipment but the other parts of the stack.
Lastly, we have a very robust rebate program. Partners get rebates for volume, rebates for selling certain products, rebates for doing certain activities. And partners get significant MDF [marketing development funds] money.
So these three things together make us one of the most profitable manufacturers out there. So it's a priority for me to keep the NetApp partner program at that level.
What are your top three challenges?
Kunkle: Focus. I'm a big believer that with focus -- if you pick two or three things and do them really well, it's a lot easier than trying to do 20 things. Focus is hard, because there are a lot of channel partners and things pop up and take [it] away. So, I'm trying to design an organization that gets that focus yet is flexible enough to handle the situations that pop up. That's something we're working on.
Did partners complain about lack of focus?
Kunkle: They really weren't complaining. It's just the world we live in. We reorganized my team this year to spend time in a way that makes more sense. We worked with our distributors, and the response has been very positive. It's not that they were complaining about it, but now that they've seen us work this way, they like it better. It was a nice surprise, but the results will be in the numbers.
We reorganized the field organization, our sales people. We had gotten to the point where we had a lot of different districts with a lot of different specialties. So when a partner would try to engage with NetApp, they would go to one team for financial services, another team for medical, another team for something else, and that was fine. But partners deal with many manufacturers, and it's hard to keep it all straight.
So one of the things we decided was to realign in the field. For example, if you're in Iowa, you're going to have one team that covers all of Iowa. All lines of business will report to one manager. It makes it very easy for a partner to align and engage with us. They no longer have to remember three teams and three managers. This move was very well responded to.
Because of that change, my team can be more focused.
Kunkle: Hmm … we're a Fortune 500 company at almost $6.5 billion in revenue. I'm launching new programs all of the time and hope to launch a couple very soon. Just getting the word out on the street -- the promotions, getting the programs out there and seeing which ones resonate with the partners. So, executing at the speed that we want. It's a challenge but one that we're working on every single day.
In the time that I've been in this job, I've launched three very extensive programs that added new money into the system. Partners were very excited about that. I launched a flash rebate, a Clustered Data ONTAP that is a premier operating system rebate, and then I launched a targeted high-end account program where if partners sold into a top account, they could get significant rebates. All of these programs have been very popular. They infuse new energy and momentum into the work our partners are doing.
Is there a third challenge that you're working on?
Kunkle: I'm pretty satisfied … I love my team, our coverage model [and] the partners that we work with. Ending in June, we refreshed our product line, so the opportunity for partners is huge. They can refresh their installed base and also grab new business. It's a great time to be a partner with NetApp.
I can't really come up with a third challenge.
Does NetApp have a direct business?
Kunkle: Direct business is a handful of accounts. If you look at any manufacturer, there are some top 50 accounts worldwide and those tend to be quite large. They're doing hundreds of millions of dollars worth of business. That handful of accounts tends to be direct.
What I find is that when you get up that food chain to those top accounts, they're not usually all direct. I've done an analysis of the top 25 and most of them work with multiple channel partners -- the average being six. At first, I scratched my head and wondered, "Where's the efficiency in that?" But these companies are usually multinational, so they may have a partner doing a virtualization project in California and another part of the company is doing an SAP project and another part of the company is doing direct business.
Once I figured it out, I liked it, because the whole point of the partners is to give us leverage. Our team can't be everywhere.
Once you get beyond these top accounts, everything else is pretty much channel.
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