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What's driving supplier-channel relationships? |
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By Sean Gallagher
03 Oct 2006 | SearchITChannel.com
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As we prepared to launch SearchITChannel.com and its daughter sites over the past few months, I spent a lot of time listening to people who labor in the information technology channel and those who run the channel programs at a number of major IT companies. I took away two major themes: Vendors are as hungry as ever for channel partners; and resellers, integrators and consultants are more suspicious than ever of vendors.
The reasons for the former are pretty clear: Regardless of how much they invest in direct sales and services organizations, the major IT players are utterly dependent on the channel to get their product in the hands (or the data centers) of most of their customers. The reason for the suspicion is equally evident: Channel companies increasingly see suppliers' services efforts and other initiatives competing with them for customers.
Microsoft, IBM, Hewlett-Packard and other major tech suppliers spend billions of dollars on their channel programs, and for good reason -- the channel is the only route to most of their market.
Microsoft has perhaps the biggest partner program of them all, with an annual budget of about $2 billion, according to Allison Watson, corporate vice president of Microsoft's worldwide partner group. And there's a simple reason for that. "Over 96 percent of Microsoft's revenue flows through our partners," she told me.
While that number includes original equipment manufacturers (OEMs) who ship Windows preinstalled, and big-box stores like Best Buy, Microsoft depends on value-added resellers (VARs), systems integrators and consultants to deliver its products to small and medium-size companies. "For 42 million customers," Watson said, "our only go-to-market route is our partners."
Even suppliers with their own dedicated services businesses depend heavily on the channel. IBM officials said that between 35 and 40% of the company's revenue comes through "skill partners" -- VARs, systems integrators and consultants. "We can only reach 10% of the market with (IBM Global Services)," said Buell Duncan, IBM's GM of ISV and Developer Relations. The other 90% of IBM's potential market, he said, can only be reached by partnering.
That's why IBM is offering a partner certification and advertising mark program for service-oriented architecture, and offering free product training and certification to members of its partner program. In our meetings with IBM partner program executives, they also played up IBM's ability to do joint sales and to provide access to leads.
All this additional love for channel partners apparently is starting to have an impact for IBM. Susan Eustis, president of Wintergreen Research in Lexington, Mass., told SearchITChannel.com news director Kevin Fogarty, "Three years ago partners were saying 'IBM has dumped on us and treated us like dirt. Now they're saying that IBM is much better; that it says it needs them. And it's true that IBM does need them. It can't get into those smaller and midsized companies without them."
IBM's change of heart is hardly unique -- since tech vendors have identified small and midmarket businesses as their best hope for growth, almost everyone is trying to get cozy with the channel again. But not all of them are following the same warm-and-fuzzy path. And many systems integrators, consultants and VARs distrust the quality of the leads and other information that they get from their vendor partners.
That's probably not going to change anytime soon, unless the forces of the channel market shake vendors up.
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