Managing vendor relationships: When to fire your vendor

Hear from two channel pros who have faced the decision to terminate a vendor partnership, and learn how they weighed the factors involved.

No one says it's easy, but sometimes divorce is necessary -- even between channel partners and vendors. When there are irreconcilable differences or issues -- usually related to either a vendor's product or the tenor of the relationship -- it's sometimes best to just move on.

And that is what channel partners often do.

"Partners leave vendor programs all the time," said Keith Lubner, managing partner with Channel Consulting Corp., a global management consulting firm specializing in helping vendors shape channel partner strategy, design and execution, headquartered in Philadelphia.

Vendors need to create an environment that promotes partner loyalty. "Channel partners want to be loyal. After all, they're going to invest time, people and money in a vendor program. But vendors must give them reasons to be loyal," Lubner said. And not just for two or three years but for many years, he added.

What drives a wedge between a vendor's partner program and VARs, systems integrators, and the like? While the threshold for pain varies among VARs managing vendor relationships, industry experts offer a number of possible reasons for contract termination:

  • The vendor is difficult to do business with. For instance, it doesn't make it easy to know who to talk to or where to get information or provide easy access to personnel.
  • There's not enough money to be made and/or the partner wants better pricing.
  • The product doesn't work as advertised.
  • The vendor doesn't put enough enablement tools into its program.
  • The vendor's Web portal is difficult to navigate, making it difficult to find information and resources.
  • There are conflicts with the vendor's direct sales force.
  • There are conflicts with other partners.
  • The vendor has poor product or technical support.

From where he sits, Kirk Robinson, senior vice president for the commercial markets division and global accounts at Ingram Micro, said the top reason for a partner/vendor breakup is vendors competing against their partners for business.

"Deal registration is a way around that; the intent here is to protect the reseller, or it can get ugly," he said.

Vendor relationships: Stuff happens

Steve J. Roux, president of Innovative Computer Systems Inc. (ICS), a 25-year-old systems integrator based in Farmington, Conn., admits that breaking up is hard to do. He is in the midst of contemplating a split from an over decade-long relationship with vendor partner SonicWall, which was acquired in May 2012 by Dell Inc.

"There's a bunch of reasons why we shouldn't split, but at the end of the day the relationship is so broken," he said.

There's a bunch of reasons why we shouldn't split [with SonicWall], but at the end of the day the relationship is so broken.
Steve J. Rouxpresident of Innovative Computer Systems Inc.

Roux had a registered deal on SonicWall products, worth about $75,000, when a Dell rep stepped in and offered the ICS customer a Dell bundle that combined servers with SonicWall routers and undercut ICS on pricing.

"They crushed us," he said.

On top of that, Roux sought feedback on the issue but it fell on deaf ears. "We're more about selling services than products, so I would have been OK getting the revenue recognition," he said.

Roux said that the ultimate sting, however, came in an icy blast email from Dell SonicWall that addressed revenue goals, partner tiers (preferred and premier) and revenue requirements.

"That's not partnership," he said.

ICS has hundreds of managed services customers running SonicWall firewalls, and the company has made significant investments in technical/engineering and sales enablement. In other words, the company is in deep with SonicWall. If it comes to divorce, it's going to cost ICS.

Too big to leave?

While some VARs opt to divorce, others fall out of love with a vendor but stay for the sake of the customers, the investments already made or because the vendor is one of their top-tier vendors and they're, well, stuck with them.

"We see more VARs drift in and out of second-tier vendor programs than with a top-five vendor," said Diane Krakora, CEO at PartnerPath, a provider of partner program design, implementation and go-to-market model services based in Mountain View, Calif.

Michael Corey, founder and CEO of Ntirety Inc., a managed services and consulting company based in Dedham, Mass., won't cut the cord with longtime partner Oracle. But he's just not that into the company anymore due to what he calls bad business practices some years back, such as undercutting his company on licensing deals.

"I'm not going to pick a fight with a billion-dollar gorilla. I just don't sell any of their licenses. But we pay our dues and have the logo on our website -- it's good for my business," he said. "I never aggressively worked the chain of command; I just stopped doing business with them."

Corey questions whether billion-dollar vendors can even have good relationships with smaller companies. Ntirety is a $50 million partner business.

Corey does cite Microsoft Corp. as an exception to that sentiment, noting that partnering is in Microsoft's DNA. Roux agrees. ICS recently received, at Microsoft's Worldwide Partner Conference, three top partner awards, including the 2013 Partner of the Year for the Northeast Region, Marketing Excellence Partner of the Year for the entire East Region, and Sales Excellence partner of the Year for the entire East Region, all in the SMB space. Channel professionals also say that IBM is a strong vendor partner.

How to exit the relationship

All this often leaves partners questioning whether their expectations of vendors are too high. But Lubner advises partners to end bad vendor relationships.

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Both vendors and partners have something to lose when a relationship goes south. VARs lose investments and will have to reinvest with a different vendor's partner program, and smart vendors know that where there's one unhappy partner there are probably more. Customers need to be kept out of the fray.

Walking out on a vendor in a huff isn't a good idea. VARs should scope out potential new products and programs and consider how much time they'll need to make the transition internally -- that is, learn new products, get their staff trained and certified, and so on -- before cutting the cord.

That's exactly what ICS' Roux is doing. While ICS hasn't finalized its decision to end its relationship with SonicWall, Roux understands that his company would continue to support his customers' SonicWall products long after they're deployed while his engineers train on a new vendor's products.

Ongoing vendor review

To avoid a big, messy breakup that can really impact a VAR business negatively, experts have some advice for VARs on managing vendor relationships.

PartnerPath's Krakora advises that VARs evaluate their vendor partnerships, especially the top-tier vendors that they do business with, on an annual basis at a minimum.

According to Krakora, partners need to ask themselves several questions:

  • Do I get the right amount of service and attention?
  • Are product lines profitable?
  • Are they as profitable as another vendor's offering?
  • What about training, sales cycles, MDF and lead generation?
  • What about the vendor relationship or the ease of doing business?

If the answers to the questions are not favorable, it's better to be aware of that early on in the relationship to lessen the impact of a split. Monitoring these factors on a regular basis provides info that can inform a VAR's decisions about vendor strategy, possibly avoiding a bad investment in time and money.

Distributors can also play a role as a feedback mechanism for partners. Think of their partner advisory councils as group therapy -- a good place for peer-to-peer inquiry and to ask the question, "Is it just me or are other partners having similar problems with a particular vendor?"

"Our size and scale helps our partners get a voice with vendors," said Ingram Micro's Robinson.

One example of how the distributor brings together partners and vendors is through invitational events, where partners can address their needs, vendors attend to attract new partners, and partner programs and education are addressed.

Another pointer: When considering a new vendor partner program, VARs are advised to do their due diligence up front and get a clear understand of the vital aspects of that vendor that are most important to their business.

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