The essence of our channel program is a value-based program, and we believe very much in the fundamental idea in partnership of reciprocity. … We put a lot of emphasis in our partner program into recognizing when our partners invest in us and reciprocate in that. That can be as little or as much as is appropriate. On the "little" side, we recognize new opportunities that partners bring to the partnership. When they talk to their existing customers or generate new demand, we recognize each and every opportunity and whether or not it's partner originated and which partner brought it to us. We have a lot of rules of engagement and recognition and rewards built around that central concept. On the other end of the spectrum, in more mature partnerships, we will have business plans and joint marketing plans. … We really structure our program around [reciprocity], whether it's our margins, or our marketing programs, or how we rank partners from a profiling perspective. What are the benefits of being 100% channel?
I think probably the biggest benefit for our partners is trust. They don't have to worry about deals going to other partners. In some cases, we hear about vendors who learn about a deal from a partner and then end up engaging another partner. Or end up taking it direct, which is even worse. … It's in the DNA of our company, whether you're in the marketing department or product management or engineering or customer support. Every single project or initiative we do has direct consideration for how it impacts our partners. Is that how you pitch Sophos to potential channel partners?
If you have some customers who you think might need some help, we'll work with you and provide you with a couple of simple questions that you can ask that are sort of 'by the way' questions. If you're talking to your customer already, "Oh by the way, what are you guys doing for encryption on your laptops?" for example. We give them two or three quick questions to ask and we ask them, "Do you need help in any of those areas?" And if they do, we have someone at the other end of the phone or the other end of the email here to help you immediately. As soon as you uncover that one of your customers or prospects has the door open and would like to talk about how to solve a particular problem, we have people here who will engage with you in the sales process from the first conversation on, and that's a big deal for partners. The challenge for them is "I can't raise a question or introduce a topic to my customer that I don't know anything about, because that's a risk to me and my credibility. And yet at the same time, I'm too busy to learn everybody's approach to technology." What is the latest on your channel effort for managed services?
We have a whole range of different partners who offer managed services currently. Some of them are very large organizations like telcos and ISPs. And some of them are very small organizations that maybe have a dozen or two dozen people, and they have their roots as a value-added reseller or systems integrator. In the past, it has been very informal. Every partnership has had its own contract, and its own terms and conditions and pricing. What we're seeing in the marketplace is that there is a lot of adoption of managed service programs and offerings within the VAR space in particular, so we feel it's appropriate for us to formalize our programs and take a more systematic approach to how we do business with those types of partners, in particular. We are in the process of creating a formal program, which we will offer globally, and which will allow those partners to utilize a range of different Sophos technologies in their managed service offerings. It will be structured from a billing perspective such that it matches the cash flow of their business, provides marketing support and content for them to use, and also provides some very important technical support in the way of tools, scripting support and APIs into our products. A number of those [features] are things that we really haven't done at all or we haven't done systematically in the past. What are some of your most recent channel program innovations? Any new announcements?
What I can share with you right now is that we will be doing a major upgrade release to our online systems for our partners, and that's going to be beneficial to partners worldwide. In particular, we have a system which allows them to come in and have a dashboard of all of their business with us: all of their current licenses and renewals, all of their current quotes and opportunities and deal registrations, pricing, etc. We're making a number of improvements and enhancements to that system, which will be very beneficial both from an ease of doing business and efficiency standpoint. …We will also be working on enhancements to our e-commerce platforms. Right now, we have been doing a pilot in North America for a limited number of partners that gives them e-commerce capabilities both on their website and otherwise, and we'll be expanding that in a number of stages throughout the year. We're really working to provide scalability in the small business and very small business segment to allow partners to better market their value proposition, their website and provide their customers with the ability to do new and renew transactions right off their partner's website or right off of Sophos.com and have it be designated for a particular partner.
Endpoint security seems to be a big focal point for customers these days. Particularly, they're focusing on data loss prevention, compliance and other issues that are really must-haves at this point for business. They're struggling with the ability to cover all of those things, still having a limited budget and a limited staff to be able to deploy new technologies or even configure existing technologies. We have DLP solutions which are a modest extension of their current endpoint security budget and resource capabilities. We have solutions that are very straightforward to deploy; very straightforward for our partners to take to our customers and activate. … When we do enhancements and upgrades to our products, our existing customers just get that. They don't have to do a forklift upgrade to another product. That's just included in their Sophos licensing. There are a lot of opportunities now for a partner to work with a customer to simply turn on things like application control and device control and encryption that we've offered to them as part of the core product. …Web security continues to be a big concern, and a lot of malware and attacks are coming through malicious websites now, not through email, so that's an area of strength for us and where we're seeing a lot of growth in. Encryption in the email space is another area from a compliance standpoint that's been a hot topic. How important is certification to your partners?
We require it in the upper tiers of our partner program. You can enter our program without certifications, but if you want to move up, you need to have both sales and technical certifications. It's an obvious investment that every partner can afford to make -- which is to spend some time to better understand how to sell and deploy our products, and that'll make them a better partner. If they're invested in the partnership, they'll make that investment, as long as it's not too big. We structured the first level of all of our certifications -- both sales and technical -- so that they are very manageable amounts of work. You can get a sales certification, a level-1, with us, which is what we require in about 2 hours total. There are three 30-minute online self-paced recorded presentations that you can watch, and then you take a simple assessment to earn your certification. For those folks that want to go beyond that level, on the technical side in particular, we have multiple levels of further certification that they can go into so they can differentiate themselves and make their business more predictable and profitable. What kinds of training do you offer solution providers that they may not be aware of?
We take an approach to solution selling, which we refer to as "value messaging," and it's really about not focusing on products, features, benefits and all of that traditional product-based selling. It will help partners recognize the biggest issues that their customers are likely to be facing right now, and take an approach of understanding what's the potential value to the customer for solving that problem --specifically looking at their current state and what their future state can be and what the financial and business benefits are. Then take that approach with respect to solutions and choose the right product that fits into that, as opposed to doing it the other way around. We have several sessions online that we make available to [partners], and we also do classroom-based training of various levels as well. That's something that Sophos bears 100% of the cost on, and it's something that we've done in concert with one of the leading sales training companies out there. How do you bring the resources of SophosLabs to bear for the channel?
SophosLabs is the intelligence and the threat engine behind all of our products. It's a global network that provides continuous updates to our products. The default setting for them is every five minutes for them to get an update, and those are very small updates. … Secondly, we provide a lot of information to partners that help them understand what's going on minute-by-minute -- whether those are threat alerts, or it's our semi-annual threat report, which really takes a very broad and holistic view of what's going on in the industry and what their customers are being faced with. There's minute-by-minute blogging from our security experts to their security experts. We provide a lot of different data for our partners to consume when they're talking to their customers to provide better support. It's not just about our products. It's about them being able to advise their customers about what's going on: what the latest threats and risks are to their environment and how to go about providing solutions that will address those. What are the top challenges you hear about from your channel partners?
Obviously the economic conditions continue to be challenging. …The business is under a lot of pressure financially. There's a lot of competition both from other resellers and other vendors. They're telling us that they're seeing a lot of pressure there. They're also seeing margins being under pressure as a result of that competition. There's a lot of discounting going on in the industry, which is making it hard for them to maintain their profitability and to fend off some of their competitors when they're working with a customer. ...I think security technologies have come a long way in the last couple of years, and they're really just having a harder time getting the opportunity to work with those technologies and help those customers and win the deals, much less so that they have very complicated solutions that don't work.