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Vendor/reseller agreement: Avoid midproject partner conflict

Find out how to construct a vendor/reseller agreement document to delineate rules of engagement around margins, types of services/support, marketing and training with your storage vendors.

Storage vendors and storage integrators have the same end goal -- to provide customers with solutions -- but they take different approaches to accomplish that goal. And while you share the end goal with vendors, they don't "get" you, and miscommunication can easily happen. To avoid the painful problems that can arise from such miscommunication -- which can translate to real lost dollars -- it's critical to set expectations with them through a vendor/reseller agreement document.

Before we talk about the specifics of the vendor/reseller agreement, let's examine the different motivations that drive you and your vendor partners. One of your motivations is likely to do such a good job for the customer that you will be asked to help them solve other IT-related problems, ones that the storage vendor may not be able to solve. You can't simply be concerned about just getting the solution to work but need to think about the total customer experience during a project. If getting the solution to work involves a lot of follow-up visits beyond what was forecasted in the statement of work, the customer will lose confidence. You will get paid and so will the storage vendor, but it may cost you future business. That lost-opportunity cost will likely be greater for you than for the supplier.

The storage supplier, on the other hand, is mostly interested in selling their solution and, yes, they want to solve the customer problem, but they have to make sure it is solved with their product, and they expect you to comply. If you provide multiple storage solutions to customers, for instance, you need to make sure that your storage vendors know upfront when you will provide what solution and when. Don't assume that they will see that two products in your line card are not competitive. They're bound to see it the other way around.

A written vendor/reseller agreement that spells out how and when you and the vendor will engage with each other -- hammered out before you enter into business with them -- can clarify this and help avoid conflict in the midst of a project. We're not talking about a formal contract; that could become a legal ping pong ball that might never get signed. What we're talking about is a less formal written agreement. It won't be enforceable by law, but a written document garners some respect, obviously moreso than a verbal agreement. Here's what should be stipulated in the vendor/reseller agreement document:

  • Operating principles. The agreement should spell out when you will use the vendor's products on a project, when they should bring you in to projects they uncover and how often you expect them to engage you.
  • Type of services/support. The document should also convey expectations around how a project will proceed. For example, some vendors may want the storage integrator to provide pre-sales technical resources, while others may not. You and the supplier need to be clear, from the beginning, what those expectations are.
  • Margins. The vendor/reseller agreement should also cover margin expectations. While it is true that pricing and profit margins are always spelled out in the formal reseller contract, almost every project gets special pricing due to competitive pressures or to meet a customer's budget number. Special pricing often renders the terms in the original reseller contract useless. It is important to understand how pricing and margins will be impacted given a competitive project. Don't leave this to a "Trust me" or "We'll do the best we can." While those conditions spelled out in the vendor/reseller agreement won't be legally binding, the document does give you something to stand on and a negotiating point when special deals happen.
  • Marketing. Perhaps the most important component of a rules-of-engagement agreement defines what each party does between projects. There are only so many projects going on at any one time, and there is always a need to refill the pipeline. The agreement should spell out how the parties are going to find new projects to work on together, and how they prepare for those projects. This comes down to marketing. It's important to outline what your expectations are for attracting and educating potential new customers on this vendor's solutions. What dollars and resources is the vendor going to contribute to that effort?
  • Training. Like marketing, training should be covered in the rules-of-engagement document. What technical resources will the vendor commit to help your people better implement the vendor's solutions? This is especially important if you've already met the basic training requirements. What advanced and personalized training can they give your engineers to help them during installations? And training is not limited to the technical people. What about the salespeople? Again, if sales staff members have been through the vendor basics, they don't need more of it; they need to understand how to solve particular customer problems with the vendor's solutions. One way to accomplish this: Have the vendor send their top sales guy to teach your sales staff.

The new year is an ideal time to sit down with your storage vendors and put these details in writing. Chances are high that they are going to come to you with a new reseller contract; why not use that time to set out the expectations for the year? Know upfront who is going to work with you to create new business and who is more likely to be an opportunistic partner, only there when there is a real project. You can navigate both situations to your advantage, but knowing a vendor's intentions upfront is critical.

About the author
George Crump is president of Storage Switzerland, an IT analyst firm focused on the storage and virtualization segments. With 25 years of experience designing storage solutions for data centers across the United States, he has seen the birth of such technologies as RAID, NAS and SAN. Prior to founding Storage Switzerland, George was chief technology officer at one of the nation's largest storage integrators, where he was in charge of technology testing, integration and product selection. Find Storage Switzerland's disclosure statement here.

This was last published in January 2011

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