More than 18 months after its emergence from bankruptcy, Peregrine Systems is making a recommitment to the channel, its best path back to solid profitability.

It wasn't so long ago that the road ahead for Peregrine Systems looked bleak. Less than two years ago, the enterprise software vendor was shrouded in bankruptcy, executive management turnover and poor channel confidence. Since then, however, the company has staged an impressive comeback with a new CEO, better product support and yes, a more comprehensive channel program, one that continues to evolve as the company realizes its products can be more strategic in an organization's total IT scheme.

"We are emphasizing our partner programs," Peregrine Senior Vice President of Strategic Initiatives Russ Mann told me recently.

"This year our focus is on investing in our partners. We will only recruit new channel partners that fill a select skill gap. We value those that have stuck with us. They stuck with us and we are sticking with them," he said.

Although any VAR or integrator is always wary of an unstable supplier, Peregrine has gone a long way to reassure its channel partners that the past is just that—past.

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The company is accomplishing this two ways: a stronger financial backbone and a reinvestment in its channel program to help VARs and integrators sell its wares.

Case in point: Last week Peregrine reported results for the third fiscal quarter of 2005, which ended Dec. 31, 2004. The "successor company" as it is being called following its emergence from bankruptcy in August of 2003, recorded an increase in revenue to $55.2 million for the period vs. $44.7 million for the same quarter for the fiscal year before. Net income—and yes there was income—came in at $1.9 million for the third quarter. This compares with a $6.4 million loss for same period a year earlier.

This alone goes a long way to make VARs more comfortable supporting the company.

But Peregrine executives realize it was the company's relationships with its partners that helped it turn the corner. They even said that publicly.

"We know we are an enterprise-class software company. We work with our partners and recognize the value they create for us," Mann said. "We are expecting to grow our channel revenue and channel services business," he said, adding that its partners currently account for about 40% of the company's overall revenue stream.

And this appears to be more than lip service. In my day I have seen many companies claim to be channel friendly, then make moves against their so-called partners and be forced to clean up the mess afterwards.

At face value, Peregrine's moves look like the right ones to support its claims. The company is including its partners in company-wide events including its recent global sales meeting, in which approximately 50 partners participated. More inclusion to make the channel feel part of the company's team is always a good move.

Further, Peregrine has invested substantial amounts into a new channel program, PartnerEDGE, to offer its partners enhanced sales and technical training as well as joint marketing and lead generation activities. As part of this the company has simplified its partner program into three categories: Strategic Partners, which provides help in implementing the company's software solutions on a global basis; Preferred Partners, which consist mainly of large regional resellers or integrators who include Peregrine's software as part of their overall solutions; and Business Partners, which provide more specialized expertise.

"We simplified our partner model to a three-tiered structure. We wanted to be easier to do business with," Mann said.

In addition, the company reorganized its internal structure to have a dedicated support staff focusing on Strategic Partners and another focusing on Preferred and Business Partners, he said. A third dedicated staff supports the company's own sales initiatives.

"We decided what we are and what we are not. Our partner discount model is in sync with our internal sales models," Mann said.

All these are moves in the right direction. And although the plan isn't perfect—I would like to see real incentives created for its direct sales force to turn business over to the channel and the overall mix of business shift to push channel participation north of the 50% line—it is evolving. That is perhaps the most important aspect. Peregrine executives realize the channel's importance in its growth and survival and are will to listen to its partners to be a better company to do business with going forward.

Elliot Markowitz is Editor-at-Large of ChannelInsider.com. He is also Editorial Director of Ziff Davis Media's eSeminars. He can be reached at Elliot_Markowitz@ziffdavis.com

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