Partners Commanding Their Own Channels

If there were a line for Cisco certification to act as a master network operation center for other managed service providers who lacked infrastructure, Colorado-based Heit would be at the head of the line.

The managed services provider specializing in the financial services sector is a big Cisco partner and proponent of its channel programs. It’s also a big advocate of the managed services model and vertical alignment. And its management, under the leadership of Dan Holt, is focused on growing the business as quickly and soundly as possible.

The new Cisco program that goes into effect today allows managed services providers with certified NOCs to provide infrastructure services to other MSPs, with all partners in the chain receiving the same benefit of the overall Cisco managed services program. In other words, Cisco won’t penalize a master MSP for reselling rackspace to smaller MSPs. Cisco believes that the change in its managed services program will stimulate more peer-to-peer relationships among MSPs.

It didn’t take a lot of prodding for Heit to jump into peer partnerships. Holt tagged Ken Totura for the company’s vice president of sales post, which includes managing peer partners. Totura's appointment is significant because he’s the guy who built the 2,000-strong MSP partner program for MX Logic; that program was the crown jewel McAfee sought when it acquired the security service provider this summer.

As Totura says, the goal of the Heit partner program is to expand sales capacity and reach, target customers in remote geographies, gain deeper penetration into their core vertical and, perchance, get help entering new vertical markets. But the one thing you won’t hear Holt, Totura or Heit as a company say is that they’re anything like a vendor channel program. “If a few partners work together to survive these economic times, it’s actually a good thing that we’re able to ride this wave together,” says Holt.

The truth is that the partnership model that Heit and many MSPs and solution providers are building don’t just resemble the partner programs of their vendors; they are the nearly the exact same structures. And the reason they’re the same is out of necessity. Here’s why.

Cisco is big on fostering peer-to-peer partnerships in its solution provider community. At its partner summit earlier this summer, Cisco executives hammered home the benefits of solution providers partnering. The synergistic resources and capacities would mean they could extend their reach and increase deal sizes, which leads to higher revenue yields and profits.

This is hardly a new concept. Microsoft and IBM have preached the same philosophy for the past several years and have hosted speed-dating sessions among their partners at conferences. The Ingram Micro VentureTech Network and Tech Data TechSelect communities are loosely based on bringing solution providers together for collaboration and, potentially, partnership. And industry groups such as 1nService and PSA Security Network were formed to ease the process of executing on peer-level partnerships.

But partnerships are complicated business. Partnering solution providers and MSPs must negotiate the terms of their relationships—even in one-off engagements. What are they precisely going to partner on? What’s the division of work and responsibility? What’s the division of costs and expenses? How is revenue and profits dived up? Who’s responsible for warranties, guarantees and liabilities? And who leads the customer relationship?

If those issues aren’t complicated enough, try a few of these lingering concerns. How do you protect standing accounts from infringement from you partner? How do you guard against your partner poaching intellectual property and personnel talent? Who absorbs back-office costs and business development activities? And who earns the most credit in the vendor channel programs you’re selling through? 

It’s issues like these that have many solution provides and MSPs building sustained partner programs. A partner program doesn’t eliminate any of the above concerns. What they do is make the solutions to those issues repeatable and scalable as more partners are added to the program. The host partner is able to define the products and service eligible for resale, set the market price and margins, and publish a fee schedule for support. Everything is defined up front.

ISVs have had partner programs and channels from those of their platform vendors for years. The concept of the master MSP reselling capacity has been around since the first managed service provider realized that he couldn’t scale sales fast enough to utilize all his data center capacity. But the advent of homegrown solutions and systems, cloud computing, and managed everything is providing solution providers with inventory that retains enough margin that they can be resold through multitier channels independent of their vendors.

As the IT marketplace continues to transform, expect to see more solution providers and MSPs take on more of the characteristics of the vendors that they’ve supported through the first two generations of the channel. Perhaps someday soon, the term “channel chief” will apply equally to vendor and partner executives running channel programs.

Lawrence M. Walsh is vice president and group publisher of Channel Insider. Read his research reports at [CI] Perspectives.

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