When Panda Software and NEC Solutions America decided to move 100 percent of their sales to the channel, they showed the kind of fortitude that many vendors with mixed channel models have yet to acquire.It's a story as old as the IT channel itself: A reseller contacts a vendor for product information to prepare a customer bid. Next thing you know, a vendor sales rep tries to steal the customer with a lower price.
Such incidents could be the result of an unstated policy within the sales staff that the vendor should take business direct whenever possible; it could also be an isolated action by rogue sales representatives desperate to make quota. Either way, it's a recipe for acrimony between vendors and channel partners.
It's also an indication that something is broken within the vendor's sales operation. The rogue salesperson is easier to deal with. A reprimand with the promise of dismissal for a subsequent offense should take care of the problem.
But implied policies sanctioned with winks from managers are tougher to change. Vendors should keep in mind that the channel is a community in which competitors are also frequent partners, and that they're in constant contact with one another.
When word gets out that a particular vendor is stealing customers, the end result is bad for the vendor. Unfortunately, some vendors never get it.
So it's especially gratifying when a vendor really does get it, decides to move its sales exclusively through the channel. That is the case with such manufacturers as NEC Solutions America and Panda Software, both of which recently decided to discontinue direct sales and work only through partners.
Panda executives say the security software company more than doubled its sales in the past year, which led to the inescapable conclusion the company needs the channel more than ever.
On the surface, it may seem paradoxical to want to move 100 percent of a vendor's sales to the channel when the company is growing so fast. After all, if it ain't broke…
But it is precisely because the company is so successful in growing sales that it makes sense to do business exclusively with the channel.
Panda executives concluded rightly that investing in the infrastructure to sustain the company's growth would have proven too costly. So instead the company is reassigning its sales division to a channel-support role and to leverage the channel's extensive infrastructure.
NEC is doing the same for its Itanium servers, software and storage solutions. After analyzing a number of channel programs from various vendors and hybrid models that combine indirect and direct sales, NEC decided it would reap bigger benefits from abandoning its direct strategy altogether.
HP needs to realize loyalty is a two-way street. Click here to read Pedro Pereira's column.
Efrem Z. Stringfellow, vice president of North American sales for NEC's Solutions Platform Group, knows first-hand the drawbacks of hybrid models, having worked at companies that have them.
If NEC and Panda can come to such a lucid conclusion on the economics of working through the channel rather than trying to maintain a costly direct-sales apparatus, one wonders why so many vendors continue to use mixed models.
Conflicts typically arise from vendors that have a direct sales force selling the same products that it is asking its partners to carry.
Ideally, whatever products a vendor sells through the channel would not be handled by its direct force, a strategy that document-imaging products vendor Questys Solutions has adopted for its small and midsize business offerings.
But if the same product is moving through the channel and a direct sales force, the rules of engagement should be perfectly clear to avoid conflict. This is where Hewlett-Packard has failed to solve conflicts between SMB VARs and its direct-sales call center.
Channel conflict expends unnecessary energy, causes recriminations and hurts sales. Vendors must strive to eliminate conflict either by reassigning direct-sales resources to support roles or, where that is impractical, clearly defining rules of engagement so that direct-sales reps and resellers don't end up competing for the same customers.
Pedro Pereira is a contributing editor for The Channel Insider. He covered the channel from 1996 to 2001, took a break, and now he's back. He can be reached at ppereira@ziffdavis.com.
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