Symantec Cuts Disties Out of Big Deals, Takes SMB Renewals DirectBy Jessica Davis | Posted 2008-07-17 Email Print
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Symantec told Wall Street analysts that it will let Platinum Partners buy direct from the company, cutting out distributors and providing a possible margin boost for both Symantec and top partners. But SMB partners will still feel the pain as Symantec plans to take contract renewals direct.
Symantec's changing channel partner strategy could actually end up favoring the company's biggest partners while eating SMB partners' lunches.
A transcript of Symantec's executives' briefing with Wall Street analysts reveals that Symantec plans to cut distributors out of the biggest partner transactions, letting its platinum partners buy directly from Symantec instead. That's a move that could improve margins for both those partners and Symantec.
"We'll move from a two-tier distribution model to a one tier for our largest partners," Enrique Salem, Symantec's chief operating officer, told Wall Street analysts. "So if you're a platinum partner, you'll have the opportunity to buy direct from Symantec. Because if the distribution channel is not adding value there's no reason to keep them in the part of the equation."
But those improvements in margin come with a trade-off, too. As earlier this week, Symantec is offering its biggest customers the option to cut out partners and deal directly with Symantec.
"We already had some of our business that was going direct to those largest accounts," Salem said in response to an analyst's question. "And now we're just saying they've got the option, the top 700, 800 accounts can go direct. And so for those there will be some margin improvement as a result."
And while the move is not unexpected in tight economic times, it could hurt Symantec's standing in the channel, according to channel experts.
"There are many other companies that already sell and service their top accounts directly. However, a shift away from the channel is always difficult," said Diane Krakora, CEO of Amazon Consulting. "I understand the benefits to Symantec to streamlining the path to revenue, particularly during these tight economic times. However, they have trumpeted their 'channel friendliness' and 'being easier to do business with' to partners for years, so this apparent shift away from being 'partner centric' is going to be received harshly by their partners."
And smaller partners will be feeling the most downside. Salem, who headed up the consumer business before he was named to head sales and marketing at Symantec, told analysts that about 70 percent of the company's consumer business is now done electronically.
"We believe the same is true in the SMB segment where we can automate or simplify the renewal process for many of our products like Backup Exec and Symantec endpoint protection, ultimately driving more efficiency but higher renewal rates," Salem told analysts.
Such a move will take a chunk out of SMB resellers' profits, according to Krakora. And that's not the only downside.
"The subscription revenues not only strike at the heart of the partners' profitability, but also their ability to service and support the business needs of their customers," she said. "The research we just completed clearly shows that the customer prefers a collaborative process between the reseller and the vendor for renewal."