Commission Payments Fit the Bill for Services Vendor

When most vendors look to prime channel sales with better incentives, a margin boost is the answer.

But when your revenue model is a recurring stream, such as hosted services, small monthly margins seem less attractive to VARs, and vendors may consider monthly payments to VARs that have little involvement after the initial engagement to be impractical.

Intermedia.NET, Mountain View, Calif., Microsoft Exchange and Web hosting provider, found the answer from traditional sales commissions.

The company is paying its VARs a one-time, 50 percent commission on new accounts, based on the amount of the client’s first two months of bills, the company announced this week.

The commission proves better compensation for VARs and an easier calculation than a margin on monthly bills that may or may not continue, said Rurik Bradbury, Intermedia.NET’s director of marketing.

The goal here, said Bradbury, is to get users signed on to the program.

“It allows us to recognize VARs in a fairly upfront manner for the role they play making the sale and advising the integration,” Bradbury said. “We manage and support the system after that.”

The program was enough of an incentive for Erik Albaugh of www.ErikJames.us, a Queens, N.Y., Web design and hosting firm, to join Intermedia.NET’s and promote it to all of his current customers.

“I’d like to get everyone of them signed up,” he said. “That’s good for me, and it’s good for them.”

Most hosting companies ErikJames.us works with offer minuscule benefits, such as discounts on their own hosting subscription, Albaugh said.

By extending the commission program to the second month of the relationship, Intermedia.NET encourages VARs to assist and advise customers as they feel their way through Intermedia.NET’s features.

“It’s really a two-three month process,” Bradbury said. “We want end users to take advantage of as many of our features as possible, and we want VARs to benefit from those added sales.”

Intermedia.NET moves about 22 percent of its revenue through its 1,000 resellers, and the company expects the ratio to grow with the latest channel program, Bradbury said.

The company relies on the relationship between Web designers and hosting providers to push their services, including a hosted fax-via-e-mail service, he said.

“For a lot of these small businesses, the Web designer is the only IT person they have any contact with,” he said. “The channel companies are trusted and valuable to these businesses.”

Intermedia.NET expects to launch a private label exchange program for resellers in January.