It’s Time to Thank a Channel Partner

The holiday season is a good time for everyone in the channel to take a step back and appreciate who exactly should be thankful for what.

Vendors are always going on about how partners need to generate sales on their behalf in order to achieve the privilege of being in their channel partner programs. But in a world where the profit margins on products are razor-thin, there’s not much vendors can really offer in the way of cold, hard cash as an incentive to participate in a program. For that reason, vendors as of late have been emphasizing a lot more of the intangible aspects of their channel programs

In reality, however, partners should be evaluating what programs to participate in based on how much services revenue any given vendor helps them generate.

Some vendors are starting to understand this new channel reality better than others. Hewlett-Packard, for instance, has created an ecosystem of application partners that includes partners such as Critical Mass, Cynergy, DigitasLBi, Organic and projekt202 under which sales, marketing and delivery teams are all tightly integrated with HP. By working more closely with HP, Paul Evans, worldwide lead for applications transformation, said the customer experience is improved at all levels, leading to greater satisfaction and eventually additional sales for all concerned.

Vendors across the board are pushing partners to depend more on the profits they generate by delivering services versus the margins generated on product sales, which many vendors are less inclined to share with partners, given the overall pressure on their balance sheets. But, in practice, that means that vendors are increasingly becoming little more than a means to an end for the partner. The partner only needs the product to generate services revenue. In fact, while this may be heresy in the channel, many partners would be better off giving away the product if that meant generating more higher-margin services revenue.

Given that, partners should probably start creating their own channel programs for vendors. Participation in those programs would then be determined by how much high-margin services revenue the vendor generates on behalf of the partner. Partners, of course, could then elect to share that revenue with vendors based on how much effort the vendor puts into the program, which, of course, would be reflected by their status and the number of certifications attained when it comes to selling an actual repeatable solution, which would be a lot more difficult to achieve than any product certification a vendor might have in place today.

The irony in all this is that channel chiefs are always looking for partners that are financially sound as defined by their ability to generate high-margin services revenue. What many of them have failed to appreciate is that, as solution providers move to that model, the clubs those types of partners are running in terms of what vendors they want to do business with are getting a lot more exclusive than any of the channel programs being offered by a vendor.

The time has come for vendors to be more proactive in acknowledging just how grateful they are to be included on the line cards of the channel partners that are responsible for driving much of the revenue that—given all the vendors competing for it—could easily be diverted elsewhere at almost any time.

Michael Vizard has been covering IT issues in the enterprise for 25 years as an editor and columnist for publications such as InfoWorld, eWEEK, Baseline, CRN, ComputerWorld and Digital Review.