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The Tricky Move to Services from Product Sales

 
 
By Jennifer Lawinski  |  Posted 2012-01-04
 
 
 

Siemens Enterprise Communications may not be a household name, but the vendor is hoping its burgeoning channel program and its partner-driven move into the North American market will help it become one as it seeks to steal market share from vendors like Cisco and Nortel.

In the four years since Siemens launched its North American channel operations, the unified communications company has not had an easy road, and channel executives say the company has been making strides to repair its relationships with partners and clearly define its go-to-market strategy.

In its first years, the program suffered from missteps and miscommunications, leaving partners with a bad taste in their mouths, Patrick Kehoe, SVP of Indirect Business, told Channel Insider.

"It's been a four year journey for us and I think I few had to do it all over again, I think we would have done some of the things we've put in place in the past year sooner," said Kehoe, who joined the company in the summer of 2010.

Patrick KehoeEarly feedback from partners told him that the company's go-to-market strategy with partners was murky, with relationships and roles ill-defined. VARs hesitated to invest in business with Siemens because they didn't feel comfortable. It was "not exactly what you want to hear from a potential or a current business partner," Kehoe said. "At the core of it was a lack of trust that I think ultimately in many cases was holding back the type of commitment we would like our partners to make in our business."

Part of making the company's North American operations more channel-friendly, Kehoe said, was revamping the direct sales force and go-to-market strategy. Siemens looked practically at its sales organization and determined that there were a focused, narrow set of customers that it would continue to sell to directly. "We aligned our direct resources squarely on those organizations… and on most cases we were pulling in a partner who has complimentary capabilities," he said.

Explicitly stating which customers the direct force would work with and where partner would have opportunity with "named accounts," has helped ease conflict and give partners more confidence in their relationships with Siemens, he said.

"The complement to that is that we've been very clear that the entire SMB market as well as the non-named account market is the domain of partners," Kehoe said.

In addition to deal registration, which Siemens launched early in 2011, the company developed a structured channel program that would compensate partners based on the role they played in a deal. The company has also launched products like its OpenScape Office and OpenScape Cloud for partners, in addition to creating training and certification resources.


Products the Channel Can Sell

"That has gained as much traction as our technology – the sense that we actually value them," said Andy Howard, who left Nortel to become Siemens's VP of Channel Collaboration earlier this year.

Part of that, Kehoe said, has been ensuring that the company is giving the channel products it can sell, and sell successfully.

"We've made great strides over this past year to provide to the partner community an end-to-end portfolio whether they're serving the small market or the largest market, there is a viable strong product and solution set that is available for partners today," he said.

Siemens is also looking to take UC to the cloud, and while many partners are on board, some are hesitant.

The challenge, according to Howard, is helping partners understand how to turn up-front $100,000 sales into recurring revenue streams that are as valuable over time, but that don't bring a huge chunk of change at the beginning.

"Most channel partners have PBX mindset… now they see themselves moving into this solutions/services base that's a little confusing to map from a revenue perspective," Howard said. "The deal value is as good as or greater than they would have in the old PBX days since you're providing the customer with more tactile services than just the dial tone. The concept is broadly engaging with your finance team and your backers to realize that the money is still there. The profitability is being enhanced; it's just being spread over a longer period of time."

 

The Tricky Move from Product to Service Sales

For Siemens, Kehoe said the value proposition to partners isn't reselling their cloud, it's in providing services to customers long-term.  "If you just view it from a partner perspective as reselling a hosted Siemens cloud solution, the value proposition is rather narrow… our view is very different. It has that broader perspective and I think where we're getting traction with partners is that we see that trend and they see what we can provide them," he said.

"Ultimately we are pushing to take advantage of our full suite of service elements and offer them to partners in a complimentary way – managed services, backup and recovery, networking monitoring… to the extent that it's aligned with their business model."

Whether channel partners go full steam ahead with the cloud and services solutions, or if they take a slower approach to change, Kehoe said partners who specialize will likely be more successful long term.

"We're moving to a model where there is significant consolidation in the channel and larger and larger players…but with that we also see core specializations. At the end of the day either from a vertical perspective or from a particular niche set of infrastructure solutions, the one who have the depth and experience and competency are really going to so," he said.

Siemens put its training and certification materials online in the past year, for free, and continues to push the company's business development and marketing assistance to the channel because it knows it's coming from behind in the market. "In the North American market we don't garner the same brand awareness and natural consideration in purchase cycles. We're very much engaged in a push-through-the-channel model," Kehoe said.

"We are trying to engender a sense of shared interested in one another's business to develop a sense of sustainable growth," Howard said, and new partners "see us as being a real alternative."

Siemens recently signed a distribution agreement with Ingram Micro and partnered with Verizon Business; the company had existing relationships with Arrow Electronics Solutions and BlackBox.

As Siemens moves into 2012, Kehoe said the company needs to refine its services business model. "We will find the right engagement model with the partner related to those services so that they truly are positioned as the core provider, which may of them are looking to do, as opposed to some hybrid model where the vendor owns part of it," he said. "Ultimately we feel that it will serve us and our channel community best if we can enable the partner to lead those relationships, and we can lead them from behind."