Channel Mavens

Quien Es Mas Macho? -- A Channel Perspective

GenericChannelMaven — Tue, 17 Jul 2007 12:58:23 GMT

Of course, here at Channel Maven Central, we're interested in all things channel, and we're generally interested in what happens when one behemoth slouches into the space previously dominated by another. For instance, we'd buy tickets to watch Southwest Airlines face off with American Airlines on the New York-London route. (Note to Gerard Arpey: ISP-STN maps out within the range of a 737-900ER.) So we noted with interest the survey done by CRN last month regarding which vendors would suffer when Dell enters the channel. Predictably, HP and Toshiba turned up at the top of the list. At least one VAR pointed out that a differentiator for Dell is that its computers lack the pre-installed software that other vendors load up on their computers. (Walt Mossberg, the Wall Street Journal's indefatigable defender of the people's right to have access to technology that's actually useful, refers to that software a bit differently.) Just as predictably, the CRN survey results seem to have focused on Dell's pricing as being quite important to the channel, but until Dell breaks open a real R&D budget, pricing will continue to be about the most interesting part of Dell's value proposition.
With regard to Dell's town-hall meetings, designed to curry favor with SMB buyers, when we think of town-hall meetings, our thoughts turn to Norman Rockwell, Vermont, and plain-spoken earnest tillers of the soil wearing plaid flannel jackets. We don't immediately think of Michael Dell fronting an academic hour at the Reuters building in Manhattan featuring product announcements and questions posed by Second Lifers. But who are we to impose classical values on a 21st-century dynamic? What's important is that Dell is reaching out. So when, in the wake of this activity, we hear Adrian Jones, the redoubtable head of HP's Solutions Partner Organization for the Americas, assert that he's getting plenty of rest, we wonder, a la Bill Murray, "Quien es mas macho, Adrian o Michael?" We'll continue to watch that space, but in the meantime, our answer to that question is, as always, "Lloyd Bridges es mas macho."

Getting There Firstest With The Mostest--A Channel Spotlight

ChannelMavenDave — Thu, 21 Jun 2007 18:08:09 GMT

Things that make me break out in a rash (not a comprehensive list):

-The fifth strawberry in the breakfast fruit bowl, but sometimes it's worth it
-Hearing from my brother-in-law about the Yankees, which is never worth it
-Thinking about deal registration which is, well, the subject of this rant

My latest rash broke out about a month ago, when I was reminded that Diamond Lauffin is credited with being the inventor of deal registration in the storage industry. Lauffin, you see, once restricted his field of view to one company at a time, when he worked at places such as QualStar and NexSan. However, he's now achieved the elevated status of "channel evangelist" and will be bringing the good news to as many companies as his consultancy, The Lauffin Group, can fruitfully engage. Lauffin has his fans, and his customers, and God bless him, I wish his business all the success in the world, but I still have doubts about deal registration. I'm definitely missing something.

What is it about the idea of stacking the deck in favor of the heroic people who uncover important new business that makes me wobble a bit? After all, drumming up new business is a pretty big deal, right? Well, yeah, but is being first on the scene the only criterion in play here?

(Cue dead teenager music)
It's a dark and stormy night. The road is wet, and I'm late getting home. My car brakes screech, and while I squeeze the hell out of the steering wheel, I can't avoid a sudden visit with the utility pole on the roadside. More than a couple of bones are broken, and I need some sophisticated help. Well, lucky enough for me, within a few minutes, a sharp-dressed EMT comes on the scene, and I am stabilized, comforted, and transported to the local hospital, where elevator music takes the place of this cockamamie dead-teenager soundtrack. I despise elevator music, but it doesn't matter, since I can't hear it in my unconscious state.

Now, since the EMT was there first, and no doubt accurately judged my condition and my pain points, shouldn't she get a preferential shot at being my orthopedic surgeon? Or at naming my orthopod? Or maybe she gets to deliver the anesthesia I'll certainly need as the orthopod is working away? I hear you saying, "Don't be stupid, Channel Maven Dave--medicine doesn't work like that. There are doctor-vendors who work in ever-shrinking specialties, and there's a good reason for that--the human body is a complex environment, and no one person can be expected to know everything about everything about it."

I am suitably chastened. You're right. My dear EMT angel was there when I needed her, and did what I needed her to do. This I concede, and if we want her to do it again, and again, and again, we better make sure she gets all the strokes, acknowledgement, and compensation due her for this specific early-stage service delivery. But wouldn't it be pretty wrong to think that by virtue of having been first on the scene, she becomes the one anointed to carry me all the way to my revival as a completely healthy camper? (Please--no cards or flowers. No channel mavens were harmed in the making of this analogy.)

You may have figured out that my real point here is that individual customer needs are usually a sophisticated mixture, and in order for these needs to be properly met, manufacturers need to look beyond simply who gets the first registration. If you have read other of my channel spotlights (or read more of them in the future), you'll have found that I tend to believe in the value of the competitive process as it pertains to the user/consumer community. This competition can even get to the point of looking like a bar fight, but it often works. Lots of energy is expended in the process, with channel disappointment and failure for all but the deal winner and perhaps the user/consumer. (It's almost always an unalloyed good when the consumer wins.) The purpose of the selling process is to allow for the needs of the user to be properly matched with the value-add and delivery capability of the supplier. Short circuiting this process has its own risks, don't you think? And for those who believe that preferential treatment for the first registrant on the deal satisfies the rest of the channel, you should look a little closer or dig a little deeper.

If the primary benefit of deal registration is to create some civility in the selling environment, then the effort may not be worth it. Registration programs basically say the vendor, not the user/consumer, decides how and from whom the user/consumer should receive products and services, and here we thought the Berlin wall was a dim memory. Registration programs are only a step or two away from the dreaded exclusive channel-to-customer relationship that this channel maven will rant about in a future spotlight. It just tries to apply too much control, in my humble...

Lauffin's signal contribution to channel management, deal registration, is good for vendors, OK for partners, and not so wonderful for user/consumers. Open and freely contested markets don't create a preponderance of losers; in fact, they create champions and even dynasties. Great channel partners will emerge from the fray, and the best possible news is that users and consumers will win, big time. And if that be the case, so, my friends, do vendors.

Think about it.

When New Plans Come Together – A Channel Perspective

GenericChannelMaven — Tue, 12 Jun 2007 21:35:00 GMT

Back in March 03, when Charlie Giancarlo spoke of why Cisco would pay $500M for Linksys, his explanation centered on the consumer and SOHO markets. "OK," we thought, "we don’t understand why Cisco wants to be a consumer company, but Cisco’s full of smart people, and they probably see the world differently than we do. Life is beautiful." We went back to sleep.

We awoke with a start when, earlier this year, Cisco revealed it had SMB ambitions for Linksys. Try as we might, we couldn’t find evidence of Charlie having said much about the SMB market when Linksys was bought. (SOHO yes, SMB no. We love acronyms.) Indeed, Cisco has never been known for paying attention to the SMB market, and seems to have ignored it generally. We know several SMBs whose owners have taken matters into their own hands and boldly incorporated Linksys "consumer" products into their IT environments; we’re pretty sure many others have acted similarly. Now Cisco seems ready to take advantage of that trend, and, in an effort to stitch the world together, is launching Linksys Partner Connection (LPC). LPC will roll out in August in North America, and will roll out in the rest of the world over the next 6-12 months. The aim of the program seems to be to integrate the Linksys and Cisco channels, and appropriate databases have reportedly been merged. Should be exciting.

LPC is being deployed in the wake of Big Cisco’s attempts to make inroads into the SMB market on its own. We expect some growing pains, and will be watching with interest. Snarky bloggers love a kludge.

What Is The Sound Of A Race To The Bottom? -- A Channel Perspective

GenericChannelMaven — Wed, 30 May 2007 17:53:42 GMT

As we shuttered Channel Maven Central in preparation for our annual Memorial Day geocaching drop-off trip (we send the interns out to recover the cache on a team-building exercise in late summer--it's very Darwinian, just like life in the channel, and most of the interns actually return), we noted with some interest that Wal-Mart had agreed to put two Dell SKUs in its emporia quite soon. We would have slowed down and discussed this latest chill in the nether world, but we had rivers to cross, mountains to ascend, etc., etc., and somebody had forgotten to order enough ice, so we had to get an early start on all the Yuengling left over from the Halloween party, but that's another story, and the police records seem to have been destroyed in an administrative oversight anyway. Nonetheless, this development kept us talking and speculating over the weekend. Some of us remembered that Dell had tried to sell at retail in the early '90s, and that hadn't worked out very well, while others of us remembered that Wal-Mart had fitfully tried to sell PCs and other electronica over the years, and that hadn't worked out very well, either, except at the very low end. ($59 DVD players, anybody?) One of our party put it nicely when he observed, "If you didn't want to build a channel, that's the way to do it." A little Zen, but we'd probably have agreed if we hadn't been concentrating on raking our stones.

So on our way down the mountain, we threw caution to the winds, and actually conducted a field trip to our local Wal-Mart, to see what sort of welcome awaits the Dell machines. What we saw surprised us. We learned we've been paying way too much for our geek whistles at Ned's Nerd City, but aside from that, we were unimpressed with the rather...incoherent PC display, hidden as it was off behind all the child-proof CDs. We noted six slots for Acer PCs, with four units on hand, along with about a dozen Toshiba laptops under lock and key. The PCs were set off by an odd assortment of generally useful peripherals, but it would be hard to understand what would compel an end user to buy a PC in that environment. Apparently, Wal-Mart management is similarly challenged--in a report to Wal-Mart management highlighted by the NY Times, it turns out Wal-Mart is "not seen as a smart choice" for purchases of groceries, clothing, home decor, and oh, yes, electronics.

Wal-Mart is obviously a consumer play for Dell, and Dell needs to get well in the consumer market if it wants to grow faster than it has recently. We don't disagree that Wal-Mart should be a part of Dell's channel strategy, but the relationship will set a tone and expectations elsewhere in the channel; we would have started somewhere else.

Oh, and as for Ned's Nerd City, we think there's enough entertainment value to be had just listening to the arcane misdirection that passes for advice at the repair counter that we'll keep buying our geek whistles there. That's the beauty of multiple sources.

Kindred Spirits or Alter Ego? -- A Channel Perspective

GenericChannelMaven — Tue, 22 May 2007 05:01:06 GMT

We’ll admit we don’t know all that much about how Channel Maven Dave spends his free time. For that matter, we don’t know all that much about how he spends his busy time. We run a pretty casual work environment here at Channel Maven Central, and we generally only see Dave as he rushes in to drop off a Channel Spotlight just before deadline, muttering, “One size fits none.” The next thing we know, he’s jumped into his powder-blue AMC Pacer and driven off at moderate warp speed. So, when we saw Carolyn April’s blog discussing Profitops, the new channel program at Oki Data Americas, it gave us pause to wonder if Channel Maven Dave has a straight job. Dave routinely exhorts channel strategists and architects to avoid the impulse to build monolithic channel structures, favoring multifaceted programs built around mutual understanding of end-users’ needs. This philosophy is spookily harmonious with Profitops, as described by Stewart Krentzman, CEO of Oki Data Americas; the Oki Data program seeks to get right down to the business-planning level with channel partners, and seems to be built to be tailored to individual partners’ needs. Ms April usefully wonders how much vendor control channel partners want on their business plans. We’d judge that as long as a vendor doesn’t turn this curiosity into a reporting exercise, and uses the insight into its partners’ business aspirations to drive demand, both parties should benefit. We’ll be watching Profitops as it rolls out; in the meantime, we’re checking out Dave’s expense reports to see if we’ve paid for any phone-booth rentals.

Dell Drops The First Shoe Into The Channel -- A Channel Perspective

GenericChannelMaven — Thu, 17 May 2007 11:39:00 GMT

Like Oscar Wilde's Salome, Dell is revealing its plans for the channel bit by bit, layer by layer. Chris Bates, who heads up Dell's previously sub rosa channel program, has been making the rounds, highlighting Dell's new direction. Interestingly, in the process, Dell has revealed it's been taking about eleven percent of Americas revenue from the channel, mostly in sales to public-sector customers. It looks like Dell's program will have the usual accoutrements, with Michael Dell and his lieutenants speaking of deal registration, a logo program, reseller financing, etc. Of course, Dell has a reputation for acting poorly with channel partners, so the company will probably have to be cleaner than clean on program execution. Dell is apparently looking for a head of its channel effort (be sure to return all your favorite headhunters' calls), and that choice will set a tone with channel players. Legions will be watching.

In the other corner, we have HP, where Mark Hurd recently took the opportunity of the announcement of HP's strong quarter to praise his channel partners for their contribution to the company’s success--Adrian Jones got some high-level help there. HP is on a roll, on track as it is to hit $100B+ in revenue this year. Was Dell’s impending entry into the channel a catalyst for the praise? We wonder.

Damon Darlin at The New York Times believes there’s evidence to show that design innovation has been an important part of HP’s recent success against Dell, and we agree. This complicates Dell’s life considerably, as the company has never been known for compelling design. (In this regard, we see Samir Bhavnani’s characterization of the HP/Dell difference in Darlin’s article as being particularly knuckleheaded—Mr Bhavnani should feel free to join the rest of us in the 21st century.)

Is Dell up to the challenge of adding a channel and becoming an innovator simultaneously? As Margo Channing appropriately telegraphed, “Fasten your seat belts, it’s going to be a bumpy night.” We’ll keep you ahead of the curve, and are thinking of forming a pool to reward the channel maven who comes closest to picking the day that Dell becomes HP.

Feeling Conflicted? -- A Channel Spotlight

ChannelMavenDave — Tue, 15 May 2007 07:45:35 GMT

Success Through Channels Series

Does Anyone Win the Channel Conflicts?

“Most manufacturers who try to cover all their different channel partners with one or two programs are missing the point--the manufacturer, the resellers and end-users would be better served if they had ten different programs to more closely meet the needs of the user.” Phil Roussey, Executive Vice President, Marketing, Bell Microproducts

There are times when a channel event spices up the evergreen discussion about good old channel conflict. Among the pot-stirring topics we noticed over the last few weeks were a Sun Microsystems promotion, as Sun tried to move some server and storage solutions direct to the user base, to the great dismay of some resellers. Likewise, we saw the announcement from Dell that selling direct, while a revolution, was not a religion, as Dell positions to beef up its efforts to go to market through channel partners. The Sun faux pas caused the expected wailing and gnashing of teeth, along with an eventual public apology, while the Dell announcement assuredly brought more smiles to channel faithful. Although channel conflict can occur in literally any environment, these instances demonstrate the potential for conflict faced by manufacturers sharing the selling space with resellers, and help kick-start our discussion. So anytime the user community is offered more than one option to acquire a good or service we are in for some fun and competition, are we not?

In the future, we’ll explore the futility of “exclusive” channel arrangements, but for now let’s consider that most situations on the well-worn path to the marketplace will afford end users multiple options to buy value-added services they actually value from the resellers they may select. As we start to examine the conflicting offers and value additions that are provided to users it is good to note that they come from channel participants who are sometimes very similar in structure and capability (often as required by manufacturers) while others vary widely in value-added scope and delivery capability. Most free-market conditions assure us that virtually all manner of sales encounter some conflict and competition but the question to explore is whether these collisions are always bad--does everybody always lose? While the conflicted channel selling process sometimes looks more like a bar fight than a chess match it serves many useful purposes.

Let me start by saying that not everyone loses, and even offer the heresy that conflict in the marketplace can be a pretty darn good process, even inside the channel. To bias this discussion to make my case, I want the word "conflict" to elicit some of the aspects of competition. Since I have bent the definition already, I will try for an easy and early point. End-users and consumers win when their suppliers engage in competition. As noted earlier, the end-user community deserves a pretty lofty position in regard to what both channel and manufacturer are ultimately trying to accomplish, that of course being the creation of relationships with happy customers along with the creation of growing, profitable businesses.

Like most real business-life situations, the stark crucible of the marketplace plays the most important role in managing and resolving channel conflict. Winning business and keeping customers is often a hazardous, risky, but hopefully at times a very rewarding endeavor. If you have allowed me the point that users indeed can be the beneficiaries of the competition, conflict in the channel will have some use in the marketplace after all. But what about the impact on channel partners and the other participants in the food chain; do they have to lose? Not necessarily, especially if they are good at what they do, and if they get the benefit of some enlightened help from manufacturers.

To build programs that actually help channel partners survive and prosper in conflicted situations, manufacturers who sell through the channel should at least adhere to the following:

1. Suppress the urge to overlegislate the rules of engagement between:

   a. Themselves and the channel—If manufacturers choose to compete with their channel via a direct sales force, they should at least be consistent in the application of their policies. The worst missteps are those that come off as surprises. The Sun 25th Anniversary Sale promotional program was most ill advised in its execution rather than its conception. While I am not a fan of hard and fast rules in the open, competitive marketplace, I do think the perception of “poaching” customers away from channel partners smacks of violating even the unwritten rules of channel partnering.
   b. Channel participants as they compete in the marketplace—Manufacturers should always work to minimize the administrative overhead for their programs. This means giving up on some of the controls that clog e-mail boxes and complicate reporting formats between different levels of the food chain. The costs and cycles saved by lightening up on the administrivia can be redirected into demand generation, eventually making all channel players happier.

2. Spend real resources to support the differences in the channel and avoid the urge to make all players fit a predetermined model
   a. One size fits none—Manufacturers should acknowledge the differences their channel partners offer to end users, and work to amplify them to end-users’ benefit.
   b. Demonstrate that you know the channel is in a business different than yours—Enlightened manufacturers will help the channel understand what their market needs, usually through the judicious and liberal application of market research, and in turn help users get exactly what they need, and that’s a good thing.

3. Educate end users on the relative advantages your channel brings to the market--Manufacturers should help the market understand the differences between the channel partners and be more proactive in helping match users up with the correct blend of products and services that are offered by their partners.

4. Create pull--Pull is the chicken soup of all of the channel equations. Manufacturers should frequently review the time and money they spend on intra-channel programs and figure out how much more they could sell if they were using those resources to create raw demand for their products.

If a vendor has an equitable channel program where all partners have a chance to add value, make an honest margin, and build a business, why shouldn’t the end-users benefit if they are subsequently offered an array of value-added services and other products when they look to their supply chain? It’s inside these options of value addition that the seeds for channel conflict are most evident. The more end-users can match their requirements regarding the purchase, adaptation, installation, service, training, use, and maintenance choices related to any product under consideration, the greater the chances for happy customers, and by definition guaranteed bruises for the resellers who were not successful in making the sale. Therefore, if you are in the channel, you have both the challenge and the opportunity to distance yourself through competition from the others who make alternative offerings. Inside an enlightened channel program, you should have the chance to be the rightful winner if your total package matches the end-user’s need. To the extent you execute well and deliver on the promise, you have the chance to profitably distinguish yourself from the other channel-conflict participants.

Let’s let that sink in for a minute…it’s the differences that can be structured into the channel’s value-add that offer up distinction, enhanced customer satisfaction, and the best chance for the rightful channel partners to succeed during the course of a sale. Alternatively, even if a manufacturer has only a few resellers, but its channel program forces them to meet the requirements of a single model or template, the users get fewer choices and the resellers are more inclined to compete on price concessions alone--the most destructive element of the conflict. Channel competition and channel conflict provide end-user markets with more choices, and this benefits both the user and the manufacturer.

Questions always arise about the number of deviations and differentiated offerings needed in the marketplace. And while the dynamic of “overdistribution” leads to another rich topic to be explored in the future, some quick points can be made here.  The number of participants in any manufacturers’ channel system can be properly influenced by many factors. Among the most prominent are:

   a. The changing needs of users--Even the most commoditized products can and often do benefit from a very diverse reseller base. Think of the different ways you might have acquired a soft drink over the last year. A cola delivered by a room-service attendant after midnight in a posh hotel has a different value than one delivered from a machine in a workplace canteen, and yet they’re the same drink.
   b. The sophistication or complexity of the product—More-complex products can lead first-time users to rely heavily on the channel for training and other services. This set of needs can, however, be transitory for subsequent purchases.
   c. Geographic and cultural use differences--Everything from localization to physical logistics comes into play when a manufacturer tries to penetrate new or foreign markets.
   d. The ability of a substantial number of the channel participants to make profit and grow their business--This measurement reflects the market’s willingness to reward those who are able to structure meaningful and differentiated value into their sales and delivery proposition.

None of the conclusions regarding channel conflict come easily from this or any other discussion alone, but more appropriately, from the aggregate votes of the market. An enlightened manufacturer will task its channel partners with understanding what end users truly need, and which value additions the users are willing to pay for. This allows the best channel partners to take the appropriate risks and reap the rewards of getting it right. Thus the manufacturer’s role changes from imposing overly confining and uniform requirements with high administrative burdens to providing assistance and facilitation regarding the differences that are aimed at winning and keeping the broadest array of customers. More and happier users, appropriately rewarded resellers, broader markets served--cool.

Is That A Rabbit In Your Hat, Or Are You Just Thinking About the Channel? -- A Channel Perspective

GenericChannelMaven — Wed, 09 May 2007 08:59:09 GMT

Ever since Michael Dell disavowed the religious character of Dell’s direct model, strategic thinkers have been sacrificing goats, watching the stars, and generally having a high old time speculating when and how Dell might enter the channel in a more systematic way than it has in the past. Over at Business Week, Peter Burrows, (we think he generally knows his onions) believes Dell would do well to buy RadioShack. Burrows believes RadioShack’s 4,000-store presence would help Dell sell PCs. We recall in the mid-late 1990s, Radio Shack had exclusive PC-selling arrangements first with IBM, and then with Compaq. Those arrangements were anchored on Radio Shack’s reach, too, but the association didn’t seem to help the vendors all that much. Burrows notes that for its part, Gateway tried its famous "Gateway Country" store experiment, and even though at one point, seventy-five percent of the US population was allegedly within a 30-minute drive of one of Gateway's stores, people stayed away in droves.

We wouldn’t just dismiss Burrows’s idea, although it’s one of the more…esoteric we’ve heard in a while, and we suspect it's one of the options on the table in Austin. Dell needs to pull a rabbit out of his hat, and his company obviously needs to sell more to consumers—historically, it’s only generated about fifteen percent of its revenue from outside the enterprise. Considering this level persisted even after the company acquired Alienware, we believe the company’s products or business model (you pick) are less and less appealing to that segment. Michael Dell has recently been talking more frequently about the next billion users, as if there must be a consumer play in there somewhere. At some remove, a RadioShack acquisition could make sense. Dell could buy RadioShack for pocket change, and although some observers believe RadioShack is overvalued, we don’t. We think the "overvaluation" speaks to strength in RadioShack’s management--investors are willing to pay about forty percent more for every dollar of RadioShack’s revenue than they are for Best Buy’s and four times as much as they’re willing to pay for Circuit City’s. RadioShack management seems to know what it’s doing, and kudos to Burrows for digging this out. All this said, we’d have a hard time imagining a situation where Dell could build or buy any retail chain and make money pushing its current products through it, as the model is generally high touch, and takes a lot of attention--characteristics that are not currently in Dell's core competencies. Staffing 4,000 locations with Apple-quality technicians would prove to be a financial and operational nightmare—not impossible, but not the sort of exercise a public company could endure without expecting to take a pasting from investors. Run for the exits if you see Dell hiring the folks who convinced Gateway to be in the real-estate business. If Dell is to enter the channel by making an acquisition, perhaps the better acquisitions would be Lexmark (ink helped HP through some bad times), a good design firm, like Ideo, and some heavy-duty market researchers—then Dell could focus on designing products that the existing channel (maybe even RadioShack) could sell to a ready market where Dell was generating demand. We could be wrong.

Can't We All Just Get Along? -- A Channel Perspective

GenericChannelMaven — Thu, 03 May 2007 18:21:38 GMT

Seems that Toni Sacconaghi of Bernstein Research took advantage of Sun’s latest channel brouhaha to note that Sun’s been irritating its channel in a variety of ways for over a year. Interesting behavior for a company that reportedly takes more than sixty percent of its revenue from the channel. For example, Sacconaghi points out that commissions were cut on service contracts to government customers, and that Sun put the squeeze on the channel in terms of inventory, all in the name of Sun’s profitability. We believe in profitability, but we also believe that what goes around comes around; Sacconaghi asserts that several of Sun’s large channel partners have taken on Sun’s competitors, or were considering doing so. Truth be told, on any given Sunday, Sun’s relationship with its channel is probably not much better and not much worse than any other vendor’s; outcomes in all cases could probably be improved by designing more flexibility into channel programs (see Channel Maven Dave’s Spotlight on why one size doesn’t fit all.). However, it’s worth pointing out that we believe the resources vendors devote to incrementally tinkering with their channel could probably be better spent in designing marketing programs and initiatives to drive demand for the channel to serve (see Channel Maven Dave’s Spotlight on who really creates demand.) For his part, Sacconaghi worries that Sun’s cavalier (our word, not his) attitude toward the channel could slow down its revenue momentum in the long run. Plenty of opportunity for Bill Cate to show his stuff.

Dude, Here Comes Dell -- A Channel Perspective

GenericChannelMaven — Sun, 29 Apr 2007 12:38:25 GMT

Dell apparently lost its religion about the channel before saying so in a memo from Michael Dell to employees last Wednesday. (Click here to read the entire memo [requires a subscription to the Wall Street Journal], or click here to read the coverage of the memo.) Here at Channel Maven Central, we've learned that last month (the same month during which Michael Dell told Duke MBA students that "the direct model is not a religion"), Dell hired at least one channel professional with a good pedigree into what seems to be Dell's growing channels organization. It's been a dirty little secret for years that Dell has derived as much as twenty percent of its annual revenue through the channel. (We think it's more like fifteen percent, but why quibble?) In the past, Dell's movement in the channel was driven by pull, and now there'll be a little push. How much push, though, is anybody's guess. Dell doesn't have much room to maneuver here. The Dell model was built around a negative cash-conversion cycle, which eschewed inventory. We agree with Ed Moltzen that having credible channel programs will require Dell to adopt a new attitude to inventory. Likewise, Dell's gross-margin profile (about 17% vs HP's 24%) means investment in channel programs will be difficult. Dell has hinted that projected savings in operations will be invested in the channel and innovation, but the company hasn't done much in either area--the late unlamented white-box server program had an afterthoughty feel to it, and the company has stuck to its position as a technology aggregator and fast follower throug its history. Since there's probably not much to be wrung out of operations, we wonder where the silver bullet is. We believe the financial markets are good judges of strategic credibility, and currently, investors are willing to pay $1.26 for every dollar of HP's revenue, while they're only willing to pay $0.96 for every dollar of Dell's revenue (on a ttm basis.) Since investors classically look to future results to justify their investment decisions, the wisdom of this crowd seems to be that the smart bet in the computing business is not today's Dell. It's going to be an interesting ride, which should ultimately be good for the channel and end users.

Sun Screen -- A Channel Perspective

GenericChannelMaven — Thu, 26 Apr 2007 17:33:48 GMT

Hats off to Sun for reacting quickly to the low-order riot in the channel caused by its 25th-anniversary celebration. (If we'd known, we'd have sent a nice pair of napkin rings.) For those of you who've been preoccupied with your preparations for the Kentucky Derby, or the concurrent Cinco de Mayo festival in San Marcos, earlier this week Sun launched a killer promotion where end users could save as much as fifty percent on certain server, storage, software, and services products, if they bought them direct from Sun. Of course, the crowd went wild, but not necessarily in a good way. We hear Bill Cate's phone was ringing off the hook. It's a wonder, then, that he had the time to participate in crafting a solution, but by Thursday, Sun execs were doing mea culpas in front of the partner community, promising all would be well. We all understand that in big companies, sometimes 25th-anniversary celebrations aren't as well coordinated as, say, 24th-anniversary celebrations, but this was a big kerfuffle, and could have undermined Sun's ambition to grow its revenue 15-18 percent this quarter. Companies establish reputations not on their mistakes, but, inter alia, on their attempts to fix what's broken. Sun acted at the speed of heat to right the wrong in this case, and that's a good thing.

On Demand -- A Channel Spotlight

ChannelMavenDave — Mon, 23 Apr 2007 16:34:00 GMT

Success Through Channels Series

Who Really Creates Demand? (Hint--it ain’t the channel.)

If you are a typical channel executive, grab your Rolaids™ and let’s talk about what you can expect when channel partners help you by "pushing" your product out to your end-user base. While there are few absolutes in (business) life one principle that comes close is your channel partners are always better at serving demand than creating it.

It may come as sobering reminder to your own marketing folks, but their role in affecting a commercially successful outcome of any product family goes up when you use channel partners to get to your targeted markets. And per usual, there are several reasons for this:

1. Marketing messages delivered through channels often don’t often get there. Even the best brochures, power points and other collateral material are very likely to get blended in with the messages from other vendors forcing a loss in clarity and impact.

2. Your channel partners have businesses and messages of their own, which may even include competitive offerings. There are good business reasons for your channel partners to have several arrows in their quivers (just like you do), and you’ll routinely find yourself in a bakeoff with your sworn enemies. It’s your responsibility to come out on top—your channel partner has already won his battle, and is happy to let nature take its course.

3. Messages you send to and through your channels generally will miss the specific nuance to meet the end user served by any specific channel partner. The channel is much closer to the end user than you are, and your partners feel their pain on a day-to-day basis.

All these factors make getting the right message to your end-user customers even more important with a channel program in place. Translated, this means creating demand needs to stay your company’s responsibility. And because you have (for at least some portion of your target market) chosen to use intermediaries your marketing crew has to work some additional cycles. And these cycles should be aimed all the way down the food chain and directly at your end users.

No one would ever have to buy another three-ring binder if those that sit on resellers’ shelves, still in their plastic wrappers, could be recycled back to the well-intended people trying to get their forgotten messages out to prospective customers by going through their channel programs. The same is true for the great wealth of unzipped presentations that clutter hard drives across the landscape of VARs, distributors and dealers everywhere. Today’s cheap storage makes this to be a less expensive failure to communicate but a failure nonetheless. Let’s face it, messages designed to go through the channel to the market may never get there. And if they do, they may not enjoy the clear crisp delivery intended.

By clearly defining your audience and aiming your message at a specific end-user segment you can create some magic with your efforts…and the magic is called "pull".

A pound of Pull is worth a ton of Push

· Pull is buzz, is cool, is hot, is brand equity, and it works way better than push

· Pull creates a path of least resistance that is irresistible to your channel partners

· Pull brings customers to your channel, reversing the expectation that your channel brings them to you

· Creating pull remains your responsibility and keeps your message to your user base under your control

Does all this mean your channel partners shouldn’t have a message? Oh, dear, NO! The message your partners take to market will be very instrumental in making them successful but please don’t worry if it is different from yours. If the world is right it should be. If we go all the way back to the reason for having channel partners, we should find that they do many things better than you do in the overall game of satisfying your end users. (If they don’t, then you have other, bigger issues.) These variations of additive values both proposed and delivered help your channel buddies make successful and growing businesses. By their appropriate conception and consistent delivery, they gain defensible and profitable differences that the marketplace can sort out and reward. Therefore, their job in a marketing sense is to provide an echo to your message, but it remains very important that they add their own identity and structure of features and benefits. It is not their role to carry the primary weight of your demand creation; you should go direct with this one. The way out of this little problem is for the responsibility for the product pull to stay the conscious duty of manufacturers. Further, they should get the message out in a way that can then be supportive of the active messages delivered separately by the channel partners.

Here is a provocative test case. If you had the ability to increase the channel’s coop funds pool from two percent to three percent, would you do it? Not on my watch, you wouldn’t. That is, if the accumulated funds were large enough to break through the information clutter and create some additional pull on the brand or product in the targeted market space. Your partners who use the coop money to directly impact their bottom lines will squeal like crazy but let’s ignore them for a moment. If your message is well developed and effectively delivered through your marketing mediums, the effect will be far more valuable to you and to your good channel partners than you have a right to expect from driving the same message through the channel. Again, remember that pull is nearly irresistible to your channel partners.

So there; it is far better to create and send your message directly to the targeted end-user and then help your channel partners add their story and value proposition in a supplemental fashion.

Put the Rolaids™ back in your desk drawer and get a meeting with the marketing team.

Choose Me -- A Channel Perspective

GenericChannelMaven — Mon, 23 Apr 2007 16:06:31 GMT

At the Cisco Partner Summit at The Venetian in Las Vegas earlier this month, Keith Goodwin, Cisco's channel chief, had a mantra for partners--"make choices". For his part, Charlie Giancarlo, Cisco's chief development officer and head of the Linksys line of business, would like partners to choose Linksys exclusively. Well, of course he would. In the words of Lyle Lovett, "...what would you be if you didn't try? You have to try." It's probably just coincidental that Goodwin's and Giancarlo's messages turned up side by side, so we won't try to characterize the juxtaposition as a good-cop/bad-cop routine (sorry, Lyle.) What interested us most about Goodwin's presentation, though, was the initiative underway to help partners find and retain talent. The approach (there's no doubt a three-legged stool on the corporate PowerPoint describing the initiative), incorporating, as it does, both referrals of Cisco's applicants and graduates of Cisco's Networking Academies as well as access to employee-development materials, seems progressive. A snarkier channel maven would note that the initiative Goodwin describes is hardly altruistic, but works primarily to Cisco's benefit. However, John Chambers, Cisco's CEO has long been interested in advancing basic and technological education in schools, so Goodwin's initiative should prosper in a welcoming environment.

Better Living Through Neuroscience -- A Channel Perspective

GenericChannelMaven — Thu, 19 Apr 2007 01:03:23 GMT

Here at Channel Mavens Central, we believe language is important. So, when we see CRN coverage that points out Infor has issued an ultimatum to its channel partners, we want to think about what is meant by an ultimatum. We are thus reminded of what economists have learned as a result of a set of experiments popularly known as the ultimatum game. To make the pain bearable, we'll just say that in the game, an amount of money is supposed to be divided between two participants--one proposes the split, while the other must accept or reject it. If the split is accepted, both parties win, in an economic sense, as something is almost always better than nothing. If the split is rejected, neither party receives anything, and both parties lose, in an economic sense. Logically, then, any proposed split, no matter how lopsided, should be acceptable. However, experimenters have demonstrated that most offers are for something close to a 50-50 split, and lopsided offers are routinely rejected. Seems the economically rational animal within us can be suppressed to both endure and inflict pain in a situation which seems unfair. Indeed, other ultimatum game experiments have shown that the brains of people who receive stingy offers become the venue for small-scale cage matches, pitting the dorsolateral prefrontal cortex (reasoning area) against the bilateral interior insula (anger area). Seems that the more active the angry part becomes, the more likely the offer is to be rejected. We wouldn't begin to suggest that Infor's (or any other vendor's) relationship with its channel partners replicates the ultimatum game, but we're thankful for the opportunity to consider how they might be connected. While we're sure Infor's relationship with its partners will eventually return to its usual rosy state, we have to wonder if the fact that there are no women on Infor's executive management team or on its board of directors might have had something to do with the way this seemingly confrontational behavior developed. Could there be such a thing as too much testosterone? We wonder.

A Better Buy Through the Channel? -- A Channel Perspective

GenericChannelMaven — Mon, 23 Apr 2007 16:08:05 GMT

Best Buy continues to position itself to enter the channel in a systematic way. In October of last year, the ubiquitous retailer twincities.bizjournals.com/twincities/stories/2006/11/06/story13.html?t=printable " target=_blank>hired David Hemler away from Microsoft, where he was president of Microsoft Canada. However, part of his 11-year tenure with the Redmond behemoth had been spent working in its small/midmarket solutions and partner group. Last month, Best Buy ">www.speakeasy.net>www.speakeasy.net/press/pr/pr032707.php" target=_blank>agreed to buy Speakeasy, a VOIP vendor to small businesses, with 40,000 customers and "several thousand" resellers. Now Hemler, speaking with CRN, is saying Best Buy wants to explore partnering opportunities with other resellers as well. Hemler points out that Best Buy has sold to small businesses in the past, but hasn't been able to provide robust services. Best Buy has shown healthy growth in its top line and stock price over the last several years, having been one of the beneficiaries of the consumer-spending boom. Now that the air seems to be going out of that balloon, expect to see Best Buy do more to generate revenue in the SMB market.

And Their End Users Shall Lead Them... -- A Channel Spotlight

ChannelMavenDave — Mon, 23 Apr 2007 16:03:54 GMT

Success Through Channels Series

Three Simple Little Rules

Searching for improvement in the performance of your channel? Don’t start with trying to perfect your channel program!!!!

Most companies make a significant mistake when looking at this most common activity, saying, “We need to get a fifteen percent increase in the effectiveness of our resellers/VARs/integrators this year for sure. Let’s take a look at fine-tuning our channel program, again.”

If your company is among those that apply this tired logic year after year, you’re overlooking the fundamentals that make all existing channels more effective—their ability to listen to and serve your end users. Herewith three simple little rules to help you make best use of your channel.

Rule #1…Tune in to your users. A single, perfect channel program doesn’t exist. Don’t waste resources and precious cycles trying to get there. The best programs look past your channel partners and spend more time understanding the needs and desires of your end users. The lines of communication and understanding should not be defaulted to others. At the end of the day they, the end-users, are YOUR customers!

Since users are not created equal, any attempt to devise the perfect channel program almost always ends in that saddest of all realizations that not only does one size not fit all…….one size fits nobody! I have witnessed over and over the harmful constraints that a unilateral channel program imposes on the powerful natural workings of the marketplace relative to the delivery of true value to targeted end users. From selling via the internet to turnkey on- site installations, plenty of variants in channel deliverables are needed to turn new end users into satisfied, repeat customers. It is these loyal customers, who are willing to buy more, as well as endorse and recommend your products to others that must drive your channel thinking. Importantly, this group of repeat customers also needs to be free to move from one template of your delivery options to another as their needs and internal requirements change.

Whether your products and/or services are commodities or require complex technical installation and acceptance, your customers’ needs are different and they change over time. While this little fact may hamper your ability to have a single approach to channel programs, the sooner you deal with this complexity the sooner you will see an improvement in the effectiveness of your channel. Be guided by one of my favorite Albert Einstein quotations-- “Everything should be made as simple as possible, but not one bit simpler.” This means we must accept many variations in our thinking about channel programs. It is this necessary complexity that will be needed to keep the maximum number of customers happy and buying.

Rule #2…Don’t always ask your channel partners to meet your expectations. Instead, plan to help your end users take advantage of your channel partners’ differences. Varying degrees of value-added services (and the related charges) allow your end users to custom fit the solutions they need at a specific point in time. If you require your channel partners to be carbon copies of one another, they’ll often wind up with the urge to differentiate themselves on price--something that may drive them out of your channel family over time. Think about this for a moment. The more you require your channel to deliver uniform services, the more your channel will be reduced to price competition to win business. The better view is to have your channel be prepared to address the many end users according to their differentiated business needs, and to differentiate themselves at the market’s discretion--not yours.

The toughest aspect of this idea is that it will insure that the scary specter of channel conflict is always at work among your resellers. Try to draw the parallels between channel conflict and competition. Like it or not, competition is likely to be a very good aspect of delivering value to your target market. It means that if your channel partners effectively understand and then meet the requirements of a identifiable portion of the market you are trying to serve, they have a better chance of creating a winning business formula. It is this winning formula that will help them earn and sustain business and profits that meet their individual requirements.

Rule #3…Help your channel meet the different customers’ needs, not yours. At the end of the day, meeting a specific need in the market is better than having the channel try to meet your program requirements. Once the varied user needs are understood, it will become incumbent upon your channel programs to help your partners become good at what the users need to have them do. Remember again that this means more variation and less uniformity. It means more flexibility on your part and surely more complexity.

All this is painful news for the many who want to make their channel programs uniform and tidy. Programs that can be measured by compliance between you and your resellers are unfortunately deceptive and inappropriate. Go to the extra effort to look further down the food chain to the varied needs of your users and then back through the channel to determine what you need to do to make your channel partners more effective. Don’t try to have all your channel partners do all things; let them develop their own special value add. It gives them a chance to win business and make money.

Follow these three simple rules to a more effective channel. Yeah, it will complicate channel life and invite channel conflict, but along the way it gives you the best possible chance to make happy users and repeat customers. Nobody said success was easy, it is almost always messy and hard. But go ahead, lighten up, listen to the needs of your end users and then help your channel be successful.

The Art of the Channel

GenericChannelMaven — Thu, 19 Apr 2007 00:48:58 GMT

Welcome to Channel Mavens, a blog where you're invited to consider and discuss the art of the channel. If you've spent more than a couple of minutes in the channel, or selling through the channel, or buying through the channel, you've probably learned that there's easily as much art as science involved in getting goods and services from the vendor to the customer (and sometimes back.) We look forward to regularly publishing thought-provoking perspectives on the dynamic of the channel, and are eager to hear your comments, your questions, and your wisdom. We have a couple of small requests of you--we'd like you to let us know if our perspectives are useful, and whenever you post a comment or communicate with us, we'd like to know whether you're a vendor, channel partner, or end customer.