Are channel partners really independent?
Absolutely not. In my experience, channel partners are sales organizations and we treat them as such. We have had countless interactions with technology resellers that pitch either the product they have the highest margin on, or a product they need to move for internal purposes. We address this by doing as much homework as possible ahead of time and then utilize their subject-matter experts for specific implementation or integration questions. Do you think you can get a better price working with a channel partner versus dealing with vendors directly?
My experience with pricing has been that it is directly related to the size of the manufacturer. We find that vendors with a large, diverse, mature product line, like EMC or Sun, offer their best pricing through the channel. Newer players or vendors rolling out a new product and looking for early adopters will inevitably offer better pricing and terms directly, than through their partners. With the competitive VAR landscape, there are fewer firms willing to distribute products on a loss-leader basis, but that still remains a vital strategy for vendors attempting to push a new product into the market place. Like any savvy buyer, we try to exert our pricing pressure and take advantage of such situations. How do you pick a channel partner?
We have very specific guidelines that we follow when selecting channel partners. Those guidelines typically revolve around how quickly they can deliver, the breadth of their offering and pricing. What do you buy and from whom?
Because of the big differential between what we spend on storage versus the rest of our IT needs, we typically look to vendors that handle the largest breadth of gear as possible. For EMC gear, for example, we work very closely with Dell. EMC has one of the largest networks of resellers and VAR [value added reseller] partners out there but we have found that we still get better service from a firm like Dell because of the fact that we buy so much other nonstorage-related equipment, servers, etc.
As an organization, we find that we need to be able to have established relationships with a variety of vendors and resellers to meet all of our needs. This is especially true when we are on a tight delivery timetable. A local reseller may charge a premium versus a larger national reseller or the vendor themselves, but they are able to add value and justify that price with a quicker turnaround.
The second key issue is that when we work with the larger resellers, we are able to get a lot better service because of our larger purchase volume. For example, we recently purchased an entry-level EMC SAN for a specific project, and had the scope of our project change overnight. We needed a SAN that could scale much larger and had to go with a higher end model that would scale further. EMC has a policy that once a PO [purchase order] is signed, they will not take a unit back unless it is due to a technical problem. Because of our relationship with Dell, they were more than willing to work with us, and did so in as painless a way as possible. If I was working direct or with a VAR that only handled storage or that I did not have the same dollar volume with, I am not confident we would have had the same experience.
Third, in theory, channel partners can introduce us to new products that we were otherwise unaware of, but in practice that is pretty rare in the current business climate. What are the downsides to working with resellers?
This depends largely on the specific reseller and the way in which the manufacturer themselves has setup the reseller program. We have seen some nightmare scenarios when resellers are responsible for first tier support or sales engineering and the resellers are not equipped with the necessary technical resources to meet our needs. This is especially true when the reseller does not have the right number of specific subject matter experts and tries to utilize more generalists.
We also have a hard time with resellers that do not stock product. In the current climate, we typically make final purchasing decisions a week or two before we need the product installed in our data center. In some cases, due to project scope changes or emergency capacity upgrades, we need to be able to have a product the next day. Most resellers today, and for that matter, many vendors themselves, are not prepared to meet that kind of delivery timetable. For organizations with static needs or even static rates of change, that may be fine, but for a rapidly growing Internet-centric business it causes a lot of problems. To resolve this issue, we typically have three or four key resellers that can source any one product we use, so with a little legwork we are able to meet our timetable.