Channel surfing

About 18 months ago, officials at Network Appliance Inc. didn't worry whether its products were sold to the federal government directly or through reseller partners.Mark Weber, vice president of federal business for the maker of storage solutions, software and servers, said the company wasn't opposed to using the channel of government resellers to sell its products, just indifferent. "If business went direct, great; if it went indirect, great," he said.But with an eye toward growth, the company has devised a new tactic."Our federal strategy is to go head over heels toward channel sales. I mean full bore at it," said Weber, who, not coincidently, joined the company as the new effort began. Weber spent 13 years with Sun Microsystems Inc. before joining Network Appliance, he said.The strategy is paying off handsomely, he said. In May, Sunnyvale, Calif.-based Network Appliance reported quarterly revenue of $451.8 million, a 34 percent increase over the same quarter in the previous year. Other recent quarterly reports have shown similar growth. A big share of that growth is coming from its channel sales, Weber said."When you're in high-growth mode like that, you can't hire people fast enough," he said. "We're doing everything we can to get in front of customers. You can't do that with just direct employees. You've got to have partners."Network Appliance isn't alone in its push to flow more business through its channel partners. It is an industrywide trend, said Steve Charles, co-founder of immixGroup, a government business-consulting company in McLean, Va.Increasingly, producers of IT wares are realizing the benefits of the reseller model. Resellers with established relationships with various federal agencies can be invaluable in expanding the reach of a product.Reseller alliances with systems integrators also help boost sales. And the reseller model is a good one for growing companies.Working with partners also is in tune with the corporate trend to outsource functions that aren't a company's core business."On a global level, Wall Street and analysts love to hear a story that a company is outsourcing distribution," Charles said. "The markets are driven by companies that are saying we've identified a function that we can get somebody else to do cheaper."Resellers are just part of a distribution system that gets products to end users. Systems integrators and distributors also play an important role in the channel. The ability of a manufacturer to be flexible and able to work with any systems integrator or any channel partner is also a key to success in the federal market, Charles said. "Sometimes agencies want to work with the incumbent on a project," he said. "So if you're a manufacturer of technology, you need to be able to work with that incumbent if you want the business."If a product is just a small piece of a bigger federal contract, it is important to have a relationship with the systems integrator that wins the contract. That can mean working with one of the systems integrator's regular resellers.KEEP DIRECT LINES OPENAlthough partners are important, maintaining direct sales is a key part of that flexibility. One of the biggest reasons to maintain some direct sales is certain federal agencies prefer to purchase directly.That's why Symbol Technologies Inc. plans on always maintaining some sort of direct sales organization. The company doesn't want to lose potential customers that insist on buying direct, said Brian Lehmann, Symbol's senior director of government solutions.The Holtsville, N.Y., company has manufactured supply-chain technology, such as bar code and radio frequency identification solutions, for about 20 years. In that time, the technology has evolved, and so has the company's strategy for selling it.[IMGCAP(2)]"We're striving for 80 percent or better to go through the channel," Lehmann said. "We just think the scalability of resellers works. When you bring your partners in, you get their sales forces to push your products."Some of Symbol's biggest customers that used to deal directly with the company now go through partners, but other customers prefer the older method."If our customers prefer or demand to go direct, we have that ability," Lehmann said. "But our goal is to send as much through the channel as possible."Direct sales are also important if a company's product is too complex to expect many resellers to become experts on it. It needs direct sales people explaining to government customers what the product is, what it does and how it fits."In the world of complex technology, such as back-office systems, they require direct sales people to go out and do the education process and help government buyers define requirements," Charles said.Another key to building a successful partner channel is to develop relationships with resellers that are dedicated to learning and marketing a certain product, said Mark Amtower, founder of Amtower & Company, a marketing and consulting firm in Highland, Md. Amtower said many manufacturers are reducing the number of partners they work with while increasing the amount of business that goes through their remaining resellers. The trend is simply the result of manufacturers focusing on their most successful partners.Value-added reseller GTSI Corp., Chantilly, Va., is seeing this same push by vendors to develop deeper relationships with their channel partners, said Scott Friedlander, group vice president for enterprise technology practices."They're looking for value from partners that not only can drive demand and create customer opportunities, but also can implement a solution all the way through," Friedlander said. "And they are going to fewer partners. That's pretty consistent." THE FEW, THE TRUSTEDVendors are seeking trusted relationships. "They want somebody that knows the customer and can satisfy both customer and partner," Friedlander said.More complex products and the need for engineers that are authorized or certified in a manufacturer's technology are contributing to the trend of fewer partners, said Ken Grimsley, vice president of strategic sales for CDW Government Inc., Herndon, Va."If you go back five or 10 years, it seemed the more partners you had, the better coverage you had of the federal market," Grimsley said. "What's happened over the last several years is people have realized that more isn't always better, and that a handful of partners provides more focus as a channel partner."Networking and security provider Juniper Networks Inc. of Sunnyvale, Calif., last year revamped the company's channel sales, said Tom Gillman, Juniper's director of federal channel operations. The Federal J-Partner Program provides financial incentives and educational offerings to make it easier for channel partners to win new business. It makes the channel program value-based as opposed to volume-based, Gillman said."It really puts an emphasis on investment, certification and training versus how much revenue you're pumping through," Gillman said.Virtually all of Juniper's federal business flows through its channel partners, and company officials expect this program will further strengthen that structure. For example, to qualify for the program, resellers must have a dedicated sales force for the federal market, Gillman said. That is to ensure that resellers really know the federal space and aren't just looking for an easy way into the market, he said.The program allows smaller resellers outside the Washington market to have a crack at selling to local federal entities such as veterans' hospitals and Air Force bases, Gillman said."We didn't want to put in an organization where the smaller players felt like they couldn't compete and, therefore weren't willing to make the investment in Juniper," Gillman said.Developing mutually beneficial relationships such as that with resellers should be a priority for any manufacturer looking to succeed in the federal space, Amtower said. "I would be looking to develop relationships with one or two reselling partners, max, and I would be spending my money building relationships with the federal agencies and trying to get more of the attention of the integrators where their products are going to move better," Amtower said. "I wouldn't worry about logistical things such as distribution," he said. "I would offload those things in a heartbeat." Staff Writer Doug Beizer can be reached at dbeizer@postnewsweektech.com.XXXSPLITXXX-In the world of commercial commerce, "channel" refers to the path a product travels to market, beginning with the manufacturer and ending with the consumer. Channel systems typically are hierarchical, starting with wholesalers, which sell to retailers, which sell to customers.Metaphorically, these channels, or manufacturer distribution models, are like an irrigation system. Tapping into the river is an irrigation canal. Branching off from the main canal are successively smaller branches that distribute water throughout the land. In this view, the public sector is served by one branch of the manufacturer's channel system. Other branches serve markets such as banking, insurance or manufacturing.Here in the federal market, where the government is ultimately the customer, we emphasize the "buy" side rather than the "sell" side, a supply-chain model rather than a distribution model. In this model, it is the government that leads. It sits at the center of this ecosystem, supplied by multiple separate irrigation systems -- its prime contractors, subcontractors, suppliers, consultants and manufacturers, each able to provide unique expertise and service, each with its own profit model, each with its own ambitions for the future.To manufacturers outside this supply-chain watershed, reaching the government customer, which owns a mission and a budget, seems much more complicated in contrast to reaching agencies' private sector counterparts. Here in the federal market, the real customer often is insulated from the marketplace by many layers of management, contractors, consultants, influencers, contracting officers and even auditors -- few of whom can articulate what is needed at functional levels.With this government-centric view of the world, is it any wonder that government executives are disinclined to listen to pitches from dozens of manufacturers introduced by high-paid lobbyists who seem to have no idea what goes on in their organization? It doesn't matter how cool the technology may sound if the executives can't see how it relates to what's on their plate at the moment. It's much more effective, these executives say, to have government program managers simply define the requirements, advertise them to the world, and let agencies' prime contractors propose a solution. Manufacturers respond by trying to develop relationships with prime contractors in the hope that they will push their technology into the government. But the primes want to know where the government has a requirement for the technology. Without a concrete requirement, they can't justify investing the time and training to learn about the technology. Bring them an opportunity, then they'll talk to you about developing a relationship. What this illustrates is the need for specialized sales and channel representation activities that the manufacturer, a trusted partner or both must perform in order for government buyers to understand the capabilities of the latest commercial technology that corporations and other governments are adopting successfully. These educational, promotional, relationship-building activities need significant investment and management by someone accountable to the manufacturer, or they simply won't get done.In my world of working with commercial enterprise technology developers, the complex network of partners in the public sector brings manufacturers face to face with unique channel and partnering issues not encountered in the private sector. For manufacturers outside the established channels, the situation presents a challenge, an opportunity and a hard question: How can I build programs that will let me show these partners how long it will take and how much they will make by investing in the services needed to bring my products to market? *Steve Charles is cofounder of immixGroup, a government business-consulting firm in McLean, Va. Steve welcomes your comments at Steve_Charles@immixgroup.com.