Battle Of The Brands: SP500 Executives On A New Kind Of Channel Conflict


"Right now, everything is in flux."

So says Ron Dupler, president and CEO of GreenPages Technology Solutions, a Solution Provider 500 powerhouse based in Kittery, Maine. And when Dupler says "everything," he means "everything."

As solution providers such as GreenPages, No. 154 on the SP500 list, shift more toward a services-led model, their reliance on vendor partners is shrinking while their focus on their own company brand is growing.

That shift is drastically altering the nature of OEM manufacturer and ISV partnerships in the channel, according to some of the top companies on CRN's SP500 list, a ranking of the top solution providers in North America by revenue. During a roundtable discussion at CRN parent The Channel Company's 2013 Best of Breed Conference, CRN editors asked these solution provider executives about the changing dynamics of their vendor partnerships and how they balance their own brands with those of the OEM suppliers.

These executives all said they're seeking to strengthen their own brands with clients. Instead of focusing on the actual hardware or software product being resold, they are concentrating on their own managed or cloud services offering and discussing business process outcomes instead of speeds and feeds.

"I think we, as partners, need to get to a point where we don't make the hardware sales matter as much to our economics," said Majdi "Mike" Daher, founder and CEO of Denali Advanced Integration, Redmond, Wash., No. 116 on the SP500.

Harry Zarek, president and CEO of Richmond Hill, Ontario-based Compugen, No. 58 on the SP500, agreed. "I'm a Ford dealer, if all I do is sell Ford, customers will think, 'If I want Ford, go to that organization,' " he said. "We want customers to come to us because we're offering them a choice, and evaluation."

The SP500 executives said vendors and their products are still a crucial part of their business, of course, so they must walk a fine line. But will their branding efforts cause friction with vendor partners and lead to a new kind of channel conflict?

"The rules of the game are changing, and I think every major hardware OEM and ISV right now is trying to rationalize what their business looks like in this future world," Dupler said. "And everybody's trying to figure out how to deliver the solution the customer wants, so [questions like] where are we going to be three to five years out, and who's going to be your friend and foe right now, I think, are in flux."

Here's how some of the top solution providers in the channel see the game changing.

BALANCING BRANDS

As solution providers focus more on their own IT services -- be it support, integration, managed services or cloud services -- and less on vendor products, does that mean the solution provider's brand becomes more important to the client?

Zarek believes it does. "The channel brand becomes the brand," he said. "And that’s why we say to our sales force, it's our brand that's the differentiator, not the vendor, because anyone can sell the vendor's product. We love our vendors because we'd have nothing to sell if we didn't have their platforms, but we need to offer customers choice to fit their specific requirements."

Dupler said brand superiority depends on the size of the customer. For example, he said, GreenPages and its subsidiary LogicsOne aren't at a point where their company brands supersede the major vendors in large enterprise accounts.

"We want to get to the point where our brand is most important to our customers," Dupler said. "I think in the midmarket sweet spot of the SMB, that's definitely attainable. Right now in the enterprise, the big hardware OEMs and ISVs are still very important to them."

Daher, meanwhile, said his company's approach is simple: When it has a conversation with a client, Denali talks about the service, not the manufacturer label. For Daher, the success of a particular solution depends not on the vendor but on Denali's ability to make it work and support it with its own services. "The one thing that I think some of the OEMs do not understand, they think they are the most important piece of the solution," he said. "No. It's all the pieces together, and that's our value."

Like Dupler, Zarek believes there's a sweet spot for solution providers looking to strengthen their brands. The major vendors, he said, will continue to focus their efforts at the top of the enterprise pyramid, but they don't have the ability to give their full attention to the rest of those clients. Why? Because, Zarek said, the major vendors are looking to cut operational costs.

"The large global OEMs are under tremendous financial pressure from the marketplace, and the only way that they're going to continue to strengthen their stock price is by reducing costs, by and large," Zarek said. "The top 100 accounts, maybe they can still afford to invest from a sales point of view in those. So with the customers that are left, there's a vacuum. And the [question] is, who's going to worry about my entire IT infrastructure?"

And solution providers can fill that vacuum, according to the roundtable participants. Dupler said solution providers are in a unique position because they can offer choice plus a breadth of technology expertise. "The solution, at the end of the day, is what the customer wants," he said.

And that is ultimately what gives solution providers a stronger brand: the ability to fully service a client across a range of IT products and build relationships as trusted advisers.

"I think there's an opportunity for us to take over that sweet spot, which is to really have that customer relationship because we have the perspective, Zarek said. "And I think the vendors understand that the decision-making is going to move from them to us together with the customers, to evaluate what's in their best interest."

And because vendors are looking to cut costs, they'll need to rely on channel partners more -- not less -- to reach customers even as solution providers' brands eclipse their own in some segments of the market.

"Those OEMs are always going to need people like us," said Daher, "and they have to play nice with us."

FEWER VENDORS, BIGGER CLOUDS

Even though major vendors are relying on the channel more today, the SP500 company executives said that doesn't mean solution providers can simply write their own tickets with vendor partners.

"They're being more selective," said Dupler. "I think most of them get what's going on and understand they need quality partners who can go out and deliver advanced solutions, but they're being selective. They're realizing that not everybody in their portfolio today is necessarily the right partner."

The SP500 companies are being more selective, too, saying they have fewer vendor partners today than they did five years ago. "We're going fewer because if we need to know the product and the technology better than the guys who are selling it, we have to invest in training, and there's just no way we can invest in everybody," said Daher. "So we do have to make bets."

Dupler agreed, saying the technology and infrastructure stacks are becoming more complex, requiring solution providers to go deeper and narrower. "You can't support them all," Dupler said. "You've got to make your bets and, to me, strategically, the bets are becoming clear around some of the technologies in the market."

Still, even with fewer partnerships to manage and closer ties to those vendors, working with vendors can still be a struggle, according to the roundtable participants. For example, Zarek said too many vendors want to turn their channel partners into carbon copies of each other that all focus on the same vendor products with the same sales and technical support skills. Instead, Compugen focuses on the client's entire IT architecture and business processes to differentiate itself and believes vendors need to do more to support their own products.

"Today there's just a tremendous amount of duplication that is going on that doesn't allow us to be effective," Zarek said. "I don't think we can afford it anymore."

One of the biggest ways the SP500 companies are differentiating themselves is through the cloud. The roundtable participants all have some cloud component within their services offerings. Denali and Compugen offer a variety of cloud options -- from SaaS and backup to data center services -- while GreenPages has its LogicsOne cloud-focused subsidiary.

"What people can't deny right now is workloads are moving from traditional customer-owned architectures over to public service platforms, or cloud service platforms," Dupler said. "Building out private cloud and enabling hybrid cloud -- those markets are growing and we're seeing tremendous demand."

And that shift, according to the executives, is giving cloud-savvy solution providers even more opportunity to strengthen their brand in the eyes of customers. "I'm a big believer in this idea of 'client to cloud,' where we manage the client device all the way back to the cloud," Daher said. "And it's about figuring out how do you build a services and product portfolio that enables you to go to a customer and say, 'Let me manage your clients, and then let me figure out what that looks like, and then figure out how we can go back and manage the infrastructure.' "

The cloud, therefore, gives the channel another way to manage and control the customer's infrastructure. Not only can solution providers position themselves as cloud experts, but they also can offer an even wider range of services -- "from desktop to data center," as Zarek said.

In the end, the roundtable participants agreed that solution providers' services allow them to become an integral part of their customers' environment. As more businesses look to offload IT to trusted advisers, the bigger the opportunity is to become the dominant force for those businesses.

"This whole idea about coming from the outside and trying to sell something to the IT [department], I think, is starting to leave very fast," Daher said. "Companies like ours, where we become an extension of a customer's IT to support the business -- that's the approach, and we have to understand we are that business."

PUBLISHED DEC. 2, 2013