Best Practices: How To Pick Alternative And Emerging Vendors

According to the 2007 VARBusiness Alternatives Survey, solution providers are both constantly and opportunistically looking for secondary vendors. For the most part, they'll explore an alternative relationship on an "as-needed" basis, or when opportunities present themselves or a customer or market need pushes them toward an alternative. A healthy minority, though, are looking on a weekly and monthly basis for new partnerships that will help expand their business.

But selecting an alternative vendor isn't a trivial matter. The following best practices, based on interviews with solution providers, can serve as a guide for finding, evaluating and selecting alternative vendors.

1 Establish an Evaluation Process

There's no single way to select an alternative vendor. Some solution providers are more opportunistic, allowing anyone on their staffs to talk to a vendor about emerging products and technologies. Other solution providers have established committees that run alternatives through a formalized evaluation process.

And alternative vendors aren't passive in their pursuit of new partners either. Solution providers report receiving calls and meeting requests as frequently as several times a week. Given the competitive nature of alternatives and rapidly changing technology needs of the marketplace, it's a good idea to have a framework for evaluating alternative vendors.

While the needs of different shops vary, every VAR should define who has the authority to forge new partnerships. In small shops, the decision typically rests with the owner or CEO. In midsize and large organizations, line-of-business managers, sales executives and technical teams may be delegated the authority.

Some VARs realize the enormity of alternative offerings and the need for them to stay competitive, so they've put together formal vendor evaluation committees. Under this model, the committee consists of representatives from the executive team, IT/engineering, sales and marketing. Members review the company's technology and product needs, market conditions and partnership opportunities. Only after careful scrutiny do they use an alternative vendor. The bottom line: No one should ever rush into an alternative relationship without due diligence.

"[The alternatives] need to do something to stand out in the crowd. They can't look just like Symantec or just like McAfee," says Jim Liksa, sales manager and partner at Orlantech in Orlando. "They've got to do something to catch your eye."

NEXT: Two questions to ask yourself when choosing an alternative brand.

2 Select Only the Best

Plenty of alternative brands and technologies are available for the choosing, but solution providers should pick only those that fit their specific business needs and can effectively compete against established market leaders.

"Why do I sell a particular product? It's about relationships," Mobitech's Luby says. "I can't stand the [vendor] pitches where they say they'll give me two points. I don't care. I want what's best for my customer."

First, compare the alternative product specs, performance and capabilities with market-leading products. Alternative products should, at a minimum, offer comparable performance and capabilities as their market-leading counterparts or provide a significant differentiation that will make them competitive. In some cases, you can sacrifice features for price, since target customers may not need the functionality of a market-leading product.

Test and retest the products to ensure that they do what the alternative vendor says they do. A red flag should pop up if the vendor isn't willing to field a proof-of-concept solution.

"If my guys can't play with it and get comfortable with it, I'm not going to recommend it to my clients," says Bryan Sensintaffer, vice president of PC ComputerSoftware in Tulsa, Okla. "I've got to feel comfortable with it."

Alternatives aren't exclusive to commoditized technologies. Alternative vendors may push untried technologies. Being an early adopter has many benefits, but it comes with the risk of having to do a lot of end-user education, market development and longer sales cycles. Smaller alternatives don't have the brand power or marketing budgets to support broad market development.

"I know a device improves with each release, but if we have to deploy this, we need to know what risk we have to mitigate against," says David White, vice president of client strategy and enablement at Beacon Technologies in Madison Wis.

NEXT: Why going with an alternative vendor could be a good move with commodity products.

Calculate the Opportunity ROI

An alternative vendor can produce the best switches, voice software, antispyware application or printer in the world, but the relationship is worthless if there's no market opportunity.

That opportunity is often a matter of size and market growth, as well as a VAR's ability to enter and capitalize on the market. The printer space, for instance, has numerous alternatives, but solution providers report that it's difficult to compete against the dominating market leader--Hewlett-Packard.

Even when looking at a commoditized market, a solution provider has to consider the opportunity of being an alternative. Cisco Systems may dominate the networking hardware market, particularly among large end users, but solution providers can carve out a niche with an alternative vendor that offers comparable performance with competitive prices.

The good news is that alternative vendors are often aggressive in their pricing and margins. Some solution providers say alternative vendors will pile on discounts and rebates when they learn of a chance to displace a key competitor.

Solution providers should also consider a vendor's financial health and its ability to extend credit and monetary incentives to its partners. Having a sense of a vendor's long-term viability--and perhaps its exit strategy (IPO, acquisition, growth targets)--will give a solution provider a sense of security about it.

Nothing is free, and taking on an alternative vendor does come with a cost. Time, training and certification expenses, marketing, customer conversion and inventory investment add up quickly. According to VARBusiness State of the Market research, most solution providers' tolerance for risk and expected ROI on new products and vendors is less than a year; this means they expect to recoup their investments and turn a profit quickly.

"We lead with certain partners because they're visible, accessible and there to help us--and don't deter us from selling," says Tony Wong, manager of corporate IT at Memex.

NEXT: The greatest challenge with alternative vendors.

4 Study the Program

While most solution providers will join an alternative vendor's channel program once they've done their due diligence, it's vital to assess thoroughly the quality of what the vendor is offering in terms of marketing, training and technical support.

Depth and reach are often the most common shortcomings in an alternative vendor's program. Limited by size and funding, an alternative may not have the same incentives, marketing support and market reach as the leaders. This is an important consideration, especially when dealing with vendors that have little brand recognition. Lead generation and market development may fall entirely on the solution provider. A good alternative is one that goes the extra mile for solution providers.

"Alternatives are working just as hard as I am," says Amy Luby, CEO of Mobitech, a small solution and service provider based in Omaha, Neb. "They're going to give us better service so they can take business away from the big guys. That's been my experience."

Training and tech support are often a mixed bag. The quality of technical support and the reliability of products are among the chief challenges cited by solution providers when adopting an alternative vendor, so solution providers should thoroughly evaluate peers' experiences with the alternative.

Product availability, too, is often cited as a source of contention with alternative vendors, particularly smaller ones. Conversely, alternatives can be a source of supplemental inventory when primary vendors can't fulfill an order.

The greatest challenge with alternative vendors, as cited by solution providers, is simply establishing a new relationship. At the very least, always ask for references. Solution providers say their peers are the best source of information on alternatives.

"Most of the time, you have to rely on your existing relationships to determine what you bring to the customer," says Stacey Spencer, vice president and CIO of managed services at UNI-DataCommunications in Flushing, N.Y.

VARBusiness editors Rick Whiting, Shelley Solheim and David Raikow contributed to this report.