Six Months In, Sophos Channel-Only Strategy Pays Off
Channel partners that make the cut are giving Sophos high marks for its partner and customer support efforts and generous margins. Sophos executives, in turn, say their approach is providing the company with a healthy increase in incremental business through partner-generated sales leads.
"We've experienced significant growth in our Sophos-related business this year. Going 100 percent channel has been really good in terms of our relationship with them," said Tema Mueller, solutions director with Softchoice, a Toronto-based solution provider and Sophos platinum partner.
Last month solution providers surveyed for the VARBusiness Annual Report Card gave Sophos the highest marks among all security software vendors -- particularly in the area of partner support -- beating out Cisco, Trend Micro and Symantec, among others.
The results of Sophos' new approach are also showing up on the company's top line. Late last month, about halfway through the company's fiscal year, Sophos said its channel partners had generated $11.3 million in sales leads and its top 30 partners were averaging 600 percent year-over-year sales growth rates. (While the company has been mulling an IPO, U.K.-based Sophos remains privately held and doesn't disclose detailed finances.)
Sophos focuses sales of its IT security and control software toward mid-market and large businesses, putting it in direct competition with Cisco, McAfee, Symantec and others in the fragmented security software market.
Prior to this year only about 60 percent of Sophos' sales were through the channel with the rest direct sales. Eliminating channel conflict was the prime motivation for adopting the channel-only strategy. "The only way to do that is to take any ambiguity out of the program," said Michael Rogers, Sophos vice president of North America alliance, channel and OEM sales, in a recent interview. "We clearly have measurably reduced the friction," added Chris Doggett, Sophos channel sales director in North America.
Sophos has adopted what it calls a "bi-directional value model" in working with its channel partners. Simply put, it means Sophos offers lots of incentives to channel partners who commit to growing Sophos' business as measured by partner investments in training sales and engineering personnel, marketing expenditures and sponsorship of Sophos-centric sales activities.
"The industry traditionally hasn't recognized those kinds of investments as much as they should," Doggett said, noting that most vendors just use sales volume as a metric for gauging channel partner success. "Measuring folks on value is a much better way to evaluate your business partners."
Altogether Sophos has about 1,100 companies in its partner system worldwide with about 500 active partners in North America. But only about two dozen of those are platinum partners and another 50 to 60 categorized as gold partners -- both of which Sophos works closely with. The rest are designated as silver partners who resell Sophos products largely on their own.
The company is recruiting new channel partners in vertical markets and geographies where it lacks presence, Doggett said, and has a team of managers who "re-energize" lagging channel partners deemed key to Sophos' growth. While he says Sophos hasn't cut ties with any reseller that's failed to measure up, Doggett said some older VARs might eventually leave the program.
In return for channel partner commitment Sophos offers a two-tier margin structure with top-level margins for resellers that bring new deals to the vendor and lower margins for "fulfillment" resellers. While company executives wouldn't discuss the amounts of the margins, channel partners say they are generous compared to other security software vendors. Sophos also provides guaranteed margins on registered deals that ultimately go to another reseller. Because resellers deal directly with Sophos rather than acquiring product through distributors, the company has more visibility into channel sales and can exercise more control to avoid partner-partner conflict, Rogers said.
The company has also expanded its on-line and classroom training programs, revamped its reseller certification program and increased spending on its channel marketing efforts by 50 percent year-over-year, Rogers said.
Sopho's efforts mesh well with Softchoice's strategy of growing by aggressively acquiring new customers, Mueller said. (The solution provider has recorded 20 percent annual growth in recent years.) "It aligns well with [Sophos'] deal registration program that rewards partners for driving new business to them." She also praised the higher margins the software company offers.
"They are incredibly connected to their resellers and they have a style that makes it very easy to work with them," said Catherine Chandler, president of CCV Software, a Sophos gold partner with headquarters in Charleston, W. Va. and Vero Beach, Fla. CCV, which focuses on the education market, and Sophos have provided each other with a number of sales leads this year, said Cheryl Narum, CCV vice president.
