Enterprise Channel Execs: Here's How We're Keeping Partners Profitable

With hardware margins shrinking industrywide, enterprise vendors are increasingly focusing on delivering professional services through channel partners. The reason is simple: Services are still pretty profitable.

Hewlett-Packard is advising partners to do 20 percent hardware and 80 percent services, and services are delivering 40 percent margin, said Matt Smith, HP's director of Americas partner marketing.

"We're trying to show people where the opportunities are around services. That's where we're seeing the margins pop," Smith said.

[Related: Microsoft Opens Office 365 Licensing Program To Partners That Sell To Enterprises ]

Managed services and the trend of buying IT resources "by the drink" is increasingly popular, and that's driving discussions about service-level agreements between Cisco Systems and partners, said Edison Peres, senior vice president of worldwide channels at Cisco.

Services are one way vendors are driving partner profitability. They're also trying to incent partners to take on more of their products.

IBM offers "significant margins" for selling hardware and software at the same time, said Neal Callahan, vice president of global business partners at IBM.

A few years ago, partners wanted to minimize expenses in the data center, and now they are focused on new revenue-generation models, Callahan said.

For example, data analytics has been "a huge success" for IBM in the midmarket channel, said Callahan.

Cisco is always striving to do business differently, and that means getting into new technology areas and forcing market transitions, Peres said.

While channel programs are important, there's no replacing the value of direct communication between vendors and solution providers, panelists agreed.

VMware's top executives often meet directly with partners, and the company is planning on broadening that exposure, said Frank Rauch, vice president of the Americas Partner Organization at VMware.

"Our empathy is obvious," he said of VMware. "We're humbled to be around you."

PUBLISHED AUG. 20, 2013