SMC Networks Spins Off Channel-Centric Business Unit

Edgecore will be separate from SMC Networks, although both will remain subsidiaries of SMC parent company Accton Technology. According to SMC executives, the move is designed to relieve conflict and branding issues between SMC's various direct and indirect sales channels, and create a new company in Edgecore that will do at least 90 percent of its business through channel partners.

"Our channel guys are the central reason for us doing this," said Keith Alexis, vice president of sales and channel chief for SMC's Business Solution Group, and now general manager of Edgecore. "SMC is very strong in the channel, but back when we first merged with Accton, we started doing a number of things that were different than our channel business. Over time, what that did was distract from a visibility standpoint what we were doing in the channel -- the brand image started to become skewed as retail."

According to Alexis, SMC Networks saw 40 percent year-over-year growth last year, and this year will see 10 percent. Despite those successes, he said, SMC years ago ran into branding problems thanks to the expansion of its Service Provider Group -- which sells networking products through service providers -- whose growth overshadowed that of the Business Technology Group's switching products.

The branding problem led to conflicts between SMC's channel partners and its sales through service providers, Alexis said. It also created issues for the OEM relationships of its parent, Accton, thanks to competition between SMC and some of those OEM partners.

Most of all, Alexis said, the branding issue has led to a loss of channel focus and stymied the success of its channel partner program.

"We haven't left the channel at all. We have created a lot of confusion for the channel," he admitted. "We definitely had to take a step back, and about four years ago, we did, and we said, what are we doing here."

Gradually, SMC began to redefine its channel image and in 2006 quietly started a new marketing campaign with some of its most dedicated VARs. Alexis said the company has spent the past few years since then looking at key differences between its home integration, cable modem and service provider businesses and the SMB and enterprise networking products it sells through the channel.

Edgecore is already an SMC brand, having been launched in Brazil, Russia, India and China in 2005 to take aim at developing markets. Alexis and his team suggested to Accton that 2009 was the right time to make a clean break, and Accton approved the creation of two separate companies, bringing the Edgecore name into North America.

SMC has remained a consistent channel presence even without that corporate focus on channel branding. The company once again placed on Channelweb.com's list of the top 10 most strategic networking vendors in this year's State of Technology: Networking survey of networking, telephony and infrastructure VARs.

But Edgecore is now planning to invest heavily in channel programs and also be a greater presence at channel-centric industry events in 2010.

"All of our funds are going to channel partners," Alexis said. "We're getting the name and visibility back to where it should be, and to do that, we needed a complete break with the brand and a rebuilding of the channel part."

Alexis, who reports to Accton chairman and former SMC Networks CEO Paul Kim, will have P&L responsibility for Edgecore Networks. He said Edgecore products will continue to be co-branded as SMC Edgecore for about three years while the company transitions.

Edgecore will have two key channel managers: Louis Mazzante, senior director of sales for channel business, and Mike Boissiere, vice president of sales for the enterprise sales business. At the time of Edgecore's spin-off, 90 percent of its business will be through indirect channels, and the other 10 percent will be legacy contracts for what Alexis called semi-OEM relationships and longstanding government agreements. He said he expected the 90 percent indirect number to increase in the next few years.

Alexis added that Edgecore will be rolling out a new channel partner program by the end of November that will add to the existing SMC channel program such capabilities as installation assistance for VARs and also include the formation of a technical advisory board.

"We have a new program," he said. "It's not just going to be a multi-level reseller program like everyone else has. Ours is going to be based on points: resellers accumulate points with us and they're going to be able to cash in those points for products, training and other network management software that they can then resell."

Edgecore further plans to offer its smallest VARs things like free network management software to demo, and greater assistance in areas such as VoIP management products.

Technology-wise, Edgecore also plans to introduce new enterprise products -- including 10-Gigabit Ethernet products -- in the North American market by the second quarter of 2010.

"We took our time over the last three to four years to hone what it is we wanted to do," Alexis said. "You'll be hearing from us a lot more this year. We've been shy and nervous about telling the public a lot of these things because we've been in a really unusual situation over the last 10 years. Separating the company 100 percent was is the right way to go."