Citrix Exec: We're Not Going Direct With License Renewals

Thomas Eacobacci, senior vice president of services at Citrix, said in an interview that the Fort Lauderdale, Fla., software vendor took over the Subscription Advantage license renewal fulfillment business as of Aug. 1, but he noted that it's not an attempt to poach sales from channel partners.

"We have no intention of taking the business direct," Eacobacci told CRN.

The new policy is designed to level the playing field for Citrix's loyal, trusted advisers, whose renewal business is poached by other partners, Eacobacci said. Under the new policy, customers renew licenses online at full price, and Citrix is establishing an agency fee model to reward partners that influence those renewals.

"The primary driver for this is that over the last few years, we've seen our partners influencing our subscription sales and influencing customers on a regular basis on products and services also not getting that renewals business," Eacobacci said, adding that the policy was developed in conjunction with some Citrix partners.

Several partners cried foul last week after Citrix sent them a letter dated July 28 announcing that it would be instituting a new online license-renewal system and would handle all of the cash flow going forward. It's not a small chunk of change: Citrix posted nearly $99.8 million in second-quarter 2006 revenue and $331 million in fiscal year 2005 from license updates, and nearly 40 percent of that business came from North America.

The new policies will reduce discounting in the field, Eacobacci said. Under the new plan, partners will be paid a 15 percent commission for influencing renewals, as long as they quote deals at 100 percent of the list price. The new policies will ensure that the right partners are compensated for their efforts and that customers are quoted one price, whether they renew via partners or Citrix, he said.

"There's a lot of price confusion because some customers ask for quotes directly and some are through channel partners. This will eliminate that," Eacobacci said.

Yet some partners said that going forward, their customers likely will do online renewals direct with Citrix, and partner margins will disappear in the long run.

Eacobacci acknowledged that Citrix will handle all of the cash flow and some customers will choose to renew without partner involvement. But he added that customers have always been free to deal with Citrix directly.

The new policy will level the playing field for all Citrix partners and ramp up the amount of licensing business through the channel, Eacobacci said.

Citrix has escalated the amount of license renewal business going through the channel to 65 percent in the last two years, and next year it's aiming for 75 percent, he said. In 2004, only 25 percent of renewals came through the channel.

In addition, Citrix instituted a new compensation-neutral policy effective Aug. 1 that no longer rewards its sales force for license deals and renewals at a higher percentage than partners, he said.

Partners that participate in the agency program will pocket higher margins, Eacobacci added. Though partners got a 20 percent discount in the past, most only earned eight to 10 points per deal, he said. The new fixed 15 percent commission represents an increase, and the remaining 5 percent will be invested in channel incentives, he explained.

"Before, customers could purchase and work directly with Citrix sales, and if they did, the Citrix sales rep got a higher commission if they bought direct," Eacobacci said. "Now, with the comp-neutral plan, whether the customer buys through the partner or reseller or sales rep doesn't matter. Our goal is to increase the amount of business through the channel program."