The 10 Biggest Channel Stories Of 2010

Channel Stories We're Still Talking About

There are always a few news stories that get the ITT channel's tongues wagging. This year, a number of channel stories kept us engaged all year long, from Cisco's supply chain woes to Microsoft's channel shakeup to NTT's purchase of Dimension Data. Here's a look at the biggest channel stories of 2010.

1. Cisco Supply Chain Problems Plague The Channel

Solution providers have been dealing with a yearlong Cisco product shortage that has left them without some of their most critical network products.

They've had to console frustrated customers, confront dwindling sales and consider alternative product lines from rival vendors.

Partners balked as much at Cisco's lack of communication about the problem as they did at the shortage itself, leaving Cisco with some channel fences to mend.

2. HP Gets A New Channel Chief

In late February, Stephen DiFranco resigned as Lenovo's channel chief to become vice president and general manager of HP's Solution Partners Organization — Americas, stepping into the role vacated by Adrian Jones three months earlier. Jones was credited with raising the engagement level between HP and its partners, and making HP's channel efforts a much more strategic part of the company's go-to-market strategy. For DiFranco (pictured), that meant HP partners were now looking to him to continue that channel sales momentum.

A 21-year veteran of the channel, DiFranco jumped in with both feet, pledging early on to bring more clarity and simplification to HP's channel relationships.

DiFranco's appointment as HP's channel chief took on even more importance a few months later when the company ousted CEO Mark Hurd and replaced him with Leo Apotheker. It's now up to DiFranco to ensure that Apotheker and the HP channel get off on the right foot

3. Winds Of Change Blowing At Microsoft

Microsoft partners had a lot of new stuff to get used to in 2010 as major change swept through the software giant this fall. In personnel moves, Allison Watson moved out of the worldwide channel chief role to become corporate vice president of the Business & Marketing Organization in the U.S. Jon Roskill, who previously held this role, took over Watson's role as Microsoft's worldwide channel chief.

Robert Deshaies, vice president of U.S. Partner Business Development and Sales, left his role to focus on an unspecified strategic initiative for Microsoft's U.S. Leadership Team. Jenni Flinders, who for the past three years has been general manager of the channel incentive and transaction channel in the Worldwide Partner Group, took over Deshaies' role.

Microsoft also made significant adjustments to its certification program. The familiar Gold and Certified partner designations have been dissolved and now partners will choose to attain Gold or Silver status in any of 29 individual MPN technology competencies.

4. Upheaval In The Sun Channel Under Oracle

Following the January close of Oracle's acquisition of Sun Microsystems, Sun channel partners were left to wonder what exactly the software giant had in store for them.

It became increasingly clear throughout 2010 that Oracle intended to shake up the status quo, starting with plans to sell Sun products direct to its largest customers.

Then in October, Oracle cut off Sun solution providers' maintenance renewals business in order to eliminate what the vendor termed a business with no value-add, which it said was abused by many legacy Sun partners. The move caught many Sun partners by surprise and caused many of them to question Oracle's commitment to building a hardware channel.

5. VARs Behaving Badly

Solution providers saw a disturbing rise in unethical behavior among their peers, driven in part by the stumbling economy. The poster child for VARs behaving badly was FusionStorm (2010 VAR500 rank: 115), which got more than a slap on the wrist after a jury found it liable for misappropriation of trade secrets, breach of fiduciary duty and breach of loyalty in a court case brought against it by fellow solution provider Technology Integration Group (TIG).

The companies ended up settling out of court, with FusionStorm agreeing to pay nearly $11 million to cover damages, expenses and legal fees for TIG, which had sued FusionStorm in 2007 charging that several of its executives and former TIG employees engaged in unethical business practices as FusionStorm moved to set up a branch office in Tampa to compete with TIG.

The court case put the spotlight on unscrupulous business practices in the channel, as well as the potential consequences for crossing the line.

6. Channel Consolidation Craze

Solution provider acquisitions came fast and furious in 2010. VARs big and small were snapped up as their peers tried to find new paths to revenue and bring on new skill sets.

One of the largest solution providers in the industry was snared this year as telecom powerhouse Nippon Telegraph and Telephone (NTT) unveiled plans in July to acquire Dimension Data (2010 VAR500 rank: 30). For NTT, buying Dimension Data brought 6,000 potential corporate customers that could purchase NTT's telecom infrastructure and data center offerings.

In another example, Sirius Computer Solutions bought MSI Systems Integrators in a deal that creates a the largest IBM partner, with annual sales greater than $1 billion.

7. Specialize Or Go Home

A number of the channel's biggest vendor partners pushed forward with plans to increase technology specialization among their solution provider partners.

Microsoft wasn't alone in its specialization push (see slide 4). IBM in November rolled out higher margins and other incentives for software partners that become certified as vertical industry experts, while Symantec that same month launched a new channel program that offers incentives to partners that invest in specializations and certifications.

Brocade also rolled out a specialization push with new additions to its Alliance Partner Program.

The message to partners? Invest more in us, and we'll invest more in you. The underlying message to partners? The more specializations you earn from us, the more loyal we know you'll be.

8. SAP's Channel Revival

SAP started off 2010 with a bang by bringing on Kevin Gilroy to head North American channel operations. Gilroy (pictured), best known to VARs for a 24-year career at HP that included a stint as the company's channel chief, brings serious street cred to SAP, a company more focused on direct sales until recent years.

To keep the momentum going, the company this year also moved 100 percent of SME sales of its Business All-in-One application suite to channel partners.

9. The SBA Cracks Down

The Small Business Administration in October suspended GTSI's authority to service federal contracts, alleging that the solution provider inappropriately served as a subcontractor on projects set aside for small businesses.

GTSI's suspension was later lifted on condition that the company oust its CEO and general counsel. Other employees were suspended, and GTSI also agreed to monitoring, among other stipulations, in order to regain its status as an approved federal contractor.

For the channel at large, the crackdown signals that solution providers working on small business-designated deals had best make sure their participation is above board.

10. Cisco Vs. HP: Caught In The Crossfire

At no time was the rivalry between HP and Cisco more blatant then the last week of April, 2010, when the companies created a battle of the partner conferences by holding their events at the same time. For the many solution providers working with both companies, it meant choosing how to allocate resources between the two.

But has Cisco had a change of heart? At 2009's Cisco Partner Summit, Cisco executives were vocal about the competition between Cisco and HP, assuring partners that Cisco was ready to "punch back." But in 2010, Cisco returned to form, with executives sidestepping questions about head-to-head competition with HP. HP, for its part, continued its rhetoric against Cisco.

Regardless of what comes out of executives' mouths, channel partners say the rivalry is still alive and well in the field. "The die has been cast," one solution provider said. "Both sides are dug in with substantial investments made in very innovative technologies ... I think the industry is in for a long battle over the server and networking markets."