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Lots of channel talk out there…Juniper is revamping reseller training online to address complaints from their channel, Fortinet coming out with an MSSP program, probably in response to the SMB and midmarket growth in managed services offerings – of course all of the AV companies out there are doing this or headed that way, and numerous comments on the CRN forums concerning whether partners should be exclusive or committed to one vendor in a given area.  The problem with just about all of the programs out there is this: Vendors are not always addressing the root problem – resellers need more GP (Gross Profit).  This won’t come through install services, and increasing product sales doesn’t necessarily mean more GP either.  Sales must come earlier in the sales cycle with shorter sales cycles driven by high touch solutions, consulting, and low cost of sales in terms of people resources.  So what do channel managers need to do?

  • Understand the reseller profit model – it’s nothing like the vendor’s…
  • Provide sales training that focuses on selling, not speeds and feeds
  • Help resellers build your technology into solutions that drag other product areas within that reseller
  • Learn about marketing and help/support VAR marketing efforts
  • Clarify how deals are protected from direct reps and competition
  • Don’t over distribute which hurts the street price
  • Remember that GP is what matters – not revenue.

Resellers, VARs, Solution Providers, and Channel Managers – this is an important lesson on the profitability of services.  While your (or your partner’s) services may be very profitable, they may not be as profitable as they seem.  As the market has commoditized, I’m seeing far more short product/install contracts…less consultative, long term engagements.  This is particularly  true in the mid and smaller markets. What is the result.

Listen and see how calculations on profit, gross profit, and net profit are sometimes confusing.  To the sales rep, all GP is good – you get paid, right?  To the person with P&L responsibility, the numbers don’t always add up…I frequently run into people who initially think they have strong services margin.  When I show them how to calculate it, we find profits to be much lower apart from the product sales.

© David Stelzl, 2010

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