Step Up Sales With Vendor Partnerships

Many VARs view manufacturers and distributors that sell directly to end users (e.g. CDW, Dell, IBM, Microsoft) as major business threats. But, $9.1 million consultant/systems integrator Networks Plus Technology Group, Inc. (Networks Plus) is no longer one of them. By capitalizing on its managed services (e.g. remote appliance/application monitoring and troubleshooting, application hosting) expertise, Networks Plus has experienced 3,000% sales growth since 2000, and it expects 20% growth in 2006 — primarily as a result of partnering with large vendors and distributors and reselling alternative vendors’ solutions.

Build Your Core Networking Services Around Your Partners’ Products
In order to make the transition from competitor to business partner, Networks Plus had to make a few changes to its business. The consultant/systems integrator bet on consulting services and saw the most opportunities in selling networking services such as security assessments, compliancy audits, high-end storage, disaster recovery planning, and IT platform migration planning. Like many other resellers, James Kernan, CEO of Networks Plus, observed how industry mandates such as Sarbanes-Oxley and HIPAA (Health Insurance Portability and Accountability Act) were forcing organizations across several vertical markets — especially banking/finance, healthcare, education, and government — to spend money on IT solutions to capture, secure, and manage their data. In addition to enabling it to address the IT needs of multiple vertical markets, Networks Plus’ choice of consultative services also enabled it to earn sales revenue by selling multiple technologies. For example, the consultant/systems integrator implements VoIP (voice over Internet Protocol), document management, storage, wireless, network security, and CRM (customer relationship management) solutions.

One of the primary ways this 29-employee company is able to address so many IT needs across multiple vertical markets is through its business partnerships, to which Kernan is quick to credit much of Networks Plus’ growth. One example that stands out is Networks Plus’ partnership with Microsoft. Like many VARs, Networks Plus resold Microsoft Office software licenses, but a year and a half ago, it decided to take its relationship with Microsoft a step further. “Microsoft is a very large, decentralized company, which makes it difficult for a small company like us to get its attention,” says Kernan. “Even if you can influence a key channel rep in one office, it’s hard to get that person to talk about your company to a Microsoft channel rep in another office.” Networks Plus put together a monthly newsletter to communicate its business activities with Microsoft. The newsletter included implementation forecasts for the next quarter, seminars and complementary offerings the consultant/systems integrator had that supported Microsoft’s network, and new engineers (as well as a list of their skill sets) who were recently hired.

The newsletter didn’t directly lead to a stronger relationship with Microsoft, but it did play a role in the software company announcing what it called a “bake off” in the San Diego area, which was a contest to see which VARs would make the best partners. Kernan’s contact at Microsoft told him that every VAR claimed to be the best company ever, and Microsoft wanted to see which one could back up that claim. Microsoft sent out the contest details to 25 VARs in the San Diego area. The contest required VARs to set up an in-person interview with a Microsoft rep and conduct a mock consulting interview to determine the customer’s business needs and recommend a solution. Most of the VARs chose not to participate in the offer, but Networks Plus took it very seriously. “We assigned two project engineers, myself, and another executive to the task and spent 50 hours planning for the contest,” says Kernan. “We ended up beating out 10 competitors to win the competition.” The biggest thing Networks Plus won from the contest was Microsoft’s respect. Reps throughout the Southern California region now know the consultant/systems integrator’s name, and Networks Plus has become the go-to-consulting-partner for Microsoft SMS (Systems Management Server) implementations/migrations in the region.

Find Alternative Vendor Products To Complement Your Consulting Business
In order to take full advantage of its Microsoft partnership, Networks Plus sought out vendor partners with products that were complementary to Microsoft’s platform. Also, the vendor had to not be the market share leader within its technology category, and it had to have a hardware or software that was just as good as the No. 1 vendor. For example, instead of reselling Cisco or Avaya VoIP equipment, Networks Plus selected 3Com. Instead of reselling the market share leader in imaging equipment, Networks Plus chose Xerox. For network perimeter security, Networks Plus selected Network Engines’ (see sidebar on this page) security appliances, and for its antivirus needs, the consultant/systems integrator went with Trend Micro. “One reason for our decision to use alternative vendors was that they offered higher profit margins than the market share leaders,” says Kernan. In some cases, the decision to go with an alternative vendor was driven by a stronger partnership opportunity. “Often, a company that isn’t the market share leader will work a little harder to earn your business,” says Kernan. “For example, an alternative vendor may provide better technical support, more flexible financing, and better communication about new products and services.”

Manage Your Vendor Partnerships Via A Distributor
Recently, Networks Plus took its VAR and alternative vendor partnerships a step further by partnering with VAR/distributor CDW. “CDW is looking for VARs in major cities to provide networking consulting services,” says Kernan. “Similar to what other companies like Microsoft, Dell, and HP were looking for, CDW wanted to work with consultants like us that could help them provide a total solution/service to their customers.” The upside of the partnership was that anytime one of CDW’s customers needed help determining which products to buy and/or needed implementation help, Networks Plus would be the go-to-partner in the area. The potential downside of the deal was that Networks Plus had to purchase any products it sold that were on CDW’s list through CDW, which meant all hardware and software from Microsoft, 3Com, Xerox, Cisco, and Trend Micro. After evaluating the offer, the consultant/systems integrator presented the opportunity to its vendor partners. “They were afraid they wouldn’t get credit on deals their salespeople discovered first or deals we were working on together,” says Kernan. Fortunately, CDW had already anticipated this problem and developed online tools to ensure the proper credit and/or commissions were paid to the appropriate business partners. For example, the online tools allow Networks Plus and its Microsoft VAR reps to register pending deals with clients so that Microsoft gets credit for selling its software licenses and Networks Plus gets credit for selling any consulting services.

Networks Plus has implemented a business strategy that goes against the philosophy of many other VARs/systems integrators. Some would argue this strategy is too risky, especially when you consider that some large companies are known to use the channel to build their industry presence and then take their business away from the channel at an opportune time. Kernan is not naïve to this possibility and even experienced this firsthand with a large PC manufacturer several years ago. “The biggest lesson I learned is that channel companies need to always find ways to add value to the products they sell,” says Kernan. “We weren’t doing that back then, and when our vendor partner told us it was going to start selling direct, I realized we got what we deserved, and I won’t ever let that happen again."