In this first ARN Channel Verdict special, Philip Sim investigates what resellers should look for in networking hardware vendors and, vis-a-vis, what the major vendors can offer resellers.
In the past, networking has always been considered something of a black art. Generally, it was restric-ted to specialist networking integrators or resellers because technically it was the domain of highly skilled and expensive network engineers. For the networking channel it had always been something of a money spinner. Users liked the idea of saving money by sharing file and print resources but because they couldn't afford the in-house technical skills they would generally rely on reseller partners to help recommend, install and maintain their networks.
While arguably networking is more accessible today, resellers are generally still heavily involved in recommending a particular brand or choosing a solution, according to Inform's 1999 ChannelTrends survey. It found that in 55 per cent of cases it was the reseller who chose the LAN/WAN networking hardware vendor and in another 21 per cent of cases, it was a joint decision between the reseller and the user.
Bearing in mind that the network is still as much a money spinner as it ever was, especially considering the emergence of the Internet and how many appli-cations now run across the network, there is now a lot riding on the reseller choosing the right solution and partnering with the right vendor.
Analysing Inform's ChannelTrends '99 results shows that Cisco was clearly the channel's networking vendor of choice. This is not surprising, considering Cisco has been such a dominant market leader in the networking space. However, it should be noted that this is the first year that Cisco has been rated as the number one LAN/WAN hardware vendor.
Perhaps this represents the breakthrough of networking into the mainstream channel; in the past the closest many resellers got to networking was when they installed a network interface card into a PC. It's probably not surprising, then, that 3Com, easily the dominant NIC vendor, had always previously been rated as the number one networking vendor.
However, Cisco trounced its main opponent this year in a result that more accurately reflects market shipment figures.
In fact it was voted as the top vendor by close to double the amount of resellers that opted for 3Com, who came second in front of Intel, Hewlett-Packard, Nortel, D-Link, IBM and Compaq.
Such has been Cisco's success that it has established a somewhat dominant position in the market. Arguably, choosing to buy or choosing to supply Cisco networking equipment is not unlike the decision of yesteryear to go with IBM; that is, nobody ever got fired for doing so.
For Brad Merrick, founder and technical director of mid-sized Sydney network integrator Path Communications, there are two key reasons why his company generally supplies Cisco equipment.
"We're a technical shop, we're all engineers, so we look for what we consider is a technically superior solution," Merrick said.
"However, the other thing is consistency and a long-term vision. It's quite amazing that what Cisco and some of the other large vendors were saying five years ago has actually eventuated. Perhaps as a result of that you have the situation where any Cisco equipment that you bought five years ago still integrates into equipment that you buy today," he said.
Merrick complimented Cisco's service and support although he added that because of the technical merits of Cisco's product Path didn't often have to call on that resource.
While Cisco is clearly dominant in today's market, it is not without its challengers. It is generally accep-ted that the worlds of voice and data communications are converging. As a result, Cisco is heavily bumping heads with the major telecommunication equipment manufacturers like Nortel, Lucent and Alcatel.
"It's going to be a real fight. Can the telcos modify their strategy enough to properly integrate data faster than the data guys can seamlessly link to PABXs?" asked Merrick.
"I'm not going to make a prediction one way or the other, but I'm certainly very interested in what the telco vendors have to offer and I think we're really going to see some stiff competition out there."
Merrick is very bullish about voice and data integration and regardless of which vendors wins out in the end, he believes that it will have to be able to provide a complete end-to-end solution.
Of course, as the industry makes significant shifts like the one towards converged voice and data, it becomes essential for organisations to keep up to date with the latest technical skills.
As such, training is one area where Merrick would like to see his suppliers work a little harder. "Training is always very important and I'd like to see vendors giving away a certain amount of training in order to enlighten resellers on how they should be selling and installing their kit. After all, it really is to the vendor's benefit and one of my only criticisms of Cisco is that most of the training is pay as you go; it is an expensive outlay for resellers."
While for some resellers and integrators it makes sense for them to stick with the big vendors, for others, particularly smaller and niche players, the ability to pitch an alternative vendor who might boast differentiating features and benefits is the edge they are looking for.
Tim Rosser, sales director of Rosser Commu- nications, admits that in many cases it is a case of selling Cisco because "the customer wants a Cisco router". However, often there is more margin and benefit in selling an alternative solution, particularly one with which you have developed a close working relationship.
For example, Rosser Communications has worked very closely with Intel in the past and has earned its stripe as an Intel Authorised Solution Provider.
According to Rosser, partner programs like Intel's IASP are extremely important.
"If every PC dealer can get hold of the equipment at the same price, we often find that we're going to lose the deal on price alone. We invest a lot of money in having the right skills and expertise and so we're not going to be able to compete at that level," he said.
"However, if we can get access to rebates and leads and incentives like that, then that's a reward for our investment in training and that is very attractive.
"If you look at vendors like Cisco it is very difficult to become a Gold Partner and therefore to compete with those bigger partners. However, I don't resent them for that because those resellers are doing huge volumes and have made big investments; they've earned their discount.
"For us, by partnering with a vendor who has similar programs that work for people who are not quite as large as the big guys, we can sign up knowing we're going to get those advantages and that extra margin."
Rosser said that because his company has several skilled engineers, it was important that it opted for a vendor which enabled it to retain its margin.
"We've actually found it difficult to separately sell the product and the services so we need 20 points margin to pay for our engineers," he said.
Of course, it's no good being able to make big margins if the product is impossible to sell.
"The equipment needs to be very saleable, it needs to have features that nobody else has," Rosser said.
"For example, we sell a lot of Shiva equipment which has very good capabilities for remote users and virtual private networks so that is a point of difference that can help us move the equipment."
Rosser also places high importance on the ability of vendors to provide excellent technical support.
"Again, we deal a lot with Shiva because they have a very good engineer on the ground in Sydney and a good technical assistance centre in Singapore. They also have a very good database of technical information that is available both on the Web and in Lotus Notes so we're quite often able to solve our own problems by querying the database.
"We've worked with other big vendors where we had a lot of problems solving an issue because their engineer in Australia wasn't very technical and it really made us look bad in front of our customer."
Availability problems are also a concern: "Lead times are critical and it's especially important that they're consistent. If the lead time is generally two days and that's what you promise the customer and then suddenly it becomes six weeks then that's going to really embarrass you in front of the customer," Rosser said.
For smaller resellers reliability is typically of the utmost importance.
Rob Deal, from Orion Computers in Melbourne, has standardised on selling NetGear products because of their reliability. "We have been selling NetGear for 12 months and we've had only one failure," he said.
That said, he also is a very firm believer that backup and support is critical and so at this end of the market it is important that the vendor has partnered with a reliable and helpful distributor.
"The backup and support through NetGear's distribution network has been sensational. We buy all our products through Teksel and they're great. If ever we have any problems and can't resolve a problem with the 1800 number, they have always taken over and involved themselves."
The other important thing for Deal is that there is a brand name that the customer can recognise. "NetGear is backed by Bay/Nortel Networks and so that gives a very good impression that it has the right technology people behind it," he said.
Deal also said it's important that the products have been designed with the smaller end of the market in mind.
"We deal with companies of up to 100 users and so NetGear has a good range of products in the market - not just hubs and switches but also products like modem routers and storage servers."
Cisco touts networking for the masses
Despite being a clear market leader, Cisco hasn't always been a channel favourite due to its past history of taking deals direct. However, over the past couple of years Cisco has made a concerted effort to mend relations with the channel and, if Inform research is any indication, has done so very effectively.
Cisco offers perhaps the broadest portfolio of products of any vendor, all of which is tied together by IOS, its internetworking operating system. However, according to Liz Lawson, Cisco's SMB regional manager, its most strategic offerings are voice, data and video integration, security and switching products.
"From a strategic point of view what we're focusing on is what we call new world networks that integrate voice, video and data together on an open platform.
"We want to take that new technology so that it's not just the domain of the big corporates, but rather anyone who wants these types of services."
In evangelising networking for the masses, Cisco believes it first needs to convert the channel and as such is trying to build up a very broad base of resellers.
"We believe all resellers have the right to retain their customer relationship and be able to take this technology to the customer. This is within the realm of any reseller from the retailer to the large systems integrator."
To support resellers, Lawson claims Cisco is investing heavily in reseller training. "We're providing free training, not just the type resellers have to go through to earn certification, because we feel that's the best value we can give the channel. We're trying to give them the skills that will help them make more margin because they can on-sell their own services."
Cisco has also invested heavily in its distribution strategy and is now represented by all three network distribution heavyweights - Tech Pacific, Express Data and LAN Systems.
Cisco has three levels of partner certification: Gold, Silver and Premier. Anyone else that sells Cisco equipment should be an authorised partner which requires no commitment to training or sales.
Premier status requires resellers to have some sales support and design qualifications and these partners must deal through distribution. Silver requires resellers to have at least two Cisco Certified Internet- working Engineers (CCIE) and to meet certain sales requirements. They may buy direct from Cisco. Gold partners must meet very stringent qualifications including a heavy support infrastructure, have a minimum of 4 CCIEs and much higher sales requirements. "What we're providing our partners with is a career path and as they move up the ladder they are entitled to more discounts, support, marketing funds and so on."
Cisco has also invested very heavily in its service and support infrastructure, something which has made some resellers nervous as Cisco does sell some service maintenance contracts directly.
However, Lawson claims that the service infrastructure represents an opportunity for resellers to on-sell Cisco's service contracts, either under their own brand or as Cisco's or to use it as a backup to their own service offering.
Nortel brings together voice and data
Nortel has developed a very clear strategy around its concept of unified networks, which claims that it will not so much be a revolutionary "new world" of networking, rather that it is an evolutionary coming together of the two fields of voice and data.
As such, it is focusing right now on skilling up its data networking partners on voice skills and training its voice resellers in data communications. (see page 18).
Nortel has several levels of certification, adopted from the Bay channel program: Global Solutions Partners, Enterprise Solutions Partners, Network Solutions Partners and Network Resellers.
However, Nortel is reworking the old Bay certification to include voice modules and Starr hinted that there could be more shakeups in the accreditation process to further shift the emphasis towards unified networks.
Rather than having to hit very defined targets in order to move up the food chain, Nortel likes to sit down with its resellers and put together a business plan whereby partner and vendor come up with mutually agreed upon sales targets and technical levels, Starr said.
Nortel has retained the same two-tier distribution system it inherited from Bay Networks. It has two distribution partners in the shape of Westcon and Express Data.
Starr claimed that, like Cisco, Nortel has invested very heavily in its customer service organisation which has doubled in size in the last six months.
"We now offer a complete unified maintenance offering that a reseller might want to resell to its customers," he said.
Starr identified Nortel's key product lines as its BayStack, Accelar and Passport products.
Channel veteran stays focused
3Com has long been a networking channel favourite; its strength in the network interface card (NIC) market has always given it a strong presence and mind share. As such it has always been a channel-focused company and it's always quick to play that card.
"We're very focused on the channel's success and because we are 100 percent indirect, our partners can be assured that we're not going to be jumping in and stealing business when it suits us," Chris Stephens, 3Com's marketing manager for enterprise and carriers, said.
3Com has a strong history of success in distribution, particularly through distribution monolith Tech Pacific. LAN Systems and Earth to Air represent its other national distributor while it has a number of regional distributors.
"We've always been quite dominant in the SME market and we put a lot of effort into supporting resellers and getting the 3Com name out into the market."
3Com has also worked hard at using carriers as a channel and is also particularly strong in education where it has recently launched a program aimed at leveraging off the success it's had in the school environment. 3Com has a certification program called the Master of Network Science which has five separate streams: LAN, WAN, Carrier Solution, LAN Solutions and Network Management.
Its Customer Service Operation provides back-end support for resellers and customers. Reseller partners are expected to provide Level 1 support, while NSIs are expected to provide Level 1 and 2 support.
Xylan goes for depth and entirety
With its acquisition of Xylan, Alcatel has stormed into the networking market, joining the growing brigade of big guns touting end-to-end voice and data convergence.
Never shy of making big statements, David Keane, managing director of Alcatel's Xylan business, claimed that Alcatel can offer more of a complete end-to-end voice and data solution than any other vendor.
Alcatel aims to have a select groups of system integration partners who are capable of selling the company's end-to-end solutions on its Business Partner Select program.
"We're not interested in signing up every man and his dog. We're looking for a commitment from our integration partners for a close business relationship.
"If you're a Cisco reseller every time you tender you're competing against 10 other Cisco bids and it's the same way with Nortel. By being selective we can minimise channel conflict and ensure that our partners maintain their margins," Keane said.
As well as focusing on the integrator market, Alcatel also has a range of point solutions for the general reseller market. "If you're simply after a 10/100 switch that fits a certain requirement we generally have the right price and the right features.
"The difference with our products is we put intelligence into every box. Rather than having a lot of dumb products with all the smarts in the middle of the network we believe you need to have intelligence as close to the user as possible."
Alcatel has chosen to focus on its relationship with its exclusive distributor, LAN Systems.
Speed and cost-effectiveness
Why would a user pay triple the price for a product that has exactly the same features and exactly the same warranty? So asks Maurice Famularo, marketing manager of D-Link in Australia and New Zealand.
"We're a cost-effective solution," he said.
However, compared to many of the other "cost-effective solutions" in the market, D-Link boasts a fairly recognised brand name and a strong local presence and support operation, said Famularo.
"We've come a long way in the last few years in developing our brand.
"Also, unlike others we are actually an Australian trading company and we have our own warehouse and our own stock. We are a serious player in this market."
The result is that D-Link is able to get products out to its channel faster than other vendors, Famularo said.
"We also have a technical group that can provide priority pre- and post-sales support and can assist with network designs and configurations." For regular D-Link customers, the company runs its Network Solution Partner Program.
"These authorised resellers enjoy rebates as part of our loyalty program. We provide them with sales leads and we keep in close regular contact with them," said Famularo.
D-Link employs three mainstream distributors in the shape of national players Tech Pacific and Synnex, and Melbourne-based BBF Computers and Components. It also uses Kimcolith. In the cabling contractor market, it uses three value-added distributors: Page Data, Neil Muller and Earth to Air.
NetGear stays focused
NetGear boasts that its focus on low-end networking enables it to service that portion of the market better than any of its competitors.
"We are very targeted at the SOHO and SME space of up to 50 users, which accounts for a fair slice of the Australian market," said NetGear manager Ian McLean.
McLean claimed NetGear now offers the broadest range of unmanaged products of any vendor in the market. It has also developed a number of products especially for the small networking market like network-based storage disks that attach directly to hubs or switches rather than through a server and integrated products like its 56Kbps modem and router.
"The whole NetGear range is very easy to use and set up, down to the level where anyone with a basic understanding of a PC operating system should be able to set it up themselves," McLean said. "That's why our dealers have very few problems with any of our equipment." NetGear offers a 24 by 7 support line for customers and dealers and if there is a problem, McLean said it is very easy to return the product and simply get it swapped for a new one.
NetGear has two national distributors in the shape of Tech Pacific and Express Data and regional distributors such as Teksel in NSW and Victoria, BMS in South Australian and J Mills in Western Australia. "Our regional distributors tend to focus on the small- and mid-tier dealers with a lot more handholding," said McLean.
NetGear focuses its support of dealers on marketing and promotion equipment, like brochures, posters and point-of-sale material, and boasts a very dealer-focused Web site, McLean said.
Cabletron demands loyalty
After selling directly for many years, many resellers and integrators have grown sceptical of Cabletron's worth as a partner. However, managing director Ian Fewtrell has made a habit recently of pointing out that 80 to 90 per cent of Cabletron's revenue now flows through the channel.
"Any scepticism on that level is totally unfounded," Fewtrell claimed.
However, Cabletron does demand loyalty and commitment from its partners.
"We're after partners who are loyal and will go out and represent our organisation and push a Cabletron solution rather than asking the customer to choose from the whole gamut of offerings that are out there," he said.
"Along with that goes a commitment to training." Cabletron asks its partners to complete a certain level of training before they can qualify for either its networking hardware accreditation or its Spectrum network management accreditation.
The higher the accreditation, the more training that is required of a reseller's engineers.
Fewtrell also dismissed the assumption that Cabletron is just a high-end company claiming that it has products that are suited to large integrators but also niche and low-end solutions for boutique and smaller resellers.
"We have some very attractive niche products like our wireless equipment and our network management offering."
To support partners, Cabletron hosts a technical assistance centre in Sydney, which is part of a global support network, providing 24 by 7 support. It has an exclusive distribution agreement with Avnet-Hallmark.
Intel has long made known its intention of establishing itself as a serious networking vendor and it may now finally be ready to make that leap.
Up until now, Intel has had a broad range of switching products for the mid-market and is a strong player at the low end, with small networking equipment and appliances like its networked-attached storage and e-mail server. However, Intel is now preparing to launch its first real enterprise product with a chassis-based Gigabit Ethernet switch.
According to Philip Cronin, Intel's area sales manager, resellers and integrators that are attracted to the Intel networking products are those that are looking to differentiate themselves in the market.
"We have a lot of success with those companies that have technical competence that are committed to providing a service rather than just making a sale and are looking for something that differentiates them and marks them as unique and special.
"Anyone can lead with a Cisco solution but many resellers are looking for that edge."
While many vendors talk about end-to-end networking solutions, Intel resellers can talk about end-to-end computing solutions, Cronin said.
"The user can standardise on Intel as its platform for the desktop, for their server and also for their network equipment. From the integrator's perspective, it can position itself as the provider of that total solution and the customer's link to Intel, rather than just the guy who sells the networking box."
Intel's primary partner certification program is the Intel Authorised Solution Provider program.
Intel has a broad distribution strategy through its five distributors: Express Data, Ingram Micro, Synnex, Tech Pacific and TodayTech.