Cover Story
 IT vendors have evolved innovative alliances between hardware integrators and regional Independent Software Vendors (ISVs) to tap the vast but diverse SMB opportunities. This strategy is bearing significant results.
By K R Nambiar
From HP to Microsoft, Sun to Intel, Sybase to AMD, vendors these days are playing the role of matchmakers. They want to strike alliances, and occasionally multiple alliances, for their partners. The suitors in the case of an HP, IBM or Sun are independent software vendors (ISVs). At the same time, vendors such as Microsoft and Sybase are scouting for partners (who sell systems and servers) for their ISVs.
Consider Hewlett Packard. It’s India Technology Solutions Group (TSG) has invested in 33 professionals whose core job is to help their enterprise partners work closely with ISVs and take their combined strengths to the market. Internally called Road Runners, their job is to identify potential customers, and help with go-to-market (GTM) strategies for their partners along with solutions from their ISV partners. “We are very serious about aligning our partners with ISVs, and play the role of matchmaking through a number of initiatives. The triangulation of bringing HP, our partners and ISVs together today accounts for around 20-25 percent of our TSG business,” informs Ashok Pamidi, Director, Partner Engagement and Telesales, HP India.
IBM India is also banking on its partnerships with ISVs, and is urging its partners to work closely with ISV partners. Last year IBM had launched Eco-Link, which enables an ISV to target new geographies and customers with the help of systems integrators (SIs). “To a systems partner of IBM as well as to an ISV, our platform is like a speed-dating zone. We give them the opportunity to interact with each other, understand their strengths and weaknesses, and go to the market selling solutions,” explains Anoop Nambiar, Country Manager, Business Partner Organization, India & South Asia, IBM. “An ISV which aligns with us gets to take its solution to other geographies. For our SI partners, they can sell deep inside their accounts.”
IBM has around 18 major ISVs and several smaller ISVs (aligned at regional levels, or for niche verticals) which are currently offering their solutions as part of the Eco-Link initiative. IBM is also leveraging on their partner system for its SMB GTM strategy, branded Smart Business. “Smart Business essentially helps an SMB customer to set up ready-to-deploy solutions, and saves the customer the hassles of installation, configuration and other issues associated with solutions deployment. The core of many of the readymade solutions in our Smart Business initiative are the solutions from ISVs aligned through Eco-Link,” says Nambiar.
Dell, which took its baby steps in channels a couple of years ago, is also extending its ISV alliance to its partners. The vendor has been wooing ISVs as part of its ISV PartnerDirect Program, and has also signed on a number of local ISVs. “The ISV community is growing, along with their innovative solutions, to address customer pain-points. Infrastructure providers are also progressing aggressively on the innovation continuum. Therefore, to provide the end-customer with best-of-breed business-enabling solutions, an ISV-infrastructure provider partnership offers a win-win situation to all involved in the eco-system,” opines Arun Bhardwaj, Senior Manager, Enterprise Solutions Marketing & ISV Relationships for Asia-Pacific Japan, Dell.
Reaching out
Even semiconductor giants such as Intel, AMD and Nvidia have been helping their partners reach out to ISVs. Last year Intel launched its Business Exchange portal (bxindia.intel.com) where ISVs and other software vendors can promote their solutions. “It has been positioned as a platform to bring software providers and Intel’s channel partners closer to reach their potential customers,” says Narendra Bhandari, director of Intel Software and Solutions Group, Intel Asia Pacific. “Our partners have a wider range to choose from, and all the solutions hosted on the portal are certified to run on the Intel platform,” he adds. The ulterior motive is to ensure that most of these solutions are shipped on systems sporting the latest Intel processors.
AMD India has also invested in signing and growing ISV alliances. “The difference is that we work closely with all leading software vendors such as Microsoft, Oracle, Adobe and Red Hat, and try to address their developer base and ISV base through these relationships. We take their solutions to our partners, and advise our partners on the right strategies. Since the ATI integration and launch of the Phenom class of processors, we have been increasingly working with ISVs in the visual computing segments,” informs Deepanshu Sharma, GM, AMD India.
Nvidia, which is pushing its Tesla super computer platform through partners such as Connoisseur Computers, is urging ISVs to develop skill-sets on CUDA—Nvidia’s general purpose parallel computing architecture—and is also helping partners to work with some of the ISVs. “We are working with a leading ISV which helps our customers migrate their existing software to CUDA, while we provide the overall solution and deploy Tesla-powered workstations,” explains Harish Kumar R P of Connoisseur.
The Cisco Industry Solutions Partner Network is Cisco’s own ecosystem that brings together application developers and Cisco partners. “Cisco’s effort is to expose our partners to a growing variety of solutions and help ISVs interact with our channel partners. While partners are looking to deliver industry solutions to increase transaction size and gross margins, we provide ISVs to grow their business,” says Paramjit Puri, Head, Strategic Alliances and SI Channel Business, Cisco India & Saarc.
Even while hardware vendors are playing matchmakers, software vendors are trying to woo SIs to sell solutions from their ISV partners. Explains Rajeev Mittal, Group Director, Small and Medium Enterprise, Microsoft India, “SIs primarily focus on offering end-to-end solutions (hardware, networking, software) to a customer, while ISVs have domain knowledge and build their solutions to address the business pains of customers in focused areas. It is therefore imperative for Microsoft to help connect SIs and ISVs, and bring value to them and the end-customer who has a single point of contact. We help matchmake the SI and ISV depending on their focus and the business needs which exist.”
While the speed-dating and matchmaking processes are mostly smooth, getting the relationship going is reported to be more challenging. While some vendors do step away, and expect the partners to work things out, a few like IBM and HP are looking at ways to ensure that the relationships consummate in business. “Like in any relationship, there needs to be complete understanding between the ISV and the SI to ensure that they go together to the customer and close business,” explains Nambiar of IBM.
Most of the systems vendors try building marketing collateral, and offer incentives for ISVs to continue working with them. These include solutions handbooks, Web sites with details of their solutions, and even market development funds. “By building a repeatable solutions practice around a pre-qualified application, channel partners can become eligible for Cisco Solution Incentives,” explains Puri of Cisco. Vendors such as Dell even involve ISVs in their multi-billion dollar online business.
Vendors also offer their products at discounted rates to ISVs to ensure that they stay interested in the ecosystem. Software vendors offer discounts as high as 90 percent, while vendors such as Sun have programs where servers are discounted at around 50 percent to the ISV.
Relationship storms
Despite all these initiatives, there are several obstacles to ISV-SI relationships. One of the biggest is support. Since solutions integration is a complex business, it often results in a blame game. “In some cases, when the relationships are not strong, there can be bitter arguments on support issues. This results in ambiguities between the ISV and the SI about who needs to support the customer, or one partner will feel that the other has let him down,” explains Sunil Jose, Managing Director of Sybase India. “In some cases the revenue impact of the applications may at times not be attractive enough for all SI partners to support the cause,” he adds.
“The gestation period of hardware sales compared to software solutions sales is shorter. Hardware partners typically sell faster and work on volumes, while a software solution sale needs a lot of dialog with customers, making it a value sale rather than a fast deal,” explains Mittal of Microsoft. “However, we see that more SI partners are realizing this, and are trying to be a single-window contact for the customer, which is a good sign.”
SIs and ISVs also see ego hassles between the two stakeholders as a major bottleneck. “Who will front-end the solution is always a question mark. Customers often say categorically that they need to buy from a single vendor, and there are arguments because the share of revenues and support costs will need to have clarity,” points out Neel Shah, director of Insight Business Machines, a partner of both IBM and HP.
Vendors are often called upon to play the role of an arbitrator in such instances. “We have seen several cases where the two partners have not been able to agree on the share of costs and margins. Sometimes our team has to step in to see that the solutions are delivered and the customer is taken care of,” admits Nambiar of IBM.
Vendors such as IBM are working on frameworks whereby such issues can be resolved even before a pitch is made to a prospective customer. “We have come up with a comprehensive revenue-sharing plan with both parties being taken into confidence, and are fine-tuning it,” adds Nambiar.
Shah of Insight calls for more action from vendors considering the gestation period for implementing software solutions. “When a solution is being deployed, often the payments come after the software vendor has successfully commissioned the solution. Vendors and distributors need to ensure that we are able to finance the hardware component of the solution and still make margins,” he says.
Reducing implementation costs and the time involved is the top priority of the systems vendors, hence they are increasingly insisting that the ISVs certify the solution for the systems these vendors sell. “In such cases solution deployments are often breezy and hassle-free as we had successfully demonstrated with the Smart Business initiative. This is advantageous for all the stakeholders involved,” says Nambiar.
Several SIs are also increasingly focusing on forging relationships with ISVs.
Many SIs are also turning ISVs. Mumbai-based security specialist Miel ESecurity is all set to launch Helios, its endpoint security compliance tool, and is thinking of working with its peers and competitors. “We have decided that initially we need to create some noise going direct. Later we would like to forge relationships with other partners and peers,” informs Anuj Gupta, Director of Miel.
However, some ISVs feel that working within vendor frameworks has tremendous advantages. “We are involved with a number of programs in the IBM partner ecosystem, are also working with some of the IBM channel partners, and the relationship has been fruitful,” informs Nagaraj Bhargava, COO of Synaptris, a Chennai-based ISV which sells enterprise BI tools.
R S Shanbhag, MD of ValuePoint Systems, agrees. “We have partnered with 10-12 ISVs under the HP AllianceOne program. We feel the alliance through HP has worked because the ISV actually takes the opportunity very seriously since it gets to work with multiple HP partners instead of signing on partners all by itself.”
In fact, ValuePoint has recently acquired a software development company, and will soon provide application-driven solutions to customers. However, Shanbhag is unwilling to disclose any details.
“We have had both wins and losses working with ISVs. We have seen in cases where there have been successes that it’s a result of greater commitment from the ISV to work with us on selling a solution by showing a single face to the customer,” says Anirudh Shrotriya, director of Shro Systems, Pune. “It has also to do with the attitude both the partners need to take. I think the attitude should be, ‘win or lose, we should do it together.’”
ISVs feel it has more to with the outlook of the SIs and their GTM strategies. “SIs who provide more than just hardware are an excellent way for an ISV to reach out to markets that would be hard to reach otherwise. The reason for this is that they have an ongoing relationship with the IT Head/CIO, and hence find it easier to introduce solutions to them,” explains Shabbir Imani, MD of NexStep Infotech, a Mumbai-based ISV. “However, working with smaller hardware channels which are only hardware-focused is more of a challenge since they find it very difficult to change the way their sales teams operate, and also offer the client applications in addition to hardware. It needs clear focus and determination to make this change, and our experience is that the success rate in such attempts is less than 25 percent. Yet the hardware channel which manages to make the change reaps rich benefits both in terms of deep relationships as well as larger deal sizes and profits.”
Need of the times
Recession is yet another reason why the ISV community, partners and vendors are trying to come together. The general opinion is that while no one had the time to get relationships going during the boom, everyone has a lot of time to catch up during the downturn. “Things should work now because everyone can invest time in building confidence in a relationship. As an SI we want to generate business in alliance with the ISV community,” says Shrotriya. Shro also confirms that apart from vendors like HP, even distributors like Redington and Avnet are taking interest in helping partners forge ISV alliances.
Jose of Sybase stresses the importance of both partners showing patience in working the relationship out. Imani of NexStep agrees. “The challenge lies in ensuring that we pick the right partners, and do not give up in-between. From our end we do a number of things to ensure success, including training SI teams, providing good collateral, and supporting the SI on pre-sales.”
Every vendor in the industry is planning new strategies to get its partner ISV alliance growing. All of them are clear that they will grow the number of ISVs partnering them, and also ensure that more SI-ISV relationships grow. “For every solutions-centric vendor (like IBM), it’s important that its partner also has a solution to sell. It’s our endeavor to see that our partners have the best-of-breed solutions to sell, and we will continue doing the matchmaking,” sums up Nambiar. |