Monday, June 09, 2008

New NetApp discovery - VARS want to make a profit!

This breaking news was reported on Friday evening.

"We got partner feedback," he said. "They said they want to provide us support for professional services. But they didn't want to pay $10,000 on top of the expense of taking people out of the field and away from billable hours."

Iventosch said the fee was originally his idea, and was aimed at offsetting the cost of NetApp's professional services support center. "I did the ROI (return on investment) on the tool, and found that it justifies the cost of the program. But partners said, 'Great, but we still have to pay the $10,000 up front.'"

Good, said Keith Norbie, director of the storage division of Nexus Information Systems, a Plymouth, Minn.-based solution provider and NetApp partner.

"It's massively significant," Norbie said. "You talk to any VAR, and they'll tell you they want services and higher margins. But they don't want to pay an annual fee to do it."

I don't think it should be 'News' that VARS want to make a profit, but NetApp has historically viewed the Channel as a Missionary sales force and lead generator for their Internal sales force, so it is no surprise that they may be puzzled by VARS who try to make a profit on Service. Perhaps NetApp will have an epiphany soon and see that if VARs have more of a margin to work with they can sell more hardware.

But with recent news that NetApp is enlarging its internal sales force, I don't see how NetApp will allow outside sales and service organizations to make more money than their internal sales force's representatives. Having two competing sales forces causes friction, but NetApp has built a sales model that has four competing sales forces. NetApp direct and their channel, and IBM direct and their channel.

Dan Warmenhoven, CEO of Sunnyvale-based NetApp (NASDAQ:NTAP), said the company plans to increase its sales force by hundreds of workers in the next few months in an effort to pick up market share.

It is all very confusing, why are they building their internal sales staff if they want their channel to make more money? Perhaps the channel should fear that NetApp's new sales folks are going to take market share from their own channel?

In other events, it was good to see NetApp's Advertisement in the Economist this week, a lot of our customers pointed it out to us.

No comments: