While Avaya is not contemplating adding or dropping any distribution partners, it is working on restructuring their compensation model, to encourage them to fulfil the role Avaya wants them to play in their new go-to-market strategy.
As Avaya increasingly moves its efforts to software and cloud, it is looking to increasingly leverage its distributors to assist them in the journey. To that end, Avaya is looking to make it worth their while by improving the DCP structure to both encourage the behavior Avaya wants, while providing compensation the distis like. Avaya is in the process of working through the changes now.
“The distributors are trying to take the partner community into the cloud model, and have been making investments in multi-vendor billing and cloud services,” said Rima Olinger, who joined Avaya from VMware two months ago as Global Vice President, Distribution and Mid Market. “They have done this on their own to remain relevant and valuable to the partner community. They also remain critical to the recruitment of the right partners, and by the enablement of demand to provide the scale and reach from credit perspective.”
When Olinger came on board, she wanted to re-energize the distributor relationship, which had been disrupted somewhat by attempted changes to the Distributor Compensation Program (DCP).
“The DCP pays out rebates according to revenue goals and growth rates in specific segments, in this case UC systems and networking,” Olinger said. “For the past year, the DCP program has been constant. There was an attempt to change it in Q1, but management team decided they didn’t want to disrupt the sales focus, so they did a further evaluation.”
Avaya’s problem was the DCP wasn’t driving the right growth.
“We want to make sure it is predictable and driving the right profitable growth for the distributors,” Olinger said. “They liked the old model but it wasn’t driving the right behavior, because under it, it was okay if you didn’t grow business. Under the new model that was going to be rolled out, they had to show growth to get anything, and of course they didn’t like that. They wanted revenue they could count on.”
Olinger described what she is doing as more of a strategy and a direction than a pilot, which is being put together based on feedback from distributors, about how to put in programs that reduce friction.
“What we are working on in the U.S. is building on multi-vendor aggregated solutions, and what we want to do is take what they are doing and brand it between the partner and the disti, including the Avaya component, and other vendors, if there are any.” Any successful rollout would be implemented in Canada as well.
Recruitment of quality new partners has become a major function distributors provide, and Olinger said Avaya wants them to adjust their recruitment to provide a better alignment with Avaya’s goals.
“The nature of recruitment is changing,” he said. “We recently did a survey and asked how many of our resellers were ready to go to a cloud model — and less than half were! We need to look for one of two things. Either we handhold and guide the existing partner ecosystem to come to this journey, or we recruit a different breed of partner — like born in the cloud partners, or security partners who will focus on the underlying network. We are also encouraging the distributors to recruit more mid-market resellers through future incentives.”
So when will changes be formally implemented? Certainly not before the second half of the year at the earliest.
“We’re reviewing the incentive programs to align them with Avaya’s future direction, but it won’t be rolled out any time soon,” Olinger said. We are still in the evaluation phase.”
Distributor interest is certainly enhanced by the fact that it is comparatively easy to make money with Avaya.
“Avaya has been stressing at this event that they are a very high-margin play, and that really is the case,” said Greg Myers, VP of Sales and Marketing at Tech Data Canada. “Compared to their competition, they are working on quite a different model, which makes working with them profitable.”
Changing the mix of distributors is not part of the equation, even though the lineup in Canada and the U.S. is different. Avaya in Canada has three distributors: Ingram Micro, Tech Data and Westcon. In the U.S., Synnex is there rather than Tech Data, and ScanSource and Jenne are also part of the mix.
“We won’t be changing the distribution relationships, and are not looking for new distributors,” said Santiago Aguirre, the new Channel and Distribution Director for Avaya’s Americas International region.