Two years ago, Red Hat Canada did about a third of its business through the channel. When Luc Villeneuve joined the company, the Canadian subsidiary was sitting at about 38 per cent of its business through the channel — about half of where the company sits overall, in the low to mid 70s in terms of business done through the channel. Now, with two years of intense focus on growing its channel business, the company has caught up with the corporate average, with about three quarters of its business coming through the channel.
“Canada” and “high percentage of direct business” do not typically go hand-in-hand. The very nature of the country, with a great deal of geography to cover, and a number of cities that aren’t likely to draw enough business to warrant a lot of internal vendor resources, as well as a channel-centric culture, many companies, in fact, due a significantly higher proportion of business through the channel in Canada than their corporate average.
So what turned it around? According to Villeneuve, it was “pure management style.”
“Some people feel it’s easier to control your environment if you do business direct, but I was a channel leader for many years, and I know that working with the channel always increases your productivity,” Villeneuve told ChannelBuzz.ca at the company’s recent North American Partner Conference in New Orleans. “You don’t end up having to chase up everything, because your partners do all that for you. They bring their talents to the table, and they’re out selling for you.”
That uptick in channel was clearly felt in New Orleans, where the company hosted 90 individuals from 45 different Canadian partners — double the Canadian attendance of last year’s edition of the show.
Villeneuve said the big focus over the last year has been increasing the number of “Ready” partners — Red Hat’s entry partner level — in Canada, and in starting to support those partners in moving up to higher tiers. He describes a higher-touch approach to on-boarding, “feeding” new partners both targeted information and leads.
“If you start to feed the partners a bit of business, they learn, they start selling. If you feed them, they’re going to want to eat more,” he said. “Now they’re here, they’re ready to invest with Red Hat, they see the value of growing outside of legacy technology, and they see the value of open source.”
The company has also significantly increased its presence in front of customers. Villeneuve estimates the company directly touched 4,000 people face-to-face across Canada with a series of roadshow events, targeting CIOs and other top executives. Over the last year, he said the company has “doubled up” on the marketing team in Canada because the workload is ramping up rapidly.
And the conversations the company is having with customers is a lot more accepting. Villeneuve says that as recently as two years ago, there was some reluctance in talking to many Canadian customers about open source software in the enterprise.
“It’s amazing — we’re getting meetings much more easily than in the past. People want to know about Red Hat, and the door is really opening,” Villeneuve said.
That lends some credence to CEO Jim Whitehurst’s assertions that open source is now the default in many “next generation” infrastructure that centre on cloud and mobile. At the Partner Conference, Whitehurst described that flipping of the traditional open source script as a major factor in the company’s growth prospects.
Among partners, the company is not only seeing growth in terms of numbers, but in terms of scale, with some partners going from signing on at the Ready level, to the next-tier Premiere level in just one quarter. In total, the number of Canadian Premiere partners doubled over the last year, Villeneuve said. That’s a function of many partners moving top technical resources away from “legacy technology stacks,” and getting them educated, and building on, open source platforms for cloud, data centre and more.
“They had capacity from their legacy experience, and they’re moving that expertise to their Red Hat business,” Villeneuve said. “Partners are telling us they want to move their best talent into the Red Hat platform, and they want to invest in order to learn and to shadow our own implementation people. There’s a huge amount of commitment out there.”
Red Hat Enterprise Linux (RHEL) and middleware remain the two big products for the company in the Canadian market, with the latter growing particularly. RHEL, Villeneuve says, is “table stakes” for many partners, but the middleware conversation is being driven by the move towards both cloud, and to a sweeping sense of need to update old applications for a new infrastructure.
And as interest grows, the company is seeing more and more business from larger partners — and larger partners are calling on the vendor themselves, rather than waiting for the vendor to call on them, or, as was more frequently the case in the past, not taking the vendor’s calls. Still, Villeneuve said, the big focus will be on the types of partners with which the company has made its business.
“The boutique partners will be leading the charge. Big partners will get a chunk of the business, but there’s room for all types of partners,” Villeneuve said. “We’ll support emerging partners as much as we can.”
To make sure that’s the case, the company is working more closely with distribution, and Villeneuve said he’s been pleased by the transformation he’s seen in his distributors in moving from simple pick, pack and ship to much higher value-added services.
“Distributors are coming up with more ways of doing more things, and the one who’s the most creative gets the most attention,” he said. “We expect to see more of those sorts of ideas from them going forward.”
Even with the growth the company has seen in the channel, Villeneuve said there’s still room for more, including pockets — both geographically and in terms of technology — where the company needs more support from “the right partners.”
“We need to remind people and customers that we have a portfolio that’s bigger than just RHEL,” Villeneuve said. “There’s a huge amount of value around virtualization, and we’re going to do a channel tour this year around it.”