This week we sat down with Keith McManigal, vice president of Worldwide Channel Sales at AppViewX, a company that provides enterprise customers with management, automation and orchestration solutions for application delivery networking systems. Prior to joining AppViewX in October, McManigal spent five years developing F5 Network's channel partner program. He has also held numerous positions at Cisco Systems throughout his career.
TVG: What is different about the relationship between vendors and partners now as opposed to when you were first getting started in this space?
McManigal: A long time ago there were very few vendors out there for customers to choose from. Networking wasn't around. Security really wasn't around. In the technology space there were computer vendors, like Hewlett Packard (HP) and IBM and only a few others. There were a few storage vendors out there. There were some printer vendors too, but there wasn't a lot of choice so customers mostly turned to HP.
A partner would be a deck partner and they would go out and they would sell the deck product line. They were basically exclusive and they might carry some peripherals as well, but as decentralized computing came around there became more and more choices. There were around five vendors back then and now it is close 20 large vendors out there. Today there's a plethora of them and partners have got to be smart when choosing their security partner. There's also so much more specialization. For me, being a partner who can build the relationships with the customers that show them how to buy the technology that is best suited for the customer as a trusted advisor is the most important thing.
TVG: How is the channel landscape changing purely from a vendor point of view? In what areas are vendors having to switch the way that they're looking at things?
Listen to McManigal's answer below.
TVG: Channel partners and their business models are starting to have to evolve whether they want to or not, from the one-time box sales to more of a recurring engagement revenue. What are the specific challenges that you're seeing with partners trying to make that transition as opposed to partners trying to set up a born-in-the-cloud shop?
Listen to McManigal's answer below.
TVG: What's the number one piece of advice that you might have for someone trying to make that transition?
McManigal: My advice would be to understand how to move yourself to a subscription model. If you can upsell you can actually make more money. The perfect examples of that are people like Microsoft or people like Salesforce who've got these huge recurring revenue streams. For them to grow 20 percent per year, they don't have to sell 120 percent. They have got to sell maybe 30 or 40 percent because they've got 80 percent of it covered through a recurring revenue stream. That's what I would tell partners, focus on recurring revenue. Learn how to take that business model and make it 10 percent of your revenue today and two years from now you can make it 50 or 60 percent of your business.
TVG: Let's talk a little bit more about what you're doing with your new partner program. What you were taking into account when you were laying this out last year?
McManigal: When I came on in October, I was tasked with changing us from a direct company to a channel company. I said well, if I'm going to come on, then the change has to happen from the CEO down through the sales organization and through the CFO. So I had conversations with everybody. Are you guys ready to do this? Do you realize this is going to cost us revenue? They said yeah, okay, we'll do it and so I showed them some ways that we could stop the bleed on profitability.
So in effect we really changed our company from a direct company to a channel company. I don't mean we just work with channels, but channels are now part of our DNA and when we do things we think about the channel. When we built our program we build it on profitability and guaranteed profitability, guaranteed margin which is easy to do because we're a smaller company, but partners really appreciated that. If they bring us a deal, a net new account, a net new opportunity, we give them even more money so that's a guaranteed margin. That resonates very well with the partners and it enables us to be able to hold the value up because 20 percent of $90 is a lot bigger than 20 percent of $60.
I’m always thinking about how we can sell the value to the customer so that they can implement it and get value out of this as quickly as possible. Of course we’re also focusing on providing recurring revenue opportunities and partner-oriented services as well to help our partners become more diverse and well-rounded companies.
TVG: What gets you most excited to wake up and go to work in the morning?
McManigal: Our channel is very small, and has a small number of vendors. We've kept it that way on purpose so I've got personal relationships with these guys. I want to help them win and be part of their win not just for us but for their entire company. These guys are my friends and I've known them for years. What gets me excited in the morning is going out and watching these guys be successful, especially with our technology, but just in general because I think this is a tough business to be in from a cashflow perspective. Watching them win and helping them win is a great thing.
TVG: Now I'm going to turn that question around. What is it about the channel that makes you the most frustrated?
McManigal: I think it's that partners have so much on their plate at any given time. If you look at the average partner they probably sell anywhere from five to 20 different vendors. No matter if they're selling five vendors or two vendors, those vendors are extremely deep and wide in what they sell. The Cisco portfolio is huge. The Dell portfolio is huge. So how do you create mind share with those reps to get them to care about you as a vendor, and what you can do for their customer? A lot of these guys have got huge quotas from a margin perspective. Finding that value proposition and figuring out what works for them is a big challenge.
TVG: Was there some piece of advice or lesson that you learned early on in your career that has served as a guidepost for the ethos that you use in the way you do business in the channel?
McManigal: In fact, I just gave this to somebody today. I said, don't ever piss anybody off in this industry because it's a small industry and you don't know when that's going to come back and bite you in the butt. Always be courteous. Always be respectful. If I'm going to hire somebody, and they give me five references, those are the guys I'm not calling. I'm calling my friends who might know somebody who knows somebody. You never know what is going to come, and what goes around comes around so that's the main thing.
The other one is, and I tell my kids this, but I say be respectful and always do your best because people can tell when you give them a mediocre product, a mediocre presentation, a mediocre effort to get something done. People can tell. Always do your best.