The McDonalds of the channel?

There remains a pronounced call from resellers and distributors for vendors to develop more of an in-country presence in emerging markets to facilitate channel development.

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By  Julian Pletts Published  April 13, 2008

There remains a pronounced call from resellers and distributors for vendors to develop more of an in-country presence in emerging markets to facilitate channel development. But when this is put to the principal level of the channel we often witness some masterful sidestepping as vendors concede that they are content to make do with independent sales managers and a handful of partners.

The reality is that even the largest multinational manufacturers don't always have the budget to devote resources to markets that might not come into fruition for over five years.

Sun Microsystems, however, has come up with what it thinks is the ideal solution to this conundrum by revealing plans to franchise a partner in emerging markets. Under its Equity Partner Programme, the storage vendor is offering partners the chance to open a Sun-branded office that will look and feel like the vendor's country base in all but ownership. Following Sun's design, the partners taking up this option will own a 60% share in the office.

So what's in it for Sun? Well, for a start, the vendor believes it will allow end-users to see a Sun presence in-country whilst making the most of local skills, knowledge and connections of the chosen partner. At the same time it shows a creative willingness from the vendor to establish a stronger presence in markets where the brand may not be getting the same exposure as in places like Dubai.

This move by Sun to do just that might well be commended, especially in light of challenges that face the region, such as recruiting skilled staff. Investing in the economy of an emerging market and boosting the IT standing of that country is good for the vendor and its partners.

Yet the practicalities of such a model are still debatable. At its partner summit in Tunisia last week where Sun first unveiled details of the plan, the response from partners wasn't exactly one of overwhelming joy. Perhaps the idea will grow on them, but trepidation seemed to be the initial general reaction.

Interestingly, Sun's regional PSO and industries chief opted to give the analogy of a fast food franchise when explaining the programme to partners. He espoused the benefits of an unsuspecting diner - who of course represents the IT end-user - that knows exactly what they are going to get without having any knowledge of the parties behind it.

This, however, didn't sit well with everyone. The risk of diminishing partner identity was the biggest and most undeniable concern raised by channel sceptics as Sun tried hardily to defend its proposal.

It's certainly easy to see where the doubters are coming from. Although it's encouraging to see markets receive more vendor attention, the danger of a partner's name, identity and localisation being eroded as a result of this fast food-style franchising casts a dark shadow over the idea for many resellers.

Indeed, several partners stood up and grabbed the mic to outline their initial fears that it could damage differentiation and identity. There is also the potential that as the model could represent Sun's first serious step, by proxy, into an emerging market, there is a high probability that when the market has matured it maybe difficult to recruit new partners because it's likely that the equity partner will already have established such a favourable position.

With Lif also indicating that as a minority equity holder Sun will be in a position to "overload" the partner when it comes to carrying out processes such as SOX compliance, Sun's partners that already have doubts over the long-term implications of the model will take a lot more persuading.

It will be interesting to see whether or not the Sun Equity Partner Programme can answer the need for greater vendor presence whilst retaining the integrity of the partner under the branding.

If the vendor wants to expand its reach across the region and for this programme to be a success, it will have to carefully listen to the concerns of the channel and and make sure that partners are not merely enveloped into the branding machine like those entities selling burgers and fries.

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