CRN Exclusive: Red Hat Channel Chief On Company's Gradual Move To Tear Down Silos Governing Partner Investments

Few software vendors have to be as attuned to transformative forces in the channel as Red Hat, whose open-source technologies, often requiring untraditional implementation strategies, have long necessitated experimentation within its partner programs.

More than half a year ago, the Raleigh, N.C.-based company hired a consultant to study the dynamics of its partners. Now Red Hat is busy implementing changes that are breaking away from a program structure that rigidly categorizes and isolates partner practices, Mark Enzweiler, Red Hat's senior vice president of global channel sales and alliances, told CRN in an exclusive interview.

"You should always change your organizational structure, your coverage models, to be consistent with where the market has moved," Enzweiler told CRN. And it has "moved to more line-of-business decision-makers" looking for comprehensive solutions, he said.

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That process is leading to a significant, although gradual, revamp in how the open-source software company evaluates, funds and otherwise supports partner initiatives.

Red Hat is shifting its investment focus to help partners win certain types of projects, without paying much mind to the traditional taxonomies: systems integrator, VAR, managed service provider, hosting provider, ISV.

"In the past, if you were the biggest guy, we gave you a target, you made the target, we called it a day," Enzweiler said. "[But] we went to partners and said, 'Give us your plan, you know what our strategy is. At those touch points, let us know and we'll invest.' "

A newly implemented Investment Review Board run by Stephen Mungall, head of global channel sales, decides which partner plans the company throws its muscle behind, "regardless of what their merit badge says," Enzweiler said.

Initiatives will be funded based on an evaluation of the value they deliver to the customer, not volume, Mungall told CRN.

Red Hat partners, at least on paper, are still classified by traditional taxonomies (although that's under review), even as the silos between those business models are rapidly blurring, he said.

"We all know a lot of these VARs are migrating to an MSP practice," Mungall said. "So we need to think differently about how they consume Red Hat products as a service."

Cutting-edge products like Red Hat's OpenStack distribution are driving those changes, requiring partners to bring to the table unique implementation and management capabilities, he said.

Many partners might still be categorized as VARs, he said, but that's not necessarily an adequate reflection of what they actually do in the market. And others are looking to move beyond that legacy model.

"We'll invest in things that are going to help them move to new consumption and new technology models. Not in being a traditional reseller," he said.

Those investments can come in different flavors, depending on what the partner is looking to achieve, Enzweiler said.

A global systems integrator might need engineering assistance in building an add-on solution; another might be looking for "funded heads" to work with practice leaders. Other partners might want help launching go-to-market efforts or joint marketing or training.

For one large Red Hat partner, Skokie, Ill.-based Forsythe Technology, Red Hat's flexibility in assessing its channel has been a useful trait over the years as its own business model adapted to the times.

Brian Peterson, vice president of systems at Forsythe, told CRN the shifting incentive strategy reflects the evolving nature of how partners of all stripes conduct business.

Solution providers that seek longevity need to be willing to pivot to new technology realities, and it helps to have a vendor partner anticipating that evolution and looking to support emerging practice models, he added.

"We've had to reinvent ourselves as a reseller 10 times," Peterson told CRN. "Red Hat is willing to look at us like a service provider, reseller, provider of technology."

That evolution from VAR to selling services, to managed services, to hosting, is the reason that Forsythe survived major disruptions that laid waste to so many other IT services companies, he said.

One reason Red Hat is ahead of the curve, Peterson believes, is that the company doesn't have two decades of channel history to unravel.

"The culture is different," he said. "That's probably related to open-source and the way they operate."

While straight reselling is an increasingly uphill business model, there are higher-margin annuities to be earned from professional services, managed services and hosting, Peterson told CRN.

That's particularly true for open-source products, which offer customers serious value, but aren't easy to implement.

"The great part of it is that customers need it," Peterson said. "Almost all customers need managed services."

Enzweiler told CRN that partners still dependent on the legacy VAR model will not be left behind.

"We do not want to disenfranchise any partner," he said, "so we have a way for them to participate consistent with how the customer wants to buy, and make investments in them so they can shift their model."

And it's important to remember that changing the program isn't a matter of flipping a switch, Enzweiler said.

The strategy will be executed over time, informed by discussions with partners and focusing on emerging technologies -- products beyond Red Hat Enterprise Linux, he said.

The process started late last year with 10 OpenStack partners. In March, the new approach was expanded to cloud and services providers.

"Red Hat doesn't do things with a lot of fanfare," Enzweiler said. "We didn't want to make a big deal. But it's off to a good start."