InterComms :: International Communications Project
  Intercomms Issue 23

Netformx logoDriving Profitability from Vendor Reward Programs

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Ittai Bareket, Chief Executive Officer, Netformx Inc.
Ittai Bareket, Chief Executive Officer, Netformx Inc.

In our previous issue Tim McElligott, Senior Consulting Analyst, Global OSS/BSS Strategy at Stratecast, interviewed Ittai Bareket, Netformx CEO, on how Netformx helps solution providers increase profitability. One of the topics discussed was increasing margin and profits through better management of vendor reward programs and incentives. InterComms interviewed Mr. Bareket to learn more about that topic and how Netformx estimates that more than $30 million was left on the table in the last 6 months!

As Netformx CEO since 2005, Mr. Bareket has provided strategic leadership that helps service providers, systems integrators, and technology vendors win more opportunities and increase profitability. Netformx customers rely on their award-winning solutions to design and sell the information, communications, and technology solutions demanded by enterprises across the globe.

Q: Ittai, before we talk about how Netformx helps drive profitability for its customers, could you give us some background on Netformx and the market you serve?
A: Netformx® is the leader in sales enablement and profit acceleration solutions that help customers win more digital enterprise opportunities. Our 2,680 customers across more than 144 countries include service providers, systems integrators and equipment vendors. They rely on our award-winning solutions to simplify the solution design process, accelerate the sales cycle and enable higher levels of profitability for every proposal.

Netformx offers three solutions to streamline a partner’s proposal generation workflow:

1. Design-to-Win: Win more digital enterprise deals quickly by designing and delivering complete and accurate proposals
2. Design-to-Implement: Create compelling proposals that meet customer needs and can be delivered flawlessly the first time
3. Design-to-Profit: Increase the profitability of every deal by raising sales efficiency, reducing errors, improving collaboration and incorporating vendor incentives

One of the ways our customers benefit from Design-to-Profit is to increase their share of vendor program rebates.

Q: What are vendor program rebates?
A: Vendors such as Cisco offer their partner community up-front discounts and back-end rebate programs that increase partner margin and profitability. Sales programs, incentives, promotions and special offers help Cisco partners increase their revenue potential when they sell Cisco products and solutions. Cisco also offers a myriad of programs that are based on a partner’s level of Cisco certification and specialization. One lucrative program, the Cisco Value Incentive Program (VIP), is a semiannual program providing partners with rebate payment based on the products they sell. Every partner would like a larger share of what Cisco’s web site calls its “multi-billion dollar VIP partner investment”!

To get an idea of the steps involved, think about a simple consumer rebate program. We need to complete the submission form, mail it before the expiration date, fix any submission errors, track the submission, receive the check, and cash it. Forms may get lost in the mail, we may miss the deadline or forget to respond when additional information is requested, or not receive the check. According to Cisco, the VIP program is much more complex and dynamic than a consumer program and can have strict compliance requirements; many of the same things can go wrong but with financial impacts in the millions of dollars. Managing all the variables associated with such a program is both costly and prone to error.

VIP rebates may not be recorded or paid as earned because, for example:

1. The partner did not provide all relevant deal information correctly
2. Transactions fell through the cracks
3. System errors
4. Inaccurate correlation of deals between distributor and selling partner

While companies do consider profitability as they design proposals and create quotes, they are challenged to create effective designs for sales proposals that balance the end-customer directive (desired functionality at the lowest price) with the organization’s mandate (to delight the customer, win more deals, and be profitable).

Executives use homegrown manual methods to manage their company’s vendor promotions and certifications—if they track anything at all. They don’t usually follow reproducible operational processes that ensure they meet the rebate qualifications or actually get paid.

"PartnerCentral has enabled us to take full advantage of vendor incentive programs by automating our manual processes and identifying opportunities we would never have been aware of. We have seen immediate growth in our reward rebates since we have used PartnerCentral to highlight vendor incentive programs as proposals are generated, to fix any rebate submission errors, and to track rewards. "

David Yarashus, CTO, Chesapeake NetCraftsmen, LLC

Q: You acquired VARcompliance last year and have rebranded it as PartnerCentral. What does PartnerCentral do?
A: The PartnerCentral SaaS platform helps technology providers increase profitability by automating the process of capturing more reward dollars, reducing labor-intensive and manual tasks to ensure compliance and significantly improving the visibility and management of vendor reward and certification programs. PartnerCentral monitors, manages, and tracks certifications and deal progress to ensure the partner gets paid what they are entitled to receive.

Even though just recently released, Netformx PartnerCentral has over 100 Cisco partners from all geographies, specializations and certifications and manages more than 17,000 partner-certified employees.

PartnerCentral has six offerings (ProfitXpert, PromotionXpert, UsageXpert, PurchaseXpert, DealXpert, CertificationXpert) that provide dashboards and drill down capabilities to help eligible companies get more return out of Cisco programs.

Q: How does PartnerCentral work?
A: PartnerCentral obtains data from multiple sources and applies sophisticated algorithms that correlate the results to improve operational efficiencies and profitability. PartnerCentral automatically analyzes the data to identify potential situations that invalidate or increase the rebate and highlights them to the partner. The partner can then dispute relevant transactions with the vendor.

Netformx DesignXpert®, the award-winning, global leader in enterprise technology design and proposal generation, helps to increase partner profitability and gross margins by using PartnerCentral to provide insights into vendor promotions and incentives during the initial proposal design phase. By automatically presenting alternate SKUs that are eligible for rebate, entire organizations can readily take advantage of partner promotions and incentives as they create designs.

Netformx DesignXpert non-invasively manages the incentive for every technology element included in the design. It accesses the full range of Cisco incentives and promotions via an object browser panel that presents alternate VIP-eligible choices relevant to the partner’s specific Cisco certifications and specializations. It shows only those VIP alternates the partner is eligible to receive rebates on and only alternates that provide a higher potential rebate payout compared to the parts placed on the design canvas. Using intelligent visual feedback, users can make instantaneous changes to the design with the added guarantee they will not exceed end-customer budget constraints.

As a result, entire organizations can standardize on the best practices that optimize the profitability of each and every deal. This makes it easier to compress sales cycles and deliver more winning proposals to customers at even higher margins.

"The integration of vendor incentive promotions and programs into DesignXpert is enabling us to select alternate parts that meet our customers’ needs while at the same time increasing our potential profit margins. This has also increased our productivity since we can consider manufacturer promotions during the design phase rather than off-line after the order has been created. "

Tom Christian, Networking Presales Engineer, Sirius Computer Solutions

Q: Do you have an estimate of the benefits your customers receive with PartnerCentral?
A: We did an analysis of Cisco’s VIP23 program that was effective from January 26 through July 26, 2014. The benefits of PartnerCentral have turned out to be significant. We are delighted to see a record number of customers using PartnerCentral to maximize their program participation and rewards.

We have found that many Cisco partners are not doing an effective job at operationalizing-to-profit, i.e., ensuring that they complete all the steps to qualify for the rebates and then get paid.

The Netformx analysis of the 6-month VIP23 period showed:

1. Netformx PartnerCentral presented its customers more than $30 million in potential incremental rebates
2. An increase of 24% in potential incremental rebates when distribution partners were included in PartnerCentral
3. PartnerCentral identified $5K more margin for every $100K in a bill of materials
4. On average, a partner-certified employee holds 3 Cisco certifications that entitle the partner to participate in various discount and rebate programs. The range was 1.5 to 10 certifications per employee.

Each partner wants to get a bigger share of Cisco’s multi-billion dollar VIP partner investment pie and to be paid what they should be paid, not miss out because of operational errors or lack of follow-through. By not automating promotion and incentive management they are leaving real money on the table.

Q: Can you provide a case study example?
A: Chesapeake NetCraftsmen is a Cisco gold reseller with about 40 employees. They primarily support federal agencies, healthcare, energy and finance sectors—regulated industries where getting it right the first time is important. Their focus is on craftsmanship—like their name. They focus on doing exemplary work while staying profitable.

Chesapeake NetCraftsmen had been using DesignXpert to create accurate designs, but senior management tracked rewards and certifications with manual processes or an occasional spreadsheet. To the extent they could, they relied on vendor reports, but struggled to gather data or useful insights.

With PartnerCentral, Chesapeake NetCraftsmen has been able to quickly understand, analyze, and track their rewards. Instead of looking at disqualifications at the end of the VIP period, they now analyze them monthly. PartnerCentral has helped NetCraftsmen get value from their Cisco reports by explaining and interpreting them. They discovered that they were not managing at all most of the areas addressed by PartnerCentral because there was no data or process. While senior management still performs the tasks, PartnerCentral has made the results and insights easy to obtain. Chesapeake NetCraftsmen likes PartnerCentral, believes in it, and is finding new ways to use it to improve profitability.

It is gratifying to see our customers capture more reward and promotion dollars and ensure their compliance!

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