Is Pay-To-Play OK?

I interviewed Chad Kempt, founder of Fast Computers, and Raffi Jamgotchian founder of Triada Networks  — on doing business with vendors who charge a premium for the privilege of selling their solutions.

CHAD KEMPT When Kempt founded Fast Computers in 1998 his company mainly handled break-fix and project work. He transitioned his business to managed services back in 2005. Kempt sits on the Datto Advisory Board as well as the ASCII Advisory Council.	RAFFI JAMGOTCHIAN Jamgotchian launched Triada Networks, an MSP established to help small independent investment companies cope with technology, cybersecurity, and compliance, in 2008. He has over 20 years of experience working in IT in the financial services industry.

Q1: Some vendors charge solutions providers for a myriad of different things — to join their channel programs, for training, and for not-for-resale copies of their software, to name a few — just to become their partner. What are your thoughts on that channel model?

KEMPT: One of the things to look for in a vendor relationship is whether it will be an actual partnership, as you can only hope to get out what you put in. If you’re hoping for free software, free training, to be a top-tier partner of this vendor, then you better be prepared to meet their requirements, whether that’s moving a certain amount of product or whatever else is required. With the vendors where it’s just the lower partner levels that aren’t very rewarding — where if you’re a new partner, you must pay for training or you must pay for not-for-resale (NFR) software but as you move up the chain you unlock those additional benefits — then I have no problems with that. Basically, they’re saying, “Are you committed to us? If so, we’re committed to you.” I think that’s great.

JAMGOTCHIAN: I’m going to give you my typical engineering consultant answer, and my view is, it depends. Mostly, I’m not a big fan of the practice. I think it’s a partnership. Both need to bring something to the table, but there needs to be some value added for it if they’re going to ask for funds up front or minimums or some investment on behalf of the partner, the MSP in this case. Too many times we see it as a land-grab, as a way for vendors to get market share and sales, but not really provide any additional value beyond that. Early on, when I first became an MSP, there was a vendor that would give NFR services away. And that way, you know, MSPs got it in their hands, used it, then they were able to sell it.

Q2: What advice would you give other solutions providers if they are choosing a partnership with a vendor who employs such a model?

KEMPT: You really need to determine your level of commitment up front. So, for example, if this is a vendor that sells phone systems, are you already selling phone systems? If so, are you looking to switch vendors or is this a new market that you’re looking to get into? And the reason why this is important is if you’re looking to get into a new market, you may not have a lot of experience or a lot of understanding of how it’s going to turn out and there are a lot of risks. If it’s a market you’re already in and you already know what your sales are and you’re looking at a different vendor, then it’s a little bit more freeform, a little easier to go along with.

JAMGOTCHIAN: I tend to have the shiny-object syndrome. I like the new and exciting. And, you know, a lot of folks have good marketing skills and will kind of draw you in. Be careful. When you look at the entire landscape if it’s an area in which you are investigating multiple vendors already, great. Don’t only investigate the solution, but investigate the partnership, investigate the level of engagement that they will have with you and your team, and make sure that it’s truly a true partnership between the two because it should be a win-win. It shouldn’t be just for them.