Blue Coat: Partners OK With Renewal Cuts

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Security vendor Blue Coat claims its partners are behind its decision to slash renewal margins in half by the end of next month.

Editor’s note: As part of our special editorial partnership, Channelnomics is publishing this recent article from CRN in the UK.

Security vendor Blue Coat Systems Inc. claims its partners are behind its decision to slash their renewal margins in half from the end of next month.

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Partners currently earn as much on renewals as they do on new business but the vendor announced in September that the figure would be halved, to bring it in line with competitors.

The change was set to kick in Dec. 10, but Blue Coat has pushed this back to Dec. 31 in response to complaints from partners that it would meddle with their year ends, or those of their customers.

The margin shake-up was designed to coincide with a mass cull of underperforming partners, which will still go ahead on Dec. 10. Some 27 percent of EMEA partners will leave Blue Coat's Channel Advantage Program on that date, with many more being demoted.

Pat Dunne, senior channel director EMEA at Blue Coat, said -- after some initial skepticism -- partners appreciate the change is necessary to help the vendor keep pace with competitors on R&D.

The vendor talked its larger partners through the changes at its EMEA partner conference in Berlin this week, which was attended by over 100 resellers, 20 of which were UK-based.

"Most partners we spoke to understood that we are moving to the industry standard," said Dunne.

"If we are not getting the right percentage of revenue from our renewals and reinvesting it in product development and the roll out of infrastructure for our SaaS service, we wouldn't be able to make as much investment as our competitors."

Blue Coat's renewal margins were half that of those available on new business until three years ago, when it opted to double them.

"It was very unusual for our industry," said Dunne. "When the company was looked at during the [Thoma Bravo] acquisition, it was out of sync with the competition."

Renewals typically make up 20-25 percent of partners' sales but Dunne emphasized that more proactive resellers focused on new business would not feel the pinch so keenly.

Over the last six months, Blue Coat has hired 200 more staff in development and sales in the U.S. after pulling some of its development resource from Bangalore.

"Clearly, the U.S. is more expensive but it guarantees better-quality products," Dunne said, adding that the size of the EMEA channel team has grown by 50 percent over the same period.

"Partners were asking us to grow and we've turned it around and are growing."

In the UK, the partner tally will be thinned by 19 percent, although the number of Premier partners will shrink by 25 percent as many are demoted to Authorized status.

"I think this shows our commitment to keeping the program clean and rewarding those who work hard for us," said Dunne.

For more UK channel coverage from CRN, visit www.channelweb.co.uk

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