Transcript

Larry Hann:   If you think about the traditional model that you’ve seen with partners in the past, it’s really been that buy, resell type model. And what we’re seeing is — as more and more assets get moved into the edge, and as software really starts becoming the driver of how to manage that and data becomes the main thing that the customers are interested in — if you’re not providing a “as a service” or some type of managed offer to your customer base, you’re going to miss out. And the reason you’re going to miss out is that you’re not going to have that touch into the overall life cycle.

Announcer:        Welcome to the Software Channel Partner Podcast where you’ll hear leaders of partner programs talk about their greatest challenges and most successful solutions. And now your host Louis Gudema, the president of revenue & associates.

Louis Gudema:  Welcome to the Software Channel Partner Podcast where we talk with leaders in software partner programs to learn about what’s working today. I’m Louis Gudema, the president of revenue & associates where we help companies grow faster by helping their channel partners market better and grow faster.

Today, I’m talking with Larry Hann, director of Digital Services Programs, IT Channel, for APC by Schneider Electric. Larry has been with APC for over 20 years and he has supported North American business relationships as manager for tier two OEM partners, and then the tier one IT distribution team. Larry was one of CRNs 2018 100 People You Don’t Know, But Should.

Before I talk with Larry, I want to add this. In 2011 Marc Andreessen — co-founder of Netscape and a principal at the Silicon Valley VC firm, Andreessen Horowitz — famously wrote, “Software is eating the world.” And it’s now come for APC, which before had been exclusively an electronics hardware company. So today we’re going to be hearing from Larry about how this 38-year-old company with thousands of employees is using the channel to succeed with new software offerings. Larry, welcome to the podcast.

Larry:     Louis, thanks for having me.

Louis:    So Larry, you studied materials science and engineering at Virginia Tech and Clemson. Please fill us in with a bit more detail on your career path and what brought you to APC and to working the channel.

Larry:     Yeh, sure. So as you mentioned, I started my career I guess on the engineering path. At the time that I graduated from Clemson with my Masters was in the middle of a recession and there wasn’t really a lot of jobs that were available in the market. I happened to know a friend who had an aunt that worked at APC. And she was able to actually get me an interview and I was offered a job to move up to Rhode Island and kind of start my career. And as you mentioned in the introduction, I’ve kind of worn a lot of different hats with APC since that time, almost always focused on the channel and helping them to leverage the solutions that we bring to market around power and cooling.

Louis:    Oh, great. So why don’t you tell us a bit about APCs traditional business and then I want to talk about EcoStruxure.

Larry:     Sure. So APC has primarily grown up as a manufacturer of power and cooling products. Actually, when I started with APC, the largest UPS we made was a five KVA UPS. And since that time we’ve really expanded our business reach outside of more the distributed type UPS models into the large data centers. We also introduced rack systems and power distribution units, cooling solutions. So now today we can primarily provide solutions all the way down from the plug at your desk all the way back into the large data centers that you see being put in place by like a Microsoft and a Google today.

Louis:    Great. So EcoStruxure is APCs internet of things, enabled architecture and platform. What does that make possible now and how does that fit into APC’s business?

Larry:     As part of our business strategy, when we’re supporting these large data centers, we actually had a software solution called StruxureWare. Which was really designed to help data center managers to manage their power, their cooling, their power distribution units, to understand what’s going on with those devices. And then to be able to take action if there was any alarms that might come about as they’re running their business. So one of the things that we did was we kind of took the concept of that and we were bringing it back up into the cloud. And one of the things that we’re seeing, and I think across the industry everyone’s seeing, is you’re starting to see more and more compute come outside of the data center and being moved closer to where the customers are consuming their IT.

So as you do that, you’re starting to have more and more requirements for that IT to be available at the same level that you might see within a data center. But the challenge is that you don’t always have the resources or even the technology in place to enable that level of availability. So EcoStruxure IT is kind of our answer to help customers and partners to bring that visibility and enable them to manage those assets to the same level that they might be able to do within their data center.

Louis:    So this is related to Edge Computing?

Larry:     That’s correct.

Louis:    Okay. So this is a major change I take it for APC and your partners. Who are APC’s traditional partners?

Larry:     So just to your comment about the changes, definitely a change, as we’ve mentioned, we traditionally have kind of grown up on that buy/resell type path. With EcoStruxure IT that enables us to start actually moving into the realm of the managed service provider and “as a service” type business model. So that really kind of opens the door for a number of different type of partners that we could work with. Now in the past, we’ve traditionally worked with a number of different types of partners. So we have relationships with the large NSPs, the National Service Providers, with electrical distributors, with national resellers and then also down to the local level. And now with EcoStruxure IT, we’re really starting to expand our reach into that managed service provider space as well.

Louis:    So are you selling primarily for EcoStruxure IT, is this targeted mostly at enterprises or does this fit into the SMB world?

Larry:     The way it’s been playing out, so I mentioned before we had our offer called StruxureWare for the large data center, that tends to be more in the enterprise space. EcoStruxure IT is actually going to be better positioned more into that SMB mid-market space, to customers such as like the school districts or financial companies that have a number of branches. Basically just any kind of company that has a distributed environment. Now we do see the enterprise side of some of those larger companies also leveraging EcoStruxure. But where its real value comes in is into those distributed spaces outside of the data center.

Louis:    So have you had to recruit a whole new set of partners, MSPs, and others to provide this?

Larry:     So the interesting thing is when we first started rolling that out, we actually thought that was the path that we needed to go down, which was to kind of find those partners that have that expertise to bring this to the marketplace. But what we found is actually our existing partner base is just as capable of providing the value prop of this offer to their customers along with the opportunity with the managed service providers. So the reality is as EcoStruxure IT really plays with any type of partner that we work with today. It’s really more driven by them providing the right type of value prop to their customer and really just meeting whatever that customer’s requirement might be.

Louis:    It has a different revenue model. It’s a recurring revenue model instead of a sales model. So that’s new for these partners right?

Larry:     I would say it’s not necessarily new for the partners, it’s new for them looking at APC and trying to rationalize how we would fit into that model. Because, as we talked about before, we traditionally have been more of just a buy/resell type and go to market strategies. So now we’re starting to talk about incorporating everything as a service and then you know, potentially even having them consume that on a monthly basis.

Louis:    So you’re saying that the partners were comfortable with that because of work they had done with other vendors, but it was just a new thing for them and APC?

Larry:     That’s correct, yes. And really a new thing for APC also and how we message back to them. So trying to figure out what is the best way for us to kind of snap into their existing go-to-market strategy. I think that’s really the, that’s the thing we’re working through now with our partners to figure out what’s the best way for that to be provided to them so they can consume it consistent with the way that they might consume other IT solutions or bring it to market.

Louis:    Okay. So what kinds of training or enablement have you had to provide for your partners around IoT?

Larry:     So right now we, actually we just launched a certification program, which will actually enable the partners to understand how the offers for a setup, and then how they might actually potentially use that with their customers. Over and above that we are really kind of working with each one individually. So we have channel managers that go out and manage the day-to-day relationship with these partners. And we’re asking them to go and actually, you know, identify the key contacts within organizations. And then we come in and we sit down with them and we kind of map out what’s the best way to kind of bring this offer to market. And as we do that, we put them through the certification process. But we also just work with them specifically based off of what their needs are.

Louis:    So what about within APC — what kind of challenges, because this is a pretty new model for you, the recurring revenue, what kind of challenges have you had in terms of, you know, having these new software products, not just being hardware and having new sales channels?

Well having new revenue models around those. I guess you’d still have the same partner channels but having new revenue models around that?

Larry:     Yeh. So you know the challenge that we’ve come across is really just how you actually might approach those partners. So in the past we would work with a partner as a project came up. So maybe there’d be a refresh of their IT, and as a part of that the power would be dragged along. So we’d work with that partner just to provide the right solution to meet the requirements, hardware requirements for that job. But then once we had done that we would then just move on to the next one.

With EcoStruxure IT, we actually kind of are changing the dynamic of how we interact with our partners. Because instead of just having this job-to-job type interaction, now we’re starting to have a business conversation with these partners around how we can fit into their profit cycle and really drive more value into their customer base. And that process is a little bit different for the sales reps because they’re not used to having that. They’re used to kind of just working with the reps to provide the right solution to meet whatever IT gear’s going out. So that’s one challenge that we have.

The other challenge is to kind of just look at how the reps are paid, the revenues. The hardware generates a large proportion of that revenue so the software is still a small portion of that overall revenue stream. So getting them to identify or understand how that potentially will actually drive more opportunity for them and think of it a little bit differently. So in the past, we would basically respond to that hardware. Now we’re trying to work with or get our reps to kind of think about using, leading with software and letting that and the visibility we provide with that to go drive the hardware sales. So it’s definitely a change in methodology. That’s as part of that handholding process I outlined before that’s what we’re working with. We’re not only consulting with our partners, but we’re also consulting with our channel managers to help them understand how to make that transition.

Louis:    Fifteen years ago or so, I headed up a company, a marketing agency, and we had a SaaS offering. And I remember going to a conference about SaaS and a bunch of the CEOs who were on one panel had come from a kind of shrink-wrap software product background and they were converting to SaaS. So even though they were coming from a software background, the whole delivery model for it was changing. And they were saying what was surprising to them was how suddenly much closer to the customer they were. They had this ongoing relationship with customers when they were SaaS customers that they hadn’t had when they were just shipping a product out to them.

Larry:     Yeh. And that’s actually, that’s one of the things that we’re also seeing, too. So if you kind of keep working downstream down to the customer. When we go in with our partners to those customers instead of just again talking about the speeds and feeds of whatever the piece of hardware equipment they need. Now we’re talking to them about, well what are the challenges they’re facing in their business and what things can we do to help enable them so they could go focus on what they do well, which is their core competencies. And in a lot of cases with our category, power and cooling, there’s not a lot of expertise within the customer, in some cases even the partner to go and kind of drive or manage that.

So you know, a lot of the customers we’re talking to, and as we get outside the data center, that becomes even more prevalent that the expertise is not there. So as we start having these business conversations with these customers, a lot of them are coming back and saying that we really don’t even want to manage the power. If there’s a way that we would just know that it’s going to be available and provide the experience that we need, we’re perfectly happy with outsourcing that to a partner or to you APC so that we again can go focus on those core competencies.

Louis:    Oh, that’s interesting. So that’s a whole new opportunity?

Larry:     It is. And the other thing is with the software, we can do some assessments, so can also help them understand what the starting point is or where their foundation is for their environment today. I think we’ve done a good job over the years of really educating our customers that they need a UPS to protect their networking switch or workstation or whatever it might be that’s outside their data center. And we’ve even educated them to go buy the SMP adapter so they can go manage that.

But what we’re actually finding is that a lot of those customers didn’t even hook that UPS into their network or if they did, they’re not managing it. So while they bought the UPS, it’s kind of the mentality has been more of a set it and forget it. And the reality is that those environments are dynamic and you need to be managing them on a regular basis.

So we’ve been actually leveraging — after we’ve had that business conversation, part of it one of the things that come out is I don’t really know what’s out there or what state it’s in. So we actually leverage these assessments to help the customer understand what’s there. But then that’s then also starting to drive hardware upgrades or projects, new projects, because the customer first of all doesn’t realize what the depth of the potential challenge is in their environment. But then they want to resolve that very quickly because they understand that they can’t afford to have their IT down outside the data center. Especially if they’re looking at doing cloud migration or any type of cloud-based offering where they need that internet switch to be available.

Louis:    So is this something new then for your channel managers to be getting up to speed on also and kind of changing their whole relationship with partners and customers?

Larry:     Yes, yep, absolutely. And it gets back to what I mentioned before is just changing that mindset of, even when they go into the partner and instead of just talking about what they can do on the hardware side. It’s really talking about, Okay, what are you doing to help bring value to your customer. And in some cases even starting to have conversations with different parts of those partner organizations. So as you get to some of these larger partners, their managed service group or their assessments group is completely separate from their sales teams that are going in and meeting these hardware requirements.

So what we’re finding is we’re actually starting to have conversations with these groups, which we’ve never had before, which again enables them to get more traction with that partner. But also changes the interaction to more of a business interaction as opposed to just we being one of 100 or 200 suppliers that that partner uses.

Louis:    So how many partners does APC have and how, you know roughly how much of your revenue are they contributing? I’ve talked with some companies where it’s a small percentage and some companies where it’s 95 or 100% of revenue are coming from the channel.

Larry:     Yeh. So I think we’re somewhere around 8,000 partners in North America today, and we as APC have always been a channel, two-tier distribution channel company, somewhere close to 90 to 95% of our business goes through the channel. The only time you might see something going direct is if it’s a large enterprise 10, 15-type company, which basically demands that they have to work direct with us if we want their business. But for most cases, everything else goes through the channel. And actually even those types of customers we even find as you get away from the corporate buyers, there’s individual groups that will still leverage their local channel partners. So everything we do is driven through the channel, and our objective has enabled them so that they can provide the right solutions from a power and cooling perspective.

Louis:    And a lot of those are through distributors. A lot of those partners are?

Larry:     A lot of those partners are through distributors yeah.

Louis:    Okay. Are they all carrying EcoStruxure IT or it’s just a small subset of your partners involved with that program?

Larry:     Yeh, so the offer was launched actually just around this time last year, so we’re still in the process of onboarding a number of our partners. I’d say we’ve had traction to this point is with the larger, you know, the NSPs and the electrical distributors and national partners, which we have established relationships. And we’re just now starting to expand and bring that back out into the larger channel. And part of that is really just driven by the offer itself, as we’ve launched it, we’ve continued to evolve the capabilities of it, you know it’s cloud-based, so you know, every couple of weeks there’s a new feature that’s enabled.

But one of the things that we’re working towards now, which is a request that really comes from the MSPs, is the ability to provide open APIs so they can integrate into their existing platforms that they’re using today. So the partners that are more early adopters are the ones that are really leveraging this as part of the hardware project that they’re selling today. And now we’re starting to make that migration into the managed service practices, which then is going to open the doors to more partners to consume this.

Louis:    So it sounds like the last year you’ve been kind of understanding what’s working, getting feedback from the channel, making refinements to the program before you expand it to a wider range of partners.

Larry:     Yeh. And one of the things that we talked to the partners about is that this is really kind of a continuous process and it’s a collaborative process. So there really isn’t any endpoint for it, the offer is going to continue to evolve, but just to that point as far as what we’ve learned throughout the year, when we introduced EcoStruxure IT it was really just the software itself. Here’s this cloud-based offer that’ll enable you to monitor your devices through the cloud. But as we’ve been working with the partners, the things we’ve realized is in some cases those partners don’t have their own NOCs, so they might need help with that. So we’ve developed an offer that enabled them to leverage our NOC to do that.

And then other partners that have had customers that come back and say, Well, you know, actually I want you to manage the remediation of whatever alarms you find, you know replace a battery, or replace a UPS or whatever it might be, but I don’t have the resources to do that, can you help us? So we’ve developed a, actually we just launched it a couple of weeks ago, an Edge service, which enables the partner to add on fleet management or remediation into the hardware that they’re selling.

And then some partners say, Okay, well I have the NOC but I want you to do fleet management, Or I want to do the whole thing myself. So over this year we’ve really actually started to develop the right go to market strategy for these partners, and the reality is is that we just have to have flexibility because each partner’s different, each partner wants to engage with us differently and in some cases it could be a project by project.

So one project that a partner is going to leverage us to do everything maybe because they don’t have the footprint in the region where that customer is. And then another project, they’re going to do it all themselves. So trying to figure out how to bring those different models to market in a way that’s consumable for that partner has definitely been a learning curve for us over the last year.

Louis:    So it sounds like you’re talking about that some customers want essentially power as a service.

Larry:     That’s correct. That’s correct. Yep. And actually the last piece of that is that we also have some, it’s really, because it’s almost like a UPS as a service, in some cases they don’t want to own the UPS at all. They just want to pay a monthly fee and have it all be available for them. So that’s kind of the last piece of that model where basically the whole thing is as a service.

Louis:    Yeh. Exciting times.

Larry:     It’s very exciting. And it’s been great, really learning as we’ve been going, but then also seeing how we can kind of change our partnerships with our partners. And then also the business opportunity. But we’re really at the beginning stages of this and then the opportunity in front of us is massive.

Louis:    So what data and analytics are you using to gauge the success of the program and how to grow and improve it?

Larry:     There’s a couple of leading indicators that we follow today. The two main ones, are our funnel. So how many projects are we putting into the top of the funnel where we’re adding the software either on its own or as part of hardware projects that are being brought to market? We also have another metric around just engagement with our partners. So we’ve challenged our channel managers, we have 19 of them across the country, to identify at least five partners that they can bring into educate, evaluate, and then actually work with them to incorporate this into their business model.

And then another, it’s more a kind of a lagging indicator is just overall connections. So number of devices that we are managing or have under management through the software itself. It’s a lagging indicator because our go to market strategy right now is to attach to existing projects. So we’re not seeing those connections happen until after the project closes. As we start to bring on more MSPs we’ll actually see that kind of switch to be more of a leading indicator because they’ll be bringing on these assets as part of their managed service offer and won’t be driven by projects anymore.

Louis:    So a year ago you wrote a guest blog post for Channel Futures in which you said, “Solution providers who fail to support digital business will soon lack the expertise customers require. They’ll face significant revenue loss within a mere two or three years.” So what prompted you to write that? That was right around the time when the program was launching. And are you starting to see that happen already?

Larry:     Yeh, and part of that’s really just driven by what we’re seeing in the industry itself. So if you think about the traditional model that you’ve seen with partners in the past, it’s really been that buy/resell type model. And what we’re seeing is as more and more assets get moved into the Edge and as software really starts becoming the driver of how to manage that, and data becomes the main thing that the customers are interested in, if you’re not providing “as a service” or some type of managed offer to your customer base, you’re going to miss out. And the reason you’re going to miss out is that you’re not going to have that touch into the overall life cycle.

So the traditional model was you sell a piece of hardware, you go off for three years, and then you come back and see where the customer is and see if it’s time for them to buy something else. The reality is is that that sales process basically never ends now. As you start working with these customers, they want you engaged, not only from the point that you actually give them the right solution, they want you managing that all the way through. And then to the point where it’s time to do some type of life cycle upgrade. So if you’re a partner, if a partner is not moving their business in that direction, they’re going to not have the visibility or the touch with their customers to be able to maintain that. So over time they’re going to have a lot of pressure to be able to maintain their revenues and you know, eventually they’re going to go out of business.

Louis:    So is IoT now increasingly built into more and more APC products? Is it most APC products?

Larry:     So as a transition as to where our product cycle is going, one of the things that is being built into the intelligence I guess, of our devices is you know, the open APIs, the ability to snap into our Ecostruxture platform. That is really going to be the driver of where we take our product innovation from an intelligence perspective. So the data that we’re able to collect will then enable us to go and start having more intelligent conversations with our partners and also with our customers. And our objective is today when we manage a UPS, we’re really just responding to or reacting to an issue that comes about. But we want to actually change that dynamic and get to the point where we can anticipate and then maybe even get to more of a prescriptive model where basically we know something’s going to happen before it does, then we can take action so there really is no downtime.

Louis:    No, that’s great. So what kind of marketing programs, through partner marketing programs or co-marketing, MDFs, or spiffs are you working on with partners to help them drive this offering into the marketplace more?

Larry:     The marketing program is, I’d say it’s in process from the standpoint of the MSP model. And the reason that is is we’re still figuring out the right go to market strategy. But as we move forward we envision that we’ll have a program that really enables and supports those partners that are incorporating this into their business. And part of that program will be a certification level. So I mentioned before we have a base certification level. We’re going to have more of a technical certification level, which really gets into that idea of how you incorporate this and really create a managed power practice within your business. Now that’s more on that how to actually get started.

Then as we move forward, we’ll also wrap around that the appropriate marketing messaging. So you know, enable a partner to kind of develop the right message around whatever their value prop is into the market. And then behind that will be programs. Today if you look at our partner program, we have our certification program, but then we have the ability to register projects, and depending on your certification level, you get a certain kind of discount based off of that registration.

For our larger partners, within the higher-level partner status, we have MDF funds and we also do a number of shows that we provide. We have some programs around joint marketing collateral so they can put their own branding on it. So we’re going to take some of those same concepts and then bring it back into the managed service program as well.

Louis:    Okay. So I want to ask you two questions that are kind of variations of questions I ask when I’m hiring people.

Larry:     Sure.

Louis:    So the first question is, what’s a program, campaign, something that you’ve done over the years that you think was especially successful? Something that you’re very proud of?

Larry:     Yeh, so one of the programs that we did, and this was back when I managed our relationship with Ingram Micro, we were trying to help our partners to kind of think beyond just the buy/resell upfront and start really looking at the full life cycle of the UPS. So we had actually created a campaign around having the partners come and work with their customers on assets that might be anywhere between three and six years old. And depending on the age of the device, that could be just the action might be to replace the battery. It might be to just extend the warranty or it might even be just to replace the UPS.

But what we did in working with Ingram is tried to get smart about it and we basically went back and leveraged their BI data, sort of their Business Intelligence around the customers that have bought from those partners. And basically identified customers that had assets that were bought anywhere within that three to six-year timeframe. The nice thing about the Ingram data set is they actually did have end-user information, because a good portion of their business is dropship for their partners.

So when we pulled that data set, we actually identified about 3,500 customers that were tied to around 700 resellers. And we did a six-week drip marketing campaign where we tested a couple of different messages around that life cycle. And over the course of that campaign, we were actually able to engage over 300 customers and drive about 900K of revenue and that was across about 250 resellers. So the nice thing was is that we were helping the resellers to have another reason to go talk to their customers. And in the process we’re able to drive some additional revenue for them, but also enable them to kind of have a deeper touch with their customer and really start to take over that lifecycle with them.

Louis:    Yeh, that sounds like a good success. Okay. No that’s a great example. Let me ask one other question. This may to take a moment of thinking. This is the flip side of that question I just asked which is: What’s a program or a campaign or something that you attempted that wasn’t successful and why you think that was?

Larry:     Oh, yeah. So I’ll kind of bring it back to what we’ve been talking to around our cloud-based offer. So that BI activity that I just talked about, that’s something that we’ve tried to repeat as we try and bring new messages to the market. So we actually did the same type of activity, but this was more focused around managed service providers and specifically around our cloud-based monitoring and management software.

So we went out and identified a number of partners that we think would be a good fit. Again, we put together that drip campaign and we thought by doing that we’re going to see this huge success. I think we reached out to somewhere around 750 partners through that campaign and we only got two or three to actually engage, which was really disappointing. Because, you know, we felt very strongly that the offer bring it to market is innovative and be something to help those partners back into the concept of the life cycle really help them on the life cycle from assessment all the way through refresh.

But what we learned as we started to go back and talk to partners is they weren’t really looking at power, or they were interested in it. They could see the value in having that visibility, but they didn’t know how to do it. So until we actually were able to kind of come to those partners with a plan on how they could actually incorporate this into their business, show them how this would actually drive that engagement with their customers, and in some cases even do it for them we weren’t able to get success. So the failure for us was the fact that we just assumed it was going to work. Without really knowing the background or understanding our customer so we can actually position in a way that they could consume it and incorporate this into their business.

Louis:    Yeh. It sounds like a tough lesson, but we’ve all been there.

Larry:     Yeh, well it’s one of those things you evolve as you go. The nice thing is with the offer being cloud-based, we got a lot of great feedback from our partners, and that’s actually been incorporated into what we bring to market now. And actually that’s going to continue to happen. We’ve learned a lot. And now we’re starting to see that success and getting the engagement that we thought we would get from day one with the partners. So it’s definitely an ongoing process.

Louis:    Well if you take the approach that there’s no such thing as failure, if you learn from it and can apply that in the future, then sounds like you got a lot out of it anyway.

Larry:     Yep, absolutely.

Louis:    Okay, great. Great example. So what should I have asked you that I didn’t? What keeps you up at night?

Larry:     What keeps me up at night is actually being able to move fast enough and getting our message out to the channel. This is a unique opportunity. The partners that we’re working with today definitely see it as a way to kind of change the conversation they’re having with their customers. But each partner has their own unique relationship. So the way that we win is that we get every partner to embrace this and incorporate it into their business. And the faster that we can do that, the more success we’ll have. We’re not the only company out there in our space thinking about these things. So really the thing that keeps me up at night is being able to move fast enough so that we can get the adoption within the channel that we really want to see.

Louis:    All right, great. So Larry, if people want to talk to you more, how can people contact you?

Larry:     Yup. So they can obviously reach me through LinkedIn. I have my profile set up there. They can reach me through my email address. It’s just Larry.hann at se.com.

Louis:    All right. Thank you for joining us today, Larry. As I do with all guests, I’ll be sending you a copy of my Bullseye Marketing book in appreciation.

Larry:     Great.

Louis:    I just found out it was recently named one of the best marketing plan books of all time.

Larry:     Oh, wow.

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