Transcript

Michelle:             I’ve been here about a year and a half, and when I joined it was at 900 partners and we slimmed that down to about 450 partners. Because what we’re doing here is about value. It’s value for the customer, it’s a high-value solution. We want to make sure that we’ve got invested, loyal and committed partners that we can pay attention to.

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:    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 Michelle Hodges, Vice President of Worldwide Channels and Alliances at Gigamon. Previously Michelle held senior channel positions at Microsoft, SAP, VMware, Intel, and other companies. She is a CRN 2019 Women of the Channel honoree, and the channel program that she oversees at Gigamon has a CRN five star rating. Michelle is a member of Cloud Girls and a board member of Baptie’s Women in Channel Leadership forum among other activities. Michelle, welcome to the podcast.

Michelle:             Thanks Louis. Thanks for having me.

Louis:    So another one of the guests on the podcast, Michelle Ruhle is a member of Cloud Girls also. Can you tell us about it and is it helpful for you?

Michelle:             Cloud Girls, gosh, I must’ve been a member there for the last three or four years. It’s a networking group out of a couple of women that I was working with in Seattle. I spent some time with a software as a service company called Aptio. And they were looking for women, not necessarily in the channel, but in the cloud space that were helping to drive cloud transitions for customers in channel. It serves a couple of pretty valuable purposes for me. The first is education.

Every month a different member of the community prepares a presentation to share their specific area of expertise. And so there’s things like Bitcoin or hyper-converged channel models, all sorts of things that I’m able to learn from that group of women. And then it’s also just networking community. Whenever you change jobs or you have a new challenge in your existing role or you’re looking for great talent for your team, it’s just a wonderful network of individuals to help to reach into. It’s been a great experience.

Louis:    That’s great. It does sound terrific. Please fill us in a bit more detail on your career. You’ve worked in the channel for a while and at some great companies. So can you tell us more about your career path and what you like about the channel?

Michelle:             Sure. I’ve been very fortunate to carry every channel role I think in every geography. The joke is I left Colorado where I was living at the time — I must have been 29 — with a suitcase and a box. And came back 15 years later with a 40-foot container, a husband, a child, and a cat. And along the way I was able to live in the UK for nine years where I worked with Microsoft as they were building their Indian system integration route to market and look after all of those Indian SIs. And Microsoft then moved me to India where I looked after the LAR and SI business in India as that real value-added channel was developing. Was able to then go spend four years in Singapore as the vice president of channels and alliances for Business Objects, which it was shortly after the Crystal acquisition. Which is every route to market that you could think of whether it was big GSIs or a commodity channel, a webstore, really we had the whole gamut. It was lots of fun.

We were acquired by SAP during that time and I was able to lead the channel integration after that acquisition and learn tons there. And then eventually found my way home and pulled together all of that experience to work with VMware, and help them build their global system integrator route to market and extending that into their services, partner route to market.

So leading me to here, this is my second channel chief in a global channel chief role. All of those experiences, the international experience, the services and SI experiences, the channel, the technical alliances experience, all really seemed to have come together in just the perfect role for my background.

And then the second question there: why I love the channel? In my very first job was with a woman who, gosh, I don’t want to date myself, 20 years ago-ish, maybe being gracious, had the same job that I have now for a monitor company, a large monitor company. And she had left the business and went to a startup back then, which was called a manufacturer’s rep. And so she, and ultimately I with her would go into third party peripheral companies or software companies or video game companies and say, Hey, we noticed you don’t have a channel in Brazil or the Middle East or Europe and say, Let us build you that channel. We’ll do the program, we’ll find you all your channel partners, we’ll get them trained and enabled, we’ll build the pipeline. And for that we’ll take a couple of percentage points off the top for doing that for you.

And it was just this crash course in channel and it, you know, I just fell in love with it. This ability to create — so how do I say it — this job that allows me to create routes to market, true routes to market for companies to get you anywhere in the world. To be able to get a piece of software or technology to show up in the middle of Africa or somewhere deep in China by a partner that the customer can trust and feel well represented, to me just really appeals to my nature, I guess.

Louis:    Yeh. And in some ways it’s almost like a business within a business?

Michelle:  It is, you know, I liken it to often when people say, Well, what is it that you do? Lots of my friends have no idea what I do and I say, Well, do you think, for example, that your car, if you bought a Ford car that you actually went to the Ford manufacturer and bought it from them? No. In reality, there’s a dealer that you purchase it from and when you get it serviced, somebody else adds value to it. And when it’s broken and you get an Uber, somebody else is providing you a different service. It’s kind of the same thing. And it’s an extension to allow the end-user, the consumer, to buy direct from the manufacturer in some way and provide that connection. So yeh, for me it’s quite, I don’t know, it’s quite entertaining. I’m a professed channel geek, been doing it a long time.

Louis:    That’s great. It’s great to love your work. So please tell people what Gigamon does and who you sell to?

Michelle:  So Gigamon delivers networks of visibility and analytics on digital applications and services across physical, virtual and cloud infrastructures. We’re mostly in what we call the G5000, which is the enterprise market. And our tagline is allowed as enterprised organizations and to federal customers and service provider customers to run fast, they secure and innovate.

Louis:    And I understand the last number that I saw was that Gigamon has about 450 partners globally. Is that about right?

Michelle:             That’s a great number. Yeh, we brought that number down. I’ve been here about a year and a half, and when I joined it was at 900 partners and we slimmed that down to about 450 partners. Because what we’re doing here is about value. It’s value for the customer, it’s a high-value solution. We want to make sure that we’ve got invested, loyal and committed partners that we can pay attention to. We’re shifting the business from what was a high – I don’t want to say volume — but was really a fulfilment business. You know, as network and infrastructure companies grew over the last 10, 12 years, we poured a lot of money into sales and the go-to-market, and we were able to establish a relatively strong direct motion that needed the channel to fulfill.

If we want to get to that next stage of growth and the type of numbers that we’re looking at, there’s no way you can, well you could, but you wouldn’t want to spend that much money in building a strong sales force. And so you’ve got to leverage the people who are already representing you. So we wanted to slim down that channel so we could impart more value to more important folks, if that makes sense.

Louis:    Kind of a quality over quantity approach?

Michelle:  Absolutely. Yeah.

Louis:    I was reading some things that your president has talked about. I understand you’re overseeing some big changes at Gigamon. He’s talked about the channel being now, Gigamon now being Channel First. So what percentage of Gigamon’s revenue do partners generate and what’s the goal? What’s the direction?

Michelle:  Yeh, so we’re almost a hundred percent channel today, right. Over 95%, it varies depending on, you know, if you’ve got a big strategic contract coming in. The trick was how can we be using that channel to really accelerate growth, provide us access and reach to markets and customers that we don’t already have. And to connect with the ecosystem, which is really critical to our architecture. If you think about where we are in the architecture stack, technology partners are just critical to our customer success, the connection there. Getting us into the ability to grow our business, get access and reach and accelerate and all of those things, really means we need to seek more value out of our channel, find partners who can bring us into opportunities, and ultimately lead a good portion of our business.

So we started this year with a low portion of our business being identified as a channel and we will exit this year at 35% of our business being channel initiated. As we go into 2020, we will look at 35% of our business being channel-led. Great opportunity for our channel partners. We’ll talk about the program eventually, I’m sure. But this is all about putting value in the pockets of our channel partners, whether it’s through programs, incentives, passing more of that opportunity onto the partners so that they can invest in their own services, enabling them around those services, building ecosystem connections so that they can have solutions and services and opportunities to sell around them.

Louis:    So yeh, we’ll get to the program in a moment. But you’ve talked about two major changes going on in business and the channel today that are really driving change. One is changes in the customer buying behaviors and the other in customer buying cycles. So what are the changes that you’re seeing in customer buying behaviors?

Michelle:             You know, I think we’re now almost past the change in a new reality where cloud transitions and digital transformation has created a customer that’s looking more for outcomes and less for just buying, I need this rack for this reason. That customers are in a constant cycle of transforming their business and through that customer success life cycle of looking at outcomes and saying, Hey, I need to improve my network throughput by X or I need you to improve my application uptime by Y. They are then in this constant refresh of, In order to do that, I have to buy this X technology and then reset that outcome component. That has impacted the channel, you know 10 years ago when we first started talking about cloud, we were like, Oh no, we’re, you know, we’re all out of a job. Clouds going to be sold directly. But the reality is somebody needs to drive that, help drive that flywheel and help marshal that customer through that cycle.

We’ll talk again about programs, but when you build programs, you got to think about how the customer is now looking at outcomes, evaluating technologies, who’s driving the adoption and usage of that technology. And then who’s setting those outcomes when you’re identifying your partners and the types of programs and incentives and enablement that will attract their attention in the process of that lifecycle.

Louis:    Yeh, it’s interesting because I was, one of the recent guests on the podcast — Ian Moyse in the UK — he very much was talking about that he thought cloud was, you know, that the channel was withering because of the cloud. And the company that he’s at now, they all do direct. But I talk to lots of companies and lots of channel leaders like yourself, the vast majority of their businesses is channel, 95 or 100% even. And if they are channel and direct, they usually say that the channel is more cost-effective, higher margin than the direct is.

Michelle:             Yeh, I mean there’s some truth to the statement. You know, if you’re a SaaS business, a traditional linear channel, if I sell you a box to a distributor and the distributor sells, opens the box and add some stuff to it, sells it to a VAR, not even a VAR, a reseller and sells it to the customer. Now that’s not necessarily there for SaaS companies or it’s not there SaaS companies, but for that SaaS company, somebody needs to drive that flywheel. Somebody’s out there servicing that customer, setting customer expectations, defining outcomes, driving adoption and usage. So the traditional channel in that model, yep it’s gone. However, if you’re in an appliance or any type of appliance business and sometimes in the software business, you know there’s still the reality of risk and logistics that somebody has to take care of. And so the channel has added value there.

And I’m amazed by how clever the channel has been in filling those spaces, of understanding outcome-based selling, of starting to measure their businesses on the mix between product and services. So they’re driving their business in the right way around delivering value-added services to their customers. Distribution is even, it’s a longer road for them, but understanding the value they have in the connections amongst ecosystem partners and the types of services they can fill in for their channel customers have been impressive.

Louis:    Yeh. And now you have born in the cloud distributors and all sorts of new models.

Michelle:             Aggregators, yeah. And yep, all of that.

Louis:    You’ve been at Gigamon for about a year and a half and this year, I think in April or so you launched the Catalyst Channel Program. How have those changes in customer buying behavior and buying cycles, how did they impact your channel strategy?

Michelle:             Channel first ultimately is about value and value exchange. The first pillar of our channel strategy is all about making sure that there’s an equal and profitable value exchange between ourselves and our partners. And in doing that you have to look at where the partner is in relation to their customer. And so if you go back to that customer buying cycle, there are some partners that are all on the front end of the deal and their whole job is to go out and find customers and to help define architectures. There are others that provide assessments, there are others that are professional services focused, there are some that do all of those things.

And so we built a program that compensates partners for where we need them in this year, which is really in helping us build this funnel engine. And where we need them to go next year, which is to help own more of the deal. And in doing that we have very, very rich front-end discounts as well as channel initiated deal reg, right? And then on the back end we have rebates and investment funding. So you know, money that we can turn back into their business to help them grow their practice, build out their NFR demo lab for things like leading the deal all the way to close or being services compliant and offering services. So really trying to incent the partner where they are in the opportunity and truly the partner who is able to do most of that life cycle of the deal for now are the ones that will benefit the most.

Louis:    So you are talking about when you’re driving a channel first transition, three tips. And I think this is always key for companies because a lot of times you have, well one of my favorite business books is Good to Great because it’s easy to say, oh this is what great companies look like or this is what great programs look like, but how do you go from here to there? And you had three tips on how to make this transition and really to up the quality of a channel program. The first was focus on value. If you want to talk about that for a few minutes and how the value is different for different parts of a company?

Michelle:  Yeh. And I would extend that to value exchange, right. One of the things I’ve probably learned too late in my career is helping your company, so Gigamon in this case, understand in a very tangible way the value that the channel brings to you, but also the value that you bring to the channel. We all think we have great products and great technology and you know, our customers and partners are just going to die to work with us. But unless you’re selling to the value drivers of that specific partner, that exchange is just not going to be there. And so for me, getting clear with my board, and my executive staff of what our value is and there are things like access, reach, acceleration, building out our ecosystem.

But also then helping my field sales teams and product teams as well understand the value of the channel. What a channel perceives as value and that it’s, they really don’t care so much anymore about the margin that you can give them on the deal. They do care about what that margin adds up to over time. But they’re more about, you know, the stackable margin across that in terms of services, air cover, marketing investment, how easy you are to do business with and those things. So I spend a lot of time internally with the business back-office field sales product, educating and helping folks understand that channel first means value for the partner, not always value for us. Well, it should be a fair and equitable exchange one hopes.

Louis:    Okay. The second one was keep a close eye on where all your stakeholders are in the change process.

Michelle:             So to that point, just talking about making sure the folks internally understand what the definition of Channel First is, which is ultimately channel value, their value. As well as keeping close to your partners and understanding if their drivers have changed right. So if you have a distributor who’s dropped a major line that your product is dependent on, if you don’t know that it’s going to impact your business. If you have a partner who is shifting to entire managed services model and you haven’t built a managed services model, you’re not going to know that. And if you only kind of sell to the transaction and the field sales folks without, you know, engaging your partner stakeholders, principals, practice directors and so on, that’s a challenge.

Louis:    Okay. The third one, the final tip you had was measure and communicate the impact of the change.

Michelle:  Yeh. Getting a clear and agreed definition on what channel value means in terms of a metric that you can share with the business and everybody can point to and agree on what the definition of that metric is or set of metrics is important. When we started here gosh, I think it was called partner initiated, and this is, it’s going to be super tactical for a second, but it’s an example.

We had this metric that was partner initiated and it was flagged by the salesperson at the end of the deal. Retroactive, somewhat subjective and really easy to argue about. People would say all the time, well, yeh, you know, not really a metric that we can trust. And so as we changed the program, we also changed how we recognize the value of our channel initiated metric to be tied to deal reg. And lockdown that process so that only partners can deal reg. And that’s kind of hard to argue that. If the partners the first one to the opportunity, converts that opportunity, it’s clearly channel initiated.

As we go into channel led, we will look at things like who managed the stages of the deal and some key things in a deal are the POC stage or the assessment stage, building the bomb stage, the actual commission of the PO, and we will metric those things. So getting super clear on the definition of success with everybody, getting everyone in the boat so to speak so you can all celebrate it together can help success.

Louis:    You know, it’s interesting I was reading — this is kind of tangential but related to what you were saying in terms of measurements and compensation — I was reading an interview with some of the senior people at The Washington Post who were talking about the changes that happened when Jeff Bezos bought The Post and really changed the culture. And one of the things was the compensation of people became less based on definitive objective measurements and more based on subjective things like how much they were committed to change. And how well they signed on to doing change when the team had agreed this is what they were going to do as opposed to standing in the way of it or being kind of passive-aggressive.

Whereas before Bezos owned it, they had these very objective measures of you know, if we had this kind of growth you are going to get this kind of raise and etcetera, etcetera. And it was kind of interesting that it wasn’t as objectively measured, although he’s obviously someone all about measurements in other areas of his business.

Michelle:  It’s so funny you say that because the metrics get you part of the way there right. So super kind of geeky channel conversation, but I can look at my channel initiated number down to the individual seller. That’s great. I know I have a channel account manager out there that’s 50% channel initiated and more than half of that comes from his most strategic partners. But then when I dig into it a little bit more, say it’s a $10 million number as an example. This is just an example. He’s got 25 transacting partners in that. For an average deal size that’s 150K. That’s a little math that leads me to the subjective conversation of, Hey, have you really adopted this Channel First change? Do you understand the go-to-market transition that the companies making, do you understand the value it is to the company and to your business, your region, your territory.

And do you understand the value drivers of the partners that you’re trying to attract. And that having 25 partners chop and change up your business is probably not super valuable to your most strategic partners. So I think the metrics certainly can be a clear indicator of how we’re doing on the whole and can lead you to the subjective conversation that you have to have. But it is a balance of both. That’s a good point.

Louis:    How well do you think partners are doing in terms of adapting to the new cloud world? What do they need to change? How far along are they? How can you help them at Gigamon to make that transition?

Michelle:  Oh, that’s an interesting question. I think they are adapting to I’m not going to call it a services world because I think there’s both cloud and digital transformation that you have to take into consideration these days. And so many digital transformation places are ending in a converged world, which is you know, just not purely a cloud model. Meaning they’re going to have legacy and hardware environments that you have to deal with. And so I think by and large, the top of the bell curve partners are doing a good job on building out their services capabilities, their value-added, their advisory capabilities and so on.

It’s got to be easier for them to provide a managed service. I think the channel needs to get more skin in the game around providing managed services and more expertise because everybody and their brother plus distribution are coming out with different managed services. Super hard to get out into the channel. What’s the channel’s role in providing some amount of ease of entry into that market, if that makes sense. I think in distribution they’ve just got to go faster. I mean we’re definitely starting to see value coming out of new models of distribution, but they’ve got to be able to execute faster around whether it’s focusing on specific parts of channel enablement or building solutions or applying services. Think speed of execution, and this is around the globe, it’s just got to be faster barring like one or two distributors that I know of.

Louis:    So I’m going to ask you two questions that are kind of variations of questions that I ask when I’m hiring people. First, not just at Gigamon but possibly at other companies too, what’s a channel campaign or a program that you think you were involved with that was especially successful?

Michelle:             So we have just launched and are launching with several distributors around the world some meet in the channel solutions with some of our technology partners. There’s four or five different technology partners, four or five different distributors that are doing that. And the work there is at a corporate perspective and sometimes in the field we sit down with the technology partner, get super clear on what our joint value is to the customer, and build out some of the core assets that you would need around a joint go to market solution you know. With our set of APIs you don’t necessarily need lots of integration work in time. It’s just a solution bill of materials you need to bill out.

And then jointly taking those to distribution and dropping them into our overlapping channels. In our case, we’re also reaching into some of our technology partner channels for some specific target partners to acquire into our business. I’m seeing almost immediate pipeline impact from those sorts of activities. And so we call that meet in the channel, right, Catalyst Meet in the Channel programs. And those have been, they’re not hard to do, take some work, but it’s not real hard to do and provides value for the distributor, provides upsell opportunities for the channel, particularly for where there’s overlap, and then provides new partner acquisition for the distributor. So it’s kind of a win-win all the way around.

Louis:    So that’s helping drive that big increase in channel lead opportunities that you were talking about at the beginning?

Michelle:             Channel initiated yeah

Louis:    Channel initiated, right. Okay. So then the opposite. What’s a channel program or a campaign that wasn’t successful and why do you think that was?

Michelle:             You know, I’ll say what’s hard, what’s always hard is channel enablement. We have some of the best enablement materials I’ve ever seen and complete and some great channel programs that take folks above certification, and into an expert level at a very kind of personal and targeted level. Driving uptake around channel enablement is just hard. And I don’t know that I can say it doesn’t work, but getting it right on how you drive uptake and usage of great programs and content has always been a challenge.

Louis:    So is that enablement around the technology or around marketing, sales? Around what?

Michelle:             So our technical enablement has a little bit better uptake. But I would say it’s across the boat. Right. So, other than sitting down with the principal of the company and walking them through all of the programs and all of the enablement and doing it month in and month out, how do you get organic uptake of enablement? You can point out somebody that says, Yep, I want to give Gig a chance, but until you know walk them through, step them through everything — which is great for the PRM companies (laughs) — but driving uptake in usage internally and externally to me has always been just very laborious. If you don’t do the work there, it’ll be a wasted investment.

Louis:    Yeh. So what should I have asked you that I didn’t? What keeps you up at night?

Michelle:  You know how you changed the hearts and minds of your sellers when you’re going through a channel first transition like this. You know, you’ll have very, very successful salespeople who have never worked a day in their life in the channel and they don’t think they need to. But Channel First, when you’re saying, Hey we are a Channel First company. We go to market through the channel. A third of our business is channel led, requires really everybody to be in that same go to market. And so being able to authentically enable and educate those folks and create valued partnerships for them to drive that change. I spent a lot of time and energy thinking about it down to the individual seller. We’ve got, I don’t know how many sellers do we have 300 people, you know, and there’s a couple dozen that, you know, I think about a lot.

And spend time with my teams, making sure that we’ve got the right internal relationships and also programs and incentives and compensation to make sure that it’s all working for them. You know, fortunately here I’ve got a very supportive board and executive team that are all in as it comes to channel. Other companies it would be, how do I get my CEO onside and would spend an inordinate amount of time and energy to fix that understanding. And for others it’s work worth doing. If you don’t have those folks on side, your job is no fun.

Louis:    So the sellers you’re referring to there, these are internal at Gigamon?

Michelle:  Ah, yes.

Louis:    Right. Okay. Yeh, and I’ve heard obviously this is kind of the classic channel conflict issue. And I’ve heard other companies people have told me about how they had to change their sales compensation and commissions and such so that they, the internal salespeople, understood that they were going to do fine working with the channel and so forth.

Michelle:  Yeh, absolutely. I think another thing that keeps me up at night is that value exchange piece, you know, is the channel as a whole and my individual channel partners receiving the value that I promised them. Because it’s super easy in January to sit here and work with Nick and write a press release and get up at SKO and promise all these things. But to remind yourself and your team that it’s not only about the metrics that you’re showing internally, but what are you, how are you demonstrating to your partners and is it real and authentic that they are providing value? We have partner advisory councils and partner summits and partner roadshows to constantly test that. But yes, that is definitely something that keeps me up.

Louis:    Okay. So how can people contact you if someone wants to talk to you about Gigamon, your channel program, other things?

Michelle:  All of my details are on LinkedIn, so my phone number and my work email are all there if they want to connect me there. I’m a pretty active user on LinkedIn as well as on the Gigamon Catalyst Program website. All of my stuff there is there too.

Louis:    Okay, great. We’ll link to that through the program notes on the revenueassociates.biz website.

Michelle:             Great.

Louis:    So thank you for joining us today, Michelle.

Michelle:             My pleasure. I appreciate the opportunity.

Louis:    As I do with all guests I’ll be sending you a copy of my Bullseye Marketing book in appreciation.

Michelle:             Oh, thank you.

Louis:    And if you’re listening to this on Apple Podcast, Google, Spotify or another app, and you found the podcast interesting and useful, please leave a review that will help other people learn about the podcast too.

Thank you for listening to the Software Channel Partner Podcast, and please subscribe and listen to future episodes.