In the Aftermath

Robert Simpson worried when he learned last year that EMC was acquiring RSA Security. Simpson's company, a solution provider and RSA partner, had some doubts about whether EMC would have the ability to properly integrate RSA's solutions, channel programs and services.

So far, Simpson, who is vice president and chief technology officer at Systems Design Group in Lexington, Ky., is pleased. "I've been reassured many times by my channel [contact] that they are very interested in having RSA help them establish an SMB [small and midsize business] channel presence," he said.

Simpson is among the thousands of channel executives who over the years have had no choice but to cope with the constant pattern of mergers and acquisitions among their vendors. To some extent, solution providers say they have become numb, but when a transaction involves one of their primary vendor partners, it's impossible not to fret. Some have good results, but not all. Adam Gray, CTO at Novacoast, a VAR in Santa Barbara, Calif., said, "[CA] is a company that acquires companies and then doesn't know what to do with them. We can go back over a decade, and I don't think they've gotten one right."

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Such was not the case when Symantec bought Veritas in 2005, said Gray, who added he was able to leverage the acquisition into new sales opportunities. "[Symantec knows] what it takes to acquire a company and fold it into the channel," said Gray.

As a result of the vendor's string of acquisitions in recent years, Novacoast managed to further extend its focus on security and risk management through new skills and new certifications.

Uncertainty, fear of conflict, concern about losing mind share and a host of other worries crossed the mind of Laurie Benson, CEO of Inacom Information Systems, in Madison, Wis. "There are always implications, both positive and negative," Benson said. Hewlett-Packard did a good job of communicating with its partners, said Benson, mitigating the potential problems through clear direction and notification.

Through the entire process, HP, which had rocked its channel a few years earlier with a direct-selling initiative in an effort to beat Dell at its own game, maintained its commitment to partners, Benson said.

"They know the only way for them to grow is through the small and medium [business] market, and that's only possible through partners," said Benson. "I thought the communication was good. They know you can't miss a beat and not deliver to partners."

Mix and match

Vendors cross-pollinate the industry, acquiring competitors, other vendors with complementary products, and, in some cases, channel partners, in an ongoing quest for profitability and market share.

Telecommunications and IT M&A deals for January through November of 2006 totaled $405 billion, up from $361 billion in 2005, according to the 451 Group, an IT research company. This year will prove equally—if not even more—active, the 451 Group predicts.

"The frequency and the deals and the scope of the acquisitive activity have never been greater," said Benson. "This is a logical way for vendors to stay relevant and move quickly."

Over the past several years, IBM, Cisco Systems, Microsoft, Symantec, EMC and Oracle—to name only a handful of the headline-making shoppers—have acquired multiple businesses. While their acquisition targets have been varied, these channel-oriented vendors face the challenge of keeping current and new partners content and dealing with possible conflicts over product discounts, geographies, account ownership and corporate mind share.

Alienating partners can quickly turn a good deal sour, said Glover Lawrence, a principal at McNamee Lawrence & Co., a 5-year-old Boston-based investment company specializing in IT businesses. "There is no way to kill revenue as quickly as alienating your third-party service providers," Lawrence said. "It won't take VARs long to find someone else. They will find somebody else."

Fortunately for partners, an acquisition's indirect channel is seen as one of its assets at a time when many vendors realize the channel plays a valuable role, not only in the enterprise but also in the giant and profitable SMB market.

"It's not a question anymore about whether a solution provider is part of the equation," said Benson. "That question's completely off the table."

Next Page: Bidding goodbye