Channel Marred

“Wall Street” character Gordon Gecko said in the 1987 film, “Greed is good.” Well, there’s plenty of greed to talk about this week in Channel-Lands. We have bad (and illegal) behavior revealed and a major bidding war to acquire a storage vendor. Not all the news is bad: we also get to celebrate stellar vendor performance and tips for building innovative businesses.

Poor Ethics and Bad Behavior

No industry is immune from greed and corruption. Even the channel has its bad apples. CRN isn’t just calling out those bad apples, but calling upon the industry to create and adopt a code of ethics.

In its report, “VARs Behaving Badly,” the CRN team recounts several cases of mischief, corporate espionage and fraud undertaken by solution providers in the pursuit of (we suspect) riches. Most notably in the report is the recently-settled courtroom clash of two VAR 500 companies – Technology Integration Group and Fusion Storm. TIG won an $11 million judgment against rival FusionStorm, which the court found engaged in deceptive practices and corporate espionage. A FusionStorm branch office didn’t just recruit TIG employees to its ranks, but got TIG employees to work for them while remaining on the TIG payroll.

But the CRN report goes much deeper, recording recent incidents of solution providers engaged in violations of non-compete and non-recruitment clauses, selling counterfeit goods, passing off used gear as new and lying about the financial stability of competitors. Several solution providers quoted in the report blamed the poor economy driving struggling solution providers to engage in unethical practices.

Perhaps the economy has something to do with bad behavior, but the truth is there are numerous cases of VARs failing to live up to high moral and ethical practices, deceiving their customers and partners, and taking shortcuts to profits. A troll through the CRN archives would find about an equal number of known cases each year for as far back as you could go. The CRN report focused solely on the solution provider community; it didn’t even touch the vendors and distributor cases of contract violations, deliberate channel conflict and compromise, and failure to provide equitable support to their channel partners. As far as anti-competitive hiring goes, no one does this better than vendors (remember HP and Lexmark’s famous 2007 battle over Scott Dunshire, who went to work for HP despite his Lexmark non-compete agreement?).

A channel code of ethics isn’t a bad idea, and CRN has proposed a standard that prohibits uttering falsehoods about competitors, poaching salespeople from rivals and stealing active accounts. Several groups besides CRN have or are working on such standards. CompTIA’s IT Security Special Interest Group has a working draft of a code of ethics for security professionals. And Technology Channel Association already has code of ethics that’s very similar to what’s proposed by CompTIA and CRN.

Do we need a channel code of ethics? Sound off and let us know what you think.

HP and Dell Battle over 3Par

Is storage really that hot to spark a bidding war over 3Par, a cloud storage specialist? Dell announced a $1.15 billion offer to acquire 3Par, and it looked like that deal would go through with no problems. That was until Hewlett-Packard chimed in with a counteroffer of $1.5 billion. Not to be outdone, Dell countered with a $1.6 billion bid. HP responded with a $1.8 billion claim. And hours later, Dell matched the HP offer, believing that the 3Par board would stick to the original deal.

It’s amazing to see a bidding war unfold this way. It’s a reflection of the depressed valuations of some companies caused by the recession, the nonstop generation of data that needs to be stored and the need of large vendors to acquire their way to growth. The issue that often comes to mind during these M&A battle royals is what happens to the channel in the process. Integrating channel programs following an acquisition often takes years, and very few fold together with easy.

Just based on this latest HP-Dell clash, we can expect to see more mega deals unfold that will have direct and indirect implications for the channel. Hit save on this – there’s much more to come.

And the Winners Are…

Everything Channel anointed this year’s class of high performers in its Annual Report Card awards. The actual analytics of the ARC study of partner satisfaction with vendor channel performance won’t be available until October, but they did distribute trophies to the cream of the crop at the XChange Americas confab earlier this week. The big winners include Sophos, Kaspersky Lab, Microsoft, Oracle, IBM, Dell and many more. Check out the full list of winners at CRN.com .

Sustain, Innovate and Grow

Many solution providers I speak with lament about the challenges of maintaining business operations and initiating growth. It’s a tricky equation and often difficult to pull off, especially when you have limited resources. MSP Mentor’s Joe Panettieri had a really interesting piece this week called “Balancing Innovation with Sustained Growth.” His tips include sticking to your roots, thinking in quarters (time periods), delegating tasks and not building from scratch. Panettieri provides some sage advice in this blog post. It’s worth checking out.

To signify the importance of innovation, I’ll complement Panettieri blog with my own from Channelnomics: “Does VAR Mean ‘Value at Risk’?”. In this blog post, I ask the question as to whether the channel is at risk of being disintermediated if it doesn’t innovate. Too often, I hear solution providers talk about their inability to innovate or change their business models. Worse, they defer that responsibility to vendors, hoping that vendor innovation will trickle down to them. It’s a bad position.

Finally, Channel Insider contributor Dave Sobel mused this week about the rise of the virtual solution provider. No, he’s not talking about virtualization, but rather solution providers that don’t have staff, infrastructure or overhead. He’s right. You can outsource or contract just about anything nowadays – OnForce has built its entire business model on that principle. It’s some interesting ideas he proposes in his column.

Last Call

Well, that’s all the week’s news from Channel-Lands where all the technology works, all the deals are profitable and all of the companies are above average. If you want to follow me on Facebook or Twitter – feel free to connect. Share your suggestions and news with me at lmwalsh@the2112group.com.