The VAR Guy

Memo to Ford, GM and Chrysler: Follow Cisco CEO’s Lead

The VAR Guy — Fri, 21 Nov 2008 01:48:09 +0000

During the dot-com implosion, Cisco Systems CEO John Chambers took an unusual step that set the tone for appropriate, responsible executive leadership during bad economic times. Now, the executive leadership at Ford, General Motors and Chrysler should follow the example Chambers set back in 2002. Here’s why.

Amid the dot-com fallout, Chambers received a $1 salary in 2002. That’s right: One dollar. Chambers also declined his bonus and gave back 2 million in stock options that year, according to CNet.

Alas, auto industry executives haven’t set a similar example.

GM CEO Compensation

According to The Wall Street Journal:

“GM CEO Rick Wagoner got “a 33% raise for 2008 and equity compensation of at least $1.68 million for his performance in 2007, a year for which the auto maker reported a loss of $38.7 billion. The salary increase puts Mr. Wagoner’s salary for this year at $2.2 million, compared with $1.65 million in 2007.”

Moreover:

Mr. Wagoner was awarded 75,000 restricted stock units valued at $1.68 million, based on GM’s closing stock price in March. He was also given stock options representing 500,000 shares.

GM told the Journal that Wagoner’s total compensation is down sharply from $8.3 million in 2006.

The VAR Guy’s take: Yada, yada, yada. Why is this guy still running GM when the company is on the brink of collapse?

Ford CEO Compensation

According to the Journal, Ford CEO Alan Mulally received $2 million in base salary, a $4 million bonus and more than $11 million of stock and options in 2007. His base salary was unchanged over 2006. Mr. Mulally has earned nearly $50 million in compensation since taking the helm of the auto maker, according to The Wall Street Journal.

The VAR Guy’s Take: Sounds like Mulally runs Ford about as well as Ford runs the Detroit Lions. Pathetic. Somebody sack this guy.

Chrysler CEO Compensation

Less is known about Robert Nardelli’s CEO package at Chrysler LLC because the auto maker is privately held. The VAR Guy’s Take: Somebody dial Lee Iacocca. Fast.

The Bottom Line

The VAR Guy doesn’t know much about the auto industry, but the situation is pathetic. According to the Associated Press:

“The leaders of the Big Three automakers have painted a grim picture of their financial position. They burned through nearly $18 billion in cash reserves during the last quarter — about $7 billion at GM, almost $8 billion at Ford and $3 billion at Chrysler. GM and Chrysler have said they could collapse in weeks.”

If Chambers was running one of those companies, he would have declined his paycheck months ago.

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Recap: Top 10 Managed Services Stories of the Week

The VAR Guy — Thu, 20 Nov 2008 19:32:27 +0000

The VAR Guy’s sister site — MSPmentor — offers non-stop coverage of the managed services market, where more and more VARs are generating recurring monthly revenue from customers. Here’s a look at the top 10 stories making headlines on MSPmentor this week.

Red Hat Finds 250 Ways to Push Beyond Linux

The VAR Guy — Thu, 20 Nov 2008 19:14:16 +0000

Repeat after The VAR Guy: Old software strategies — developed in the 1980s and 1990s — DO work in the emerging IT channel for open source solutions. Skeptical? Here are 250 ways Red Hat successfully pushed beyond Linux to promote open source middleware to customers.

Fact is, Red Hat is leveraging Microsoft’s oldest secret to success: Before you pursue customers, you need to evangelize your products and development tools to ISVs (independent software vendors). That strategy created platform demand for Microsoft Windows, Red Hat Enterprise Linux, Oracle’s database, and so on.

Now, Red Hat seems to be repeating that success in the open source middleware market, where the company has recruited 250 partners into the JBoss Certified ISV Program. According to Red Hat, the ISV program is:

“a fully-integrated component of the Red Hat Partner Program, will deliver software, support and cooperative sales and marketing benefits to independent software vendors that integrate their applications with industry-leading JBoss Enterprise platforms and frameworks.”

Some quick facts to note: Nearly 60 percent of Red Hat’s revenue comes through channel partners, and integrators that focus on JBoss typically make more than $10 in consulting services for every dollar they generate in JBoss software sales.

Red Hat isn’t the only open source company building a strong partner channel. The VAR Guy will publish a list of the top 50 channel-focused open source companies in December.

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Ubuntu Server Edition: Canonical’s Big Challenge

The VAR Guy — Wed, 19 Nov 2008 16:16:11 +0000

On desktops and Netbooks, it has been a stellar year for Canonical’s Ubuntu Linux distribution. But on the server, Ubuntu continues to face long-term challenges in terms of application and vendor support. Here’s the scoop from The VAR Guy.

First, let’s be clear: The VAR Guy isn’t pressing the panic button. It will take several years for Canonical to build a business around Ubuntu Server Edition. The effort will require an ecosystem of independent software vendors (ISVs), server hardware makers and VARs.

Remember: It took Microsoft roughly four years to build a decent ecosystem around Windows NT Server, which originally launched in 1993 but didn’t gain much traction until 1996 or 1997.

Now that The VAR Guy has set some expectations, it’s time to offer some key observations.

Server Partnerships: Sure, Sun Microsystems certifies Ubuntu for its server hardware. But trying to get Sun to talk about its Ubuntu Server strategy is like pulling teeth. Fact is, Sun is dealing with massive layoffs and doesn’t have much info to share about how it plans to promote and sell servers with Ubuntu. Other potential partners like Dell continue to take a wait-and-see attitude with Ubuntu Server Edition.
ISVs: During LinuxWorld Expo in August, numerous ISVs stepped up and announced support for Ubuntu Server Edition. But sources say many of those ISVs will be late to market with native Ubuntu server applications. One prime example: Sources at Openbravo, the open source ERP and POS specialist, confirm that the company has been busy with a range of deadlines and is behind schedule on the Ubuntu efforts.
Resellers and VARs: Very few solutions providers even know about Ubuntu Server Edition.
Rivals: Red Hat is entrenched on the server and Novell is now striving to migrate those Red Hat customers over to SUSE Linux. Novell has no such plans to target Ubuntu because Canonical has such a small footprint in the server market.
Other Priorities: Canonical deserves huge credit for helping to fuel the Netbook (sub-notebook) craze. Even Dell has been advertising Ubuntu-based Netbooks for the holiday season. But The VAR Guy thinks Canonical is stretched too thin — focusing on mobile internet devices (MIDs), Netbooks, desktops, servers and a range of other efforts. As a result, the server push may take even longer than expected.

Look Who’s Running Ubuntu

Time to give up on Ubuntu Server Edition? Certainly not. The VAR Guy’s sister site, called Works With U, is developing a massive list of businesses across the globe running Ubuntu Server and Desktop Editions. Check out the Works With U 1000 for a look at the list.

But keep your expectations for Ubuntu Server Edition under control. Building out that business is going to take years — rather than months.

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ADTRAN to Network VARs: Hardware Profit Margins Await You

The VAR Guy — Wed, 19 Nov 2008 00:08:35 +0000

Time for a surprising reality check from The VAR Guy. Conventional wisdom says there’s no margin left for VARs in hardware sales. But Pulse Inc. — a $10 million solutions provider that works closely with ADTRAN Inc. — strongly disagrees. Here’s why.

Pulse doesn’t have much interest in the services space. Instead, the company drives much of its business by reselling ADTRAN’s networking gear and collecting the profit margins, according to Pulse President Salvatore Costantino.

Pulse isn’t alone. ADTRAN has attracted more than 500 new solutions providers to the company’s partner program this year, and that one-year increase should approach 600 new partners before the end of 2008, predicts Ted Cole, VP of ADTRAN’s US channel for enterprise sales.

Secret Sauce

So, why are partners flocking to ADTRAN? Here are a few thoughts:

Product margins: A few folks tell The VAR Guy that top ADTRAN solutions providers can make 20% (or more…) margin on the company’s VoIP, Ethernet and routing hardware.
Filling A Niche: ADTRAN’s product positioning is pretty simple. The company doesn’t intend to compete head-on with Cisco in the network core. Instead, ADTRAN targets small and midsize businesses, and promotes edge networking gear that typically costs less than Cisco’s products. (Ironically, ADTRAN is succeeding where 3Com failed miserably in the late 1990s.)
Southern Hospitality: Visit ADTRAN’s headquarters in Huntsville, Alabama, and you get a feel for a company that focuses all of its efforts on customer service. And all of ADTRAN’s business customers essentially are VARs.
Purely Channel: That’s right. ADTRAN has no direct sales force, and ADTRAN only works through partners to sell into enterprises.
Managed Services Upsell: Cole says roughly 40 percent of ADTRAN’s US enterprise sales involve managed service providers (MSPs). The VAR Guy is tempted to say more about the MSP topic, but his lips are sealed — at least for a few more weeks.

Let’s Not Bury Cisco

Okay, so ADTRAN is having success in the SMB space, and CEO Tom Stanton says the weak economy has forced businesses to seek lower-cost alternatives to Cisco.

But even the ADTRAN folks keep the company’s market position in perspective. Cole notes that ADTRAN is roughly one-eightieth (1/80) the size of Cisco.

Anyone who predicts ADTRAN can somehow topple Cisco needs to double-check their facts (and find new industry sources).

However, it’s clear ADTRAN has carved out a niche for itself. Why else would nearly 600 new solutions providers jump on the ADTRAN bandwagon this year?

The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS and Twitter feed.

ADTRAN And Digium Asterisk: Rivals or Close Cousins?

The VAR Guy — Tue, 18 Nov 2008 16:12:24 +0000

It’s no secret that Digium (the poster child for Asterisk) has multiple employees who previously worked at ADTRAN, a neighboring networking company in Huntsville, Alabama. Are ADTRAN and Digium rivals or partners? The answer: A little of both.

Sure, some folks may tell you that ADTRAN and Digium compete for IT talent in Huntsville. In fact, Digium’s executive team includes multiple ADTRAN veterans. And as more and more customers kick the tires on open source Asterisk solutions, it could create new competition for traditional VoIP solutions sold by ADTRAN, Cisco and other traditional networking firms.

Friends or Foes?

The press loves to play up potential friction between ADTRAN and Digium. But during a visit to ADTRAN’s headquarters today, The VAR Guy heard from a key ADTRAN customer that has built a mixed network using ADTRAN and Digium solutions.

Moreover, ADTRAN described how the company’s R&D team continues to test product integration with Digium’s offerings as part of a strategy to maintain strong connectivity with third-party products.

The VAR Guy needs to check in with Digium for their perspective on the ADTRAN relationship.

The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS and Twitter feed.

The Land of Free WiFi: Huntsville, Alabama

The VAR Guy — Tue, 18 Nov 2008 15:57:28 +0000

The VAR Guy is impressed with Tom Perry. As the head of IT for the Huntsville (Alabama) airport, Perry made a strategic decision. Instead of launching a paid WiFi service, he built a free WiFi network for travelers. Here’s why.

During the typical trip, business travelers are forced to pay for WiFi access across multiple hotels and airports. The process can be frustrating and expensive — as we all know.

Perry’s goal, in stark contrast, was to give travelers a “great first impression” or “last impression” with Huntsville as a technology center.

Huntsville is home to NASA’s Marshall Space Flight Center (7,200 employees), ADTRAN (the networking company, 1,700 employees) and other tech-oriented organizations.

Not by coincidence, Perry leveraged ADTRAN WiFi solutions to build the airport’s wireless network. The VAR Guy plans to give it a try before his flight home Wednesday.

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Who Is ADTRAN CEO Tom Stanton?

The VAR Guy — Tue, 18 Nov 2008 14:46:16 +0000

Quick, describe ADTRAN CEO Tom Stanton (pictured). Chances are you’re silent. The VAR Guy has spent nearly two decades covering the networking industry. He knows quite a bit about ADTRAN and its SMB networking strategy. But our resident blogger must concede: He’s never met Stanton — until today. Here’s the scoop from Stanton, and his vision for ADTRAN partners.

ADTRAN has spent the past two years developing and introducing more than 60 products, notes Stanton. The 1700-person company offers a range of Ethernet, switching, routing, VoIP and other gear for SMBs, enterprises and carriers.

Instead of inviting media to the company — again and again — for each product launch, ADTRAN held off, says Stanton.

Ultimately, the company wanted to have a higher-level discussion — mixing media with customers and partners — at ADTRAN’s headquarters in Huntsville, Alabama. That discussion started last night and continues through Wednesday.

Good News, Bad News

Stanton sees plenty of opportunity for ADTRAN. But he also sees a key problem: lack of brand and name recognition.

“Our win rate is close to 70 percent when we’re on the shortlist of vendors considered,” said Stanton. “But our challenge is we’re only involved in 1o percent of [networking business proposals].”

Instead of focusing on speeds and feeds — where new routers and switches from multiple companies can constantly leapfrog one another — ADTRAN is focusing on customer usability, service and support. “It’s tough [for rivals] to shift from first gear to fourth gear in usability,” says Stanton. “That’s a sustainable advantage for us.”

On the support front, ADTRAN treats customer support with one thought in mind: “You need to always assume it’s your fault when your customer support phone lines ring,” says Stanton. “We have the industry leading warranty program and we offer free bug fixes and I think that sets us apart.”

More thoughts from Stanton and ADTRAN to follow later today and Wednesday.

The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS and Twitter feed.

Dell’s Linux Ads: Microsoft’s Nightmare Before Christmas?

The VAR Guy — Mon, 17 Nov 2008 06:14:21 +0000

For at least the third time in recent weeks, prominent Dell newspaper advertisements feature the Inspiron Mini 9 Netbook running Canonical’s Ubuntu 8.04 (that’s a small Linux notebook, folks). The VAR Guy hears Microsoft “has gone postal” over the Linux notebook ads. You might even say this is Microsoft’s nightmare before Christmas. Here’s the complete scoop.

The VAR Guy first noticed Dell’s newspaper inserts featuring the Inspiron Mini 9 running Ubuntu in October. Different versions of the ad seem to arrive at The VAR Guy’s front door each Sunday. The latest Ubuntu Netbook ad was part of a Dell multi-page insert that shipped with Newsday (Long Island’s largest newspaper) on Nov. 16.

Here’s a look at the ad (the Linux Netbook is on top; the Windows XP Netbook is below). And The VAR Guy’s pithy blog continues below — including Microsoft’s alleged reaction.

Redmond Roars

At $349, Dell’s low-cost Ubuntu Linux system is “giving Microsoft fits,” according to one source familiar with the Microsoft-Dell relationship. “It’s one thing to have Dell ship Linux to consumers,” said the source. “It’s quite another to have Dell advertising Linux to millions of consumers in a Sunday newspaper heading into the holiday season.”

The VAR Guy has already explained why Linux Netbooks are impacting Microsoft Windows sales and profits. And don’t forget: More and more businesses are running Ubuntu on selected desktops and servers. Check out the Works With U 1000 — which tracks Ubuntu business deployments worldwide — for details.

For the record, Dell’s multi-page ad was filled with Windows Vista and Windows XP systems. But that one little Linux Netbook ad shows big changes are under way in the PC market, The VAR Guy believes.

The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS and Twitter feed.

ADTRAN: Living (And Growing) In Cisco’s Shadow?

The VAR Guy — Mon, 17 Nov 2008 06:00:46 +0000

Somewhere between Cisco Systems and disruptive startups like Digium, there is a wasteland of networking companies that tried — and failed — to compete against Cisco. Still, a few nimble firms carve out solid networking niches for themselves. The VAR Guy will spend Nov. 17 through 19 with one such company: ADTRAN Inc. Here are four key issues he expects to explore during the visit.

1. Living (And Growing) In Cisco’s Shadow: Take a look at this list of companies Cisco has buried in recent years. How has ADTRAN maintained growth in an industry filled with so many business casualties or Cisco acquisitions? Some answers will emerge this week.

2. ADTRAN Financials: It has been a month since ADTRAN announced quarterly results. Those results met Wall Street’s expectations but the company’s outlook scared some investors.

Alas, the economic crisis has grown worse in recent weeks, so The VAR Guy wonders if the financial mood around ADTRAN has changed. This isn’t a financial conference. But The VAR Guy will ask a few dollars and cents questions.

3. Telecom Business: A lot of channel folks focus mostly on ADTRAN’s network equipment sales to businesses. But The VAR Guy wants to hear more about ADTRAN’s work with telecom and broadband service providers. While big service providers hype fiber broadband, ADTRAN continues to push Ethernet over Copper. Are customers showing interest?

4. Managed Services: The VAR Guy has noticed ADTRAN sponsoring MSPAlliance conferences in recent months. The MSPAlliance serves managed service providers — which are VARs and integrators that remotely manage customer networks. By hanging out MSPAlliance events, ADTRAN seems to be researching that market … …

It’s nearly time for The VAR Guy’s trip to ADTRAN. He’ll be back online later today with more perspectives.

Full Disclosure: ADTRAN is covering The VAR Guy’s travel costs to the company’s “Get REAL” event in Huntsville, Alabama. (How else do you think an anonymous blogger can afford to live on the road?) If you think the paid travel impacts The VAR Guy’s objectivity, post a comment and explain where our resident blogger missed the mark with his ADTRAN coverage.

The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS and Twitter feed.

Meet the IT Channel’s Top 50 Open Source Companies

The VAR Guy — Tue, 30 Nov 1999 05:00:00 +0000

Open source operating systems, applications and middleware continue to disrupt and infiltrate the IT channel. But which open source companies are truly committed to VARs, solutions providers and managed service providers? You’ll find out in December when The VAR Guy unveils The Open 50: the top companies — from across the world — building the open source channel.

CA World 2008: Not the Same Old Computer Associates

The VAR Guy — Mon, 17 Nov 2008 03:46:38 +0000

CA Inc. (formerly Computer Associates International) is in Las Vegas this week, hosting its CA World partner and customer conference. It’s an opportune time for The VAR Guy to ask: Can partners trust this latest iteration of CA — which includes a new managed services and SaaS (software as a service) push? The VAR Guy sure seems to think so. Here’s why.

First, a little history. The VAR Guy thinks CA is in its third generation as a company. During CA 1.0, company co-founder Charles Wang built Computer Associates into a leading mainframe software provider through home-grown applications as well as mergers and acquisitions.

In CA 2.0, Wang gradually handed leadership to Sanjay Kumar. In case you missed it, that error (oops, era) had a tragic ending involving accounting scandals and Kumar going to jail.

CA 3.0: Swainson, SaaS and Managed Services

In CA 3.0, current CEO John Swainson (an IBM veteran) has gradually restored CA’s credibility with Wall Street, customers and partners. In particular, Swainson certainly seems to have earned Wall Street’s trust.

At CAWorld, the company showed some channel loyalty by launching an on demand disaster recovery service that’s only available through partners. The CA Instant Recovery On Demand service could allow CA to compete more effectively against a range of fast-growing online storage services — including the Symantec Protection Network.

Still, The VAR Guy isn’t suggesting CA is fully repaired. CA’s direct sales force spent nearly three decades practicing aggressive tactics that rubbed some customers and partners the wrong way. (How’s that for a tactfully written sentence about the old CA?)

Changing CA’s DNA has required Swainson’s tireless efforts. So far, so good.

The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS and Twitter feed.