Red Hat Reveals Major Changes to Channel Strategy

The Red Hat channel is going through “fundamental changes”; therefore, partners will soon see a different strategy in how the company engages with them.

So says David Farrell, SVP of global strategic alliances at Red Hat. He says the company is shifting to a channel strategy based on co-creation with partners.

Red Hat’s David Farrell

Farrell maintains that distribution, and the value-add it provides, remains critical to Red Hat’s channel plans. However, it is “moving away from a distribution-oriented mindset that leverages the ecosystem for scale,” he said. “Red Hat has been making significant investments in how we engage with partners prior to them developing their own solutions. An example would be what we’ve done with Accenture and SAP running on our Red Hat stack. It’s looking at a market opportunity and bringing in people from our product development organization. We’re putting resources into our partners to help co create a solution with them.”

Farrell said the move was reflected in “a lot more headcount and investment dollars.”

“We didn’t used to do that, just to be quite honest,” he said. “It was, ‘Here’s our technology, here’s a support line, here are a few engineers to help you out. Good luck with it.’ Now it is much more around, ‘What’s the opportunity? How do we build new capability together?’”

From Selling To, to Selling With Partners

The second area of investment focuses on how Red Hat sells with partners. Farrell said the vendor is moving from selling to – or through – partners, to selling alongside them.

“This ‘sell with’ motion around go-to-market is an area we’re really investing in,” he said. “This year, we have stood up dedicated teams in each one of our geographies around the world. Our sell-with people are targeted on the success of our partners’ solution in their given marketplace. Working not only with our sales teams, but with partners and other ecosystem partners, to help them win.”

Farrell also said Red Hat has changed its incentives to reflect this new sales model.

“We made two changes to our field incentive model at the top of the year to motivate co-sell with our partners. For our global ISV program, we’ve established a landing credit compensation model. When one of our ISV partners lands their solution at a customer, and when they’re embedding Red Hat technology, we pay our local sales team to be there. They help explain the technology … provide the technical resource they may need, the expertise, the road map, whatever they may need. Field sellers are motivated to help ISV partners that adopt our technology to go land at their customer.”

Red Hat aimed its second incentive at its top premier and advanced partners.

“We have an acceleration bonus, so the Red Hat field team earns more when they sell Red Hat technology with a partner. We’re seeing some other folks in the industry do this. You have to be thoughtful about these things, because we have a lot of partners in our ecosystem. And you want to make sure that the sales team is adding value. So, we’ve got some lightweight process around that.

“But these were two big things that our partners are asking us for — ‘Help me get to market and scale my solution.’ And having that pull motion coming from the thousands of Red Hatters that are helping to position our partners’ solutions to customers.”

The exec says the landscape has changed and that the bar is higher now for what partners are looking for from the vendor.

“It’s more than just MDF,” he said. “It’s more than just kind of those classic things that we’ve all done in the channel. Now it’s about value creation, and that’s really where we’re focused.”

Farrell estimated it does about 75% of its business with or though partners.

New Managed Cloud Services

Farrell was speaking at the launch of Red Hat Summit 2021 Tuesday. He said the company geared many of its product announcements this week around DevSecOps, the edge, hybrid cloud and managed services.

For example, Red Hat announced the expansion of its open hybrid cloud technology portfolio with new managed cloud services. The services now include Red Hat OpenShift API Management, Red Hat OpenShift Streams for Apache Kafka and Red Hat OpenShift Data Science. These “deliver a fully managed and streamlined user experience as organizations build, deploy, manage and scale cloud-native applications across hybrid environments.”