Ivanti Exec Says Despite Direct Sales Shift, Partners Remain Strategic

Ivanti’s plan to shift to a direct sales model for software and renewals of license and maintenance agreements is a controversial move, but one that the company’s new management team believes will be key to growth moving forward. The pivot to direct sales is the consequence of a complete management overall that resulted in Infor founder and former CEO Jim Schaper replacing Steve Daley as Ivanti’s chief executive.

In addition to shifting its go-to-market model starting on April 1, Ivanti is signaling that it is seeking merger and acquisition opportunities with help from its backer, private equity firm Clearlake Capital. While there are numerous new faces in Ivanti’s executive suite, five-year company veteran Mitch Rowe leads global sales for the company as executive vice president. Rowe discussed the new go-to-market strategy with Channel Futures and what it will mean for partners.

Channel Futures: What has precipitated this overhaul?

Ivanti’s Mitch Rowe

Mitch Rowe: We’re three years into the life together with Clearlake Capital as the investor, which at the time of the merger with LANDesk, owned Heat Software. When we rebranded into Ivanti, we clearly had some very bullish aspirational expectations of the business. I would suggest we’ve not executed as quickly as they would like in terms of top-line growth. With the addition of Jim Schaper to the business back in September, they saw an opportunity to change some areas. Clearlake is a very responsible investor and they’ve also just raised a new $7 billion fund. Clearlake is still very bullish about Ivanti and sees Ivanti as a platform play with a good structure for bringing on additional M&A activities.

CF: How did that result in the changing of the partner model?

MR: As we merged the companies — and it really was a merger even though the entire executive team came across with LANDesk — there was a consolidation. It was a roll-up play. We were all over the place on the pipeline and on the technology side, so we had to rationalize our go-forward plan. And part of that rationalization plan was getting all partners from Heat and all partners from LANDesk onto one partner program. I would suggest that as we went through that three years ago, we took the approach with partners similarly, as we did with employees and with resellers, which was we wanted to retain everybody. As you know, with a merger and acquisition and certainly a consolidation play, it’s impossible to retain everybody. In fact, it’s not even good business to retain everybody.

CF: In retrospect, was that a mistake?

MR: I’d suggest that we were flawed in our approach on the channel side and I’m the first one to raise my hand. My fingerprints were all over that to get the Heat partners on the same partner program and on the same page as the LANDesk partners. Part of that meant the Heat business was doing renewals directly, while at LANDesk, we were doing renewals through and with partners and resellers. So, I would suggest we either miscalculated or we went in a direction that we later realized we could have done better. We tried to maintain every single partner, but the reality was there were a lot of partners that were still hanging on. They were still doing business with us, but it was more of an opportunistic relationship. It wasn’t strategic for them. It wasn’t strategic for us. And at the end of the day, it wasn’t strategic for some of the customers. So, starting about six months ago, we really started to …

… dig into our overall partner strategy. We’ve always been very channel friendly: lead with partners and lead with resellers. And we still have a good segment of the business that is very channel-centric. But there’s also the realization that we’ve got to be very, very strategic and deliberate about which partners we want to double down with. They need to be partners that are very, very relevant to the spaces we compete. That means they have to be relevant with the customers, the install base. We’ve got to fit in well with their business strategy and they have to fit in well with our business strategy.

CF: What is the new partner strategy for Ivanti?

MR: We’re going live with the 2020 partner program on April 1. Essentially what we’re doing with most of our expert solution providers, which we call ESPs, is transitioning from a reseller model to what is called two-party gross contract, or 2PG. Partners get market development funds based upon their partner tiering. Our Platinum partners will get x percentage of points, which really translates now in this to 2PG model into a commission model, if you will. In a two-party gross contract, the paper’s on Ivanti paper and the partner is recognized for their collaboration within the deal. We certainly look at deal registration, at where the relationship is relevant, and we look at partners that are doing the technical part of the presales work. Make no mistake, partners are very, very strategic to our go-forward business. They remain that way. What you’re going to see though, is we had over 4,000 partners of record around the world. But really about 450 of those partners were responsible for 80% to 90% of the business we were doing with partners. We had those hangers-on, laggards, opportunistic partners that we weren’t necessarily relevant to anymore. More importantly, in our focus around customers, we want to make sure that our partner programs and go-to-market strategy and how we interact with our customers, both directly as well as indirectly with partners, are strategic and relevant for the well-being of the Ivanti customers.

CF: How do these changes affect those that want to do renewals?

MR: There are a lot of stakeholders involved: customers, our investors, our board of directors and our management team. We realized that we had become a little bit more distant from our customers than what we wanted to be. We were not as involved in that renewal discussion and we determined that we need to manage that more directly, be more hands-on. What that means net-net is that over half of our revenue as a company is recurring, either maintenance renewals or subscription SaaS renewals. And historically 90% of those renewals have been going with and through partners on their paper. And that that has a cost associated with it in the form of margin, if you will. And the reality is there are many, many partners that we will still do renewals with.

CF: Which partners will you continue to allow to continue offering renewals?

MR: Areas where we do not have direct head count investment or direct head count in the field, such as the Middle East, Latin America, Eastern Europe. South Africa and a few other areas in APAC. We will continue to transact with those partners, retain those partners in a resale model, really no change. Those partners will still maintain …

… the annuity opportunity, the renewal opportunity directly with customers. Where it is changing is in our core geographies where we do have field sellers, as well as CSMs, renewal reps, customer support, etc., where we’re choosing to manage that renewal opportunity directly. One other outlier would be public sector, certainly in the fed space. We have identified Carahsoft that will own the renewal opportunity in the public sector. There are also within our ESPs, those partner relationships, contracts obligation agreements, that they will continue to maintain some of those renewal opportunities with state and local agencies, municipalities that require it based upon the contractual terms.

CF: What are the benefits you hope this shift will offer?

MR: We want to be close to our customers and part of that is better understanding their needs on an ongoing basis. On the support side, are we fulfilling their needs? What types of changes have they had in terms of any acquisitions? Divestitures? What does their IT landscape look like? Are we fulfilling their needs? What types of opportunities are there for us to get more strategically relevant with them? We believe that it is very important for us to get involved directly with those customers, stay relevant so we can continue to drive value to the customer base. Another motivation, and we won’t be shy about it, certainly is economics as it relates to giving away margin points on renewals. Those partners need to be lifting the business and continuing to show net new, add-on and cross-sell, upsell. Our diligence across the board suggested that it was time for change. In order for us to stay relevant with our customers and strategic with our partners on an ongoing basis, we felt it necessary to change our approach with how we are interacting with our partners.

CF: Are you concerned that some of those partners will shift their recommendations away from Ivanti, and perhaps even to your competitors?

MR: There are certainly pockets of either risk or opportunity that they will do that. That’s where you need to ask yourself, how strategic is Ivanti? Are we sticky? Are we operationalized? Are we driving value within those customers such that they’re content that we’re aligned with their strategic goals and initiatives and that we’re a strategic partner going forward? I would suggest what is equally risky, if not more, is that such a change in the partner program for 2019-2020 in the renewals approach can drive some partners away. And that’s an absolute reality. Some of those, as you can appreciate, are large NSPs such as the CDWs, SHIs and Insights, who took news around the renewal side as a big, big blow.

CF: How did they react?

MR: They were not shy in saying,  “Look, this is going to fundamentally change the strategic alignment of our relationship.” And that’s a strategic decision that we as a business decided was a risk worth taking. In terms of us getting closer to customers, these are mutual customers. So respectfully, those are relationships that happen to use Ivanti software and they happen to buy with and through CDW or the like. And frankly, we didn’t feel like our best interests from an Ivanti perspective were being represented. It’s not uncommon, of course, to see changes, in partner programs. Nor is it uncommon to see …

… industry changes either. As you look at the details of what the net-net is for customers, what’s the net-net for partners and our ESPs that have built a business around being strategically aligned with Ivanti, they will continue to grow, thrive and actually, it’s a better environment for them.

CF: For those partners that want to or need to stick with the referral program, how will that relationship work?

MR: If we’ve got a partner that is not extremely strategic for us or does not desire to transition from our current resale agreement to the 2PG or two-party gross model, then that’s fine. They can remain a partner with us and we will transition them to a referral-only partner, whereby there’s an opportunity to get some margin points, referring opportunities, registering deals and the like. The reality is there are still going to be a number of partners for whom that makes sense. They’re opportunistic, they’ve got relationships within organizations via public sector or commercial. But it’s not necessarily their book of business or their domain expertise, such that even by their own admission, they’re not investing sales resources, tech resources in building out capabilities around Ivanti. In instances like that, it doesn’t make sense for them to transition to a 2PG model. But that resale model is changing. You’re either going to be relevant with us be part of that 2PG model or you’re going to get transitioned over to a referral-only partner. Now in the case of CDW, I’ll go ahead and call it out. They’re not transitioning to a 2PG model; they’ll remain within the resale model. As you can appreciate, CDW did not have any interest in it moving over to two-party gross contract. They’re motivated, of course, and a lot of the value they provide, they are a contracting vehicle. They do a lot of business with a lot of organizations that prefer to continue to buy on CDW paper. There will be plenty of relationships that go down that path. I’ll call it out that it’s painful for them that they’re no longer participating in the renewal part of that business.

CF: Does that also affect their public sector business with CDW-G?

MR: They will remain aligned with the CDW-G. As you know they’ve got a significant business there. Carahsoft will essentially be our value-added DISD for all things government and CDW-G will remain a strategic partner with us.

CF: What are the what are the commitments and investments partners who want to go forward with a 2PG are required to make?

MR: I would suggest there are no additional requirements or investments other than we’re getting very aligned on what the annual targets are. And this looks at their capabilities, their current pipeline deal reg and their number of resources that are dedicated to Ivanti. One of the wonderful things that’s coming out of this this transition to the 2020 partner program is that we are being very deliberate and strategic with the ESPs around services. We are not selfishly motivated in selling Ivanti services. As a half-billion-dollar software organization, we will always have consultants who have a pro services team. These are expert consultants around product and value-added services. We desire to leverage the channel, the ESP around implementations, iterations, deployment, configurations, projects, etc. Our transition from 2019 to 2020 is twofold. Under our compensation models for our reps in the past, for every dollar they could retire in quota services, they could retire a dollar of quota for product. In our 2020 plan, one dollar of services sold will retire only 50 cents. Now while not necessarily attractive for a seller that has seen a dollar for a dollar, it’s very attractive for …

… our ESPs, because they can see that the shift in software really is that it’s much more important to your sellers to sell services. It’s nice it’s needed, but they’re no longer self-motivated to sell services.

CF: Why is that good for these ESP?

MR: As you can appreciate, a good book of their business and their strategic focus on their business and their investments going forward around project deployments, pro services implementation, that’s where their domain expertise is. And that’s where the ESPs that are strategic with Ivanti will really thrive in 2020 and beyond.

CF: When you talk about reselling services for 50 cents on the dollar, you’re talking about reselling Ivanti-delivered services, as opposed to delivering their own?

MR: Yes, we’re talking about Ivanti -delivered services. Where we do subcontract to partners, we subcontract pro services. Part of this 2020 partner program is solution enablement, where we’re really increasing our investment around certifications. Our Global Academy is taking partners through our best practices, best known methods, etc. and enabling them to build out solution practices around implementing the Ivanti solution.

CF: What is the plan to roll that out?

MR: That’s being rolled out concurrently with April 1 as we go live with the new partner program in terms of the transitioning from reseller to 2PG. But the Global Academy and the enabling of partners is happening real time. In fact, last week, we had our sales kickoff for the second straight year in a row and we invited partners. Partners were part of every single session that we did.

CF: Along with the partner program changes, are there changes planned for the products?

MR: We’re creating an independent business unit, or IBU, and we’ve gone to all of our legacy customers with installed products and we’ve led with a message that there will be zero end-of-life of any of our products, period. As long as our customers are willing to pay maintenance support, we will align with them on our road map, release schedules and give them visibility into what that looks like and align with their needs.

CF: What does that mean?

MR: That means that within the new IBU, we actually have specific personnel around customer support, development, engineering, product management, renewals and sales that are focused on nurturing these customers and this installed base. There will be no forced migrations, there will be no forced end-of-life. That is definitely a pivot in the strategy and partners are playing a part in that as well.