Zyxel's David Soares: VARs Need More Help to Compete with e-Commerce

Small VARs are the “sweet spot” for Zyxel Communications, a provider of secure broadband networking, internet access and connected home products, and the company wants to do all it can to help them better compete with e-commerce.

That’s according to David Soares, formerly with Netgear, who has been appointed Zyxel’s vice president of North American sales. He brings 28 years of experience as a senior business executive in the IT industry to drive awareness and growth of Zyxel’s channel business among SMBs and service providers in North America.

Soares was appointed Netgear’s general manager and senior vice president of its retail business unit in 2011, and then left the company in 2014 to travel for three years and has now returned to the channel. Prior to Netgear, he spent 12 years in management with Hayes Modems.

“We believe that the extensive experience and knowledge that David brings to our team is truly a game-changer for our business,” stated Howie Chu, CEO of Zyxel North America. “David’s experience in leading other companies in our industry through various stages of their growth, building them from startups to leading global brands will be instrumental in taking our business to the next level across our consumer, SMB and service provider business units.”

In a Q&A with Channel Partners, Soares talks about his plans for big changes to Zyxel’s partner program and how he wants to help VARs deliver more services to their customers.

Channel Partners: What made you decide to join Zyxel?

Zyxel’s David Soares

David Soares: One is that, although it is a well-established company, it had on the channel side … that startup feel to it and it was a small team. And two, there’s an environment where I felt I could really make a difference, and help them adapt to changes going on in the market and therefore grow the business, and help our channel partners succeed as well because there’s a lot of changes happening for partners, especially for VARs. So there are things I want to do to try to help VARs become more competitive in the market and perhaps change the the types of services that they’re providing to their customers so they can be more successful in the face of e-commerce, which is the big competing channel for the VARs. And I know some of them are finding it difficult competing with eCommerce, which is understandable.

CP: What is your take on Zyxel’s channel strategy? Are changes needed?

DS: Yes, changes are needed. Like many other companies, you can segment our channel into three different sections: VARs, e-commerce and brick-and-mortar retail. We don’t sell a lot in brick-and-mortar retail…

…so e-commerce and VARs. The whole IT business was founded on the VAR channel originally, long before e-commerce or even retail existed. And then along came retail and for the VAR, it wasn’t just about selling the product and helping the customer choose the product. VARs have to do more than that to be successful and to help their customers. And I felt there was a lot more that Zyxel could do. The channel partner program that we have and are about to change does reward the VARs for the additional value that they bring to their customers, in helping to choose the products and in helping to install, run and maintain the products. But I felt that there was more that could be done. I believe VARs need to offer more services to their customers, and Zyxel can help them do that. So for example, in our field, which is networking, there is a place in the market for VARs now to offer network managed services to their customers. And through our new Nebula cloud management networking system, we’re giving those VARs a platform to provide that to their customers. So that’s an additional service VARs can offer their customers. Typically there’s a monthly fee for managing the network, so there’s a recurring revenue stream for the VAR … using our cloud management software.

CP: What are some of the major changes you’re implementing in Zyxel’s partner program?

DS: Previously, we had two tiers; one tier basically got a 10 percent discount and the other tier got a 20 percent discount on most of the products, so there’s a big gap there between the two. I think it was more difficult for the smaller VARs, perhaps, to compete given that the larger ones had a much larger discount in relation to them. And also the 10 percent discount probably wasn’t enough to reward them for the value add that they’re offering over e-commerce, for example. So with the new partner program, we’re offering what amounts to an 18 percent or a 22 percent discount program for the VARs who are registered in our program. That’s the Silver and Gold tiering that we’ll have. There’s a requirement for those VARs to get those discounts. One of those for the Silver is they have to sell $6,000 over a six-month period so it averages out to $1,000 of product a month. And for Gold it’s double that.

The other aspects of the program include things like deal registration, online training for our partners, tech support for the partners and also a lease-financing program as well. For those partners that want to get into…

…providing network managed services to their customers, what they can do to make that more attractive to those customers is offer a financing program for all of the hardware that goes with that so the customer doesn’t have the capital outlay of financing the network if they’re installing a new network or revamping their network. With the lease-financing, a third-party financing company will provide finance to the VAR and ultimately to the customer so the customer pays a monthly rental fee for the hardware so they don’t have the big capital outlay. That will help our VARs in their sales efforts and to provide their managed services because it helps them to overcome the objection that some customers may have in the initial cost outlay if they want to revamp their network. The customer is less likely to delay a decision.

CP: Why is it critical to provide more assistance to VARs?

When I talk to our VARs, many of them are finding it increasingly difficult to compete with e-commerce. That’s really their No. 1 challenge. They offer installation services for their customers, so they charge separately for installation, so if they have to compete with e-commerce typically they may not make a lot of margin on the product if they have to match eCommerce pricing. And the new partner program rewards them for the value add that they provide by giving them the 18 or 22 percent discount.

It’s also about showing the VARs that they can also offer network managed services to their customers. They can manage the customer’s network for them, and that gives the VAR a recurring revenue stream and that’s a service that e-commerce can’t provide as well.

When I look at our numbers and the numbers I get from our distributors, the number of VARs out there is steadily declining, slowly but surely, every month, in fact. But I think there’s an important place for them in the market to provide these additional services that customers want. So that’s the No. 1 issue, how do I as a VAR compete against e-commerce and our solution for them is to look into providing these network managed services for your customers. And then we’ve got the other aspects of the partner program.

CP: So it’s providing a lifeline for VARs?

DS: That is correct, but it’s not just about providing a lifeline to the VARs. In doing that, we’re also providing an important service to the end customers, to the small business. If you have a small business … you need to be (an) expert in what you do and you shouldn’t have to worry about your network, and it shouldn’t have to be a case of…

…a VAR installs a network and something goes wrong in the network, and you have to phone the VAR and the VAR has to come out and fixes it for you, and you have downtime because of that. When a VAR is providing a network managed service, the chance of the network going down completely is greatly reduced because of the constant monitoring and maintaining for the customer, and also a lot of times the VAR gets alerted by our cloud software ahead of time that something’s wrong so that they can fix the problem for the customer ahead of time so the customer has minimum downtime. So in providing a lifeline to VARs, we’re also providing a better network to our customers.

CP: How are you using your prior experience with Netgear in your new role?

DS: At Netgear, we sold through the channel as well and I was there for 16 years. And in all of that time running channel I also ran product development as well when Netgear switched to the business unit structure in 2011. On the channel side, we saw it evolve and change over the years, and I learned a lot about the channel, but quite frankly, even from when I left Netgear the channel has evolved since then over the last three years. There’s more that needs to be done to help the channel even from what I learned at Netgear. It was really a process of understanding what’s the value that VARs are bringing over e-commerce, what’s the benefit e-commerce is bringing over VARs and how you address their needs and help them address their needs. So it was really just the years of experience with those two channels combined with all the new things that are happening and new things that need to be done. So it’s not just about what I learned with Netgear about the channel, but also the channel has moved on since then. It’s not just about your channel program. You have to deliver in your product as well. It’s a two-pronged approach. One is through products and the other is through your partner program.

CP: What are the biggest issues facing Zyxel and what will be your role in addressing them?

DS: At Zyxel, the biggest issue is how do we as a vendor best serve our channels to market, VARS, e-commerce and retail. As the world evolves, how do we best address their needs? And I think that’s where things were falling down a bit in how we address those needs. So my mission is to help our channel, especially the VARs, develop the services that they deliver to their customers. And in fact, we’ll have a drive to help our VARs do that. And so my measure of success is how well we succeed in doing that over the next year.

Part of what I want to achieve in the first half of next year is to recruit at least 30 new, solid MSPs. So these are organizations that used to be VARs that are now dedicated to purely providing network managed services along with the hardware to their customers. It’s about recruiting those by helping our channel partners evolve into MSPs. That’s the main mission and the main challenge for Zyxel. As the world changes, how do we evolve with that? And that’s how we’re doing it, we’re helping our channel to provide more services to their customers, which makes their customers’ lives a lot easier as well.

CP: What do you plan to accomplish during your first six months to a year in your new role?

DS: The new partner program with the two levels of discounts … and then the lease-financing that goes along with that … we’ll be launching it and it should be running in about two weeks on the website. And then next year, a measure of success is going to be the number of VARs that are using and selling our cloud network management services. We need to see that component of our business grow much faster than the traditional controller-based network management. And if that happens, then that’s an indicator that we’re being successful in helping the VARs to deliver network management.