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Compuware Corp. fought the war for information-technology dollars with few allies four years ago, just as it had done the previous 30 years on its way to becoming a $2 billion company. But when the bottom fell out of the tech market, going it alone stopped working. The answer has been to build its indirect sales channel, now made up of more than 500 resellers of Compuware products. Four years ago, the number was less than a handful. What Compuware calls its ``partners'' make up 35 percent-40 percent of the company's distributed product revenue, said Jamie McGuffie, senior vice president of partner business development at Compuware (Nasdaq: CPWR). Revenue for distributed product — used to run combinations of mainframe, desktop and server computers — was about $204 million for fiscal 2005, according to the company's annual report filed June 7. And though Compuware's reported revenue of $1.2 billion for fiscal 2005 isn't exactly the $2 billion it had in 2001, McGuffie said the indirect sales channel has helped Compuware weather the fallout from the dot-bomb that affected the entire information-technology industry. ``We've had our direct sales force for more than 30 years,'' McGuffie said. ``But it was really in the last three years or so that we really started to work with partners.'' When the bottom fell out of the information-technology market, tech companies sought ways to cut expenses. But customers who were buying still demanded the latest and greatest technology, he said. Working with other companies gave providers such as Compuware a way to combine service and product offerings, McGuffie said, and satisfy customers. Here's how it works: Compuware allows its products to be packaged within a suite of other products made or sold by the reseller. For example, a health care information-technology company might want to use Compuware's network-testing software as part of a network upgrade for a hospital system. However, because Compuware doesn't specialize in health care, it makes more sense for the health care IT company to develop the suite of products and resell the total package to its customers. Compuware then would get a cut of the final sale. This is different than before Compuware worked with resellers, McGuffie said, because the company would have just tried to sell the network-testing software directly to the hospital system. The relationship between Compuware and Tampa, Fla.-based BayTech is a good example of how it works. Mike McLachlan, vice president of sales at BayTech, said his company's customers were having production issues. Instead of spending time and money developing its own products, BayTech looked to a third party that already had software that would meet that need. Compuware and Mountain View, Calif.-based Mercury Interactive Corp. (Nasdaq: MERQ) had products BayTech wanted, McLachlan said. ``After evaluating products, we felt Compuware offered the best integrated, end-to-end solution we were looking for,'' McLachlan said. McLachlan was one of the attendees at Compuware's first partner summit, held last week at its downtown Detroit headquarters. The event was attended by about 125 individuals and representatives from 100 companies. Relationships such as the one with BayTech are paying off for Compuware. In 2000, at the height of the tech boom and when Compuware didn't work with resellers, its distributed-product revenue was about $221 million. When the market tanked, however, so did its distributed-product revenue, bottoming out at about $154 million in 2003. However, when Compuware started working with resellers, distributed-product revenue rebounded to $177.5 million in fiscal 2004 and to $204 million in fiscal 2005. The fourth quarter exemplifies how important resellers have become. Hank Jallos, corporate executive vice president at Compuware, said during a May 5 conference call that resellers contributed 34 percent of total distributed revenue during the fourth quarter ending March 31. During the quarter, 159 resellers had at least one transaction and 39 new resellers signed on. Also, during the quarter, there were 28 partner transactions greater than $100,000, he said. David Rudow, an analyst with Minneapolis-based Piper Jaffray & Co., attended the summit and spoke with several of Compuware's resellers. ``We were impressed that every partner spoke positively about their relationship with Compuware, the depth and strength of the products,'' Rudow said. ``Almost every partner we spoke to indicated that … customers are now specifically asking for Compuware in competitive deals, something that did not occur a year ago. ``We are pleased with the progress the partner team is making in building out this important channel and view the partner summit as a success in further developing its partner relationships,'' Rudow said.
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