Do channel partners have the financial skills training to comprehend Cloud opportunity? Was the question being asked at a recent Channel Dynamics event.
According to Channel Dynamics co-founder and director, Cam Wayland, finance is not taught. It is an assumed knowledge. He stressed that having the right partners or training partners to have the right skills to articulate the financial value proposition around a Cloud service, is a critical attribute.
“When we start moving from a traditional, perpetual sale, where there is a margin and a rebate, if we hit certain goals, we can work that out. But when we start talking about Cloud and the impact of this for partners in terms of cash flow and recurring revenue, particularly when selling Cloud and moving from OPEX to CAPEX, it is often not really understood,” Wayland said.
In describing Cloud as a ‘land grab’, Wayland warned the audience to expect churn, not dissimilar to the telco industry.
“Everybody is signing customers up left, right and centre. In the Cloud or as-a-Service marketplace, churn is currently relatively low, but it will get bigger as the market matures," he said. "The tools are already there to migrate from one Cloud provider to another. Program structures will need to adjust. So look at customer lifecycle and management, and they will start to reward partners for those ongoing activities, not just the initial sale.”
Wayland said Cloud was both an enabler and a disabler for the channel and revealed some critical success factors in recruiting, engaging and managing high-performance channels.
This is done by outlining the implementation of a post-Cloud, go-to-market business strategy following a strategic process of partner and customer definition and selection.
Wayland also asked attendees to weigh the alignment of their business plan when overlayed with their channel plan and discussed how the strong uptake of Cloud affects the channel ecosystem.
“What has Cloud done to your existing strategy? Whether its vendors, distributors - certainly partners in the mid-market, enterprise, and even now in the SMB space - they’re all having to rethink their strategy because of what Cloud has done,” he said.
“Depending upon who the customer is and whether that is SMB, mid-market or enterprise, the partner will need different skills sets in selling. It’s about working out who are the right partners to take your product to that particular customer.”
Wayland said vendors get trapped in the belief that their product is the solution, whereas in reality, the product is ‘only one portion of the solution’ and stated that it was all about the value.
He explained that the opportunities for margin and for channel engagement with the customer shrink because often it is now taken care of by the Cloud offering itself.
“There is less requirement for channel interaction because the customer knows what they want," he said. "The core product expands and as a result, some of the traditional things that the VARs and resellers are doing have shrunk - but that actually gives rise to a whole range of other opportunities for the product in the Cloud era like integration and strong networking."
In noting the importance of strategic partner selection - quality over quantity, Wayland also explained the critical nature of implementation and ensuring the right business structure to be able to support partners so they can make money.
“A common challenge is that rather than defining the right partners and target market, vendors start implementing. They fluff around with partner programs and training and throw in large amounts of market development funds (MDF), but their business is not aligned to enable those partners correctly. If it’s not profitable for them, they will go and do something else,” he said.