February 2013 Feature

Incentivizing Partners and Customers to Adopt the Cloud

by Ian Moyse – Sales Director, workbooks.com, Eurocloud UK Board Member and Cloud Industry Forum Governance Board Member

Cloud computing continues to be heavily hyped and marketed and you can’t avoid articles, shows, webinars, and seminars on the subject. Love it, hate it, reject it, or embrace it—there is no doubt you have heard, talked, and been aware of it and this will continue as the industry and internet-based solutions (the Cloud) proliferate further. The Cloud is generating much discussion and skepticism andFlying Money the term is rolled out as if everyone fully understands it, from the end user, to the channel, to each vendor. There remains, however, confusion as to what it really means, where the different offerings (SaaS, PaaS, Iaas, Private Cloud, Public Cloud) fit, and when and where to utilize them. Do all the people involved understand clearly? Ask a customer to explain the above terms, and where and why they might use any of them, and the truth quickly becomes clear.

Gartner estimated that worldwide Cloud services revenue will reach $150 billion sometime during 2013. IDC estimated that the Cloud will generate half of the anticipated growth in the European software market, and that on-premise software will rise by just 2%, while applications sold as a service will jump by 48%. The analysts also predict that the SaaS market is set to grow more than 25% annually for the next three years, eventually coming to represent more than a third of new business software purchases.

So are partners and customers adopting the Cloud at the speed vendors need or wish? More has been spent to date globally on developing and building Cloud solutions than on buying them! While this is to be expected in a new, fast-emerging market where you have to “build it before they come,” there is increasing pressure applied on providers to recoup their investment and grow customer attraction and revenues accordingly. Hence we have seen incredible hype and over-marketing of the word “Cloud” to the point that many remain confused and even turned off when hearing that the Cloud will save everything and make the world a better place!

In encouraging end-customers and partners to adopt the Cloud, we need a more pragmatic approach, an understandable one that acknowledges that many do not truly understand what it’s all about and that adopts an educational technology and vendor-agnostic approach. Having spoken at many events, I have had positive feedback from the audience to this delivery method, finding they then become engaged and interested in what you do offer as a vendor within this arena (the right to “pitch,” earned from first delivering value to the audience’s agenda and not my own). This goes against much advice you will hear in the marketing sphere, as it seems like you are pushing the brand and technology, hard, onto an audience that may not be receptive or understanding enough yet!

But let’s use the early introduction of the automobile as an example: You’ve all seen images of a man with a red flag walking in front of a car in accordance with the law then, as people who saw cars spoke with caution and fear of these new-fangled “devil’s machines.” Yet today we all accept cars as the norm. Back then, marketing the simple message of, “You must buy a car!” and playing on the technology and brand would have failed. Explanations, in easy-to-understand terms that made it familiar and safe, smoothed the path and increased users’ willingness to take their first ride.

So which approach should you take, which Cloud will incentivize your customers and partners to take those steps?

The Cloud model is attractive to customers for a number of reasons, most particularly because it reduces capital and operational costs. With the economic climate as it is, firms are always looking to do more with less. But never forget that customers like innovation as well—it is not all about saving money. The Cloud is also able to strengthen a mobile computing strategy, providing easy access anyplace, anytime with always on, always accessible computing. It liberates IT staff, cutting down deployment time, delivering resilience and affordable computing power, and allows more focus on delivering business value.

So how do you incentivize customers and partners towards the Cloud? Do you convey the Cloud’s benefits to your customers and partners using a stick or a carrot?

First, understand that end users are concerned about understanding what it is, what questions they should be asking, and need reassurance in clear terms about data sovereignty and liberation (where it is, who has access, and how they get their data back). They need to understand the business benefits of using the Cloud over a traditional network solution, not simply to hear that, “doing it in the Cloud is better,” or the age-old, “you’ll get better ROI” message (which many find difficult to quantify). Customers need examples of people like themselves who have seen clear top-line and/or bottom-line benefits that they can recognize and relate to achieving themselves. They need to hear simple messaging about why the solution is better than an on-network approach and clarity about how it works.

For partners, the Cloud is often seen as a threat, a new solution that vendors will take on only directly, and cause cannibalization of the existing business/renewals of the reseller. For some this is true. Where the vendor only sells direct, such as Salesforce, partners are only able to engage in the implementation stage; others allow partners to transact the whole sale (the license, implementation, and support) and a mix in between exists. In reality, a great many Cloud vendors are “pure Cloud,” so are keen to grow rapidly. Channels can successfully ride this wave if they get on board with those vendors early and bring their own added values to the table.

The Cloud is certainly a leveler. Not only is it attractive to customers who want to save money and gain flexibility, but it can also turn the whole supplier market on its head, with smaller providers winning deals that they could only have dreamed of in the past. The traditional larger customers, larger resellers, will lean heavily on their accreditation levels and the amount of resources on hand to fulfil the contract—something a smaller reseller just cannot afford to offer. This has led larger customers to see the small reseller as less valuable because they do not have the necessary scale. With Cloud solutions, stories abound of small, focused resellers trading in larger and larger customers by using the Cloud vendor to underpin their credibility and to validate capability and their own solution—selling skills, customer relationships, and value add coming into play around the Cloud offerings to level the playing field.

Partners need to understand the business model of the Cloud, the annuity stream, high renewals, and predictable revenue streams; how to adjust commissions to motivate sales behaviors; and how to attract new customers to grow their business. It is key that vendors help partners realize that the Cloud is not all about cannibalizing existing customers, but is an opportunity to widen their customer base and to differentiate their value among the volume of resellers, both to the end customer and to the vendors. Many partners are doing well in the Cloud, gaining consistent new clients, good growth, and renewal bookings with margins that were first touted as unattainable in a Cloud model.

Customers need education on the business top- and bottom-line benefits of the Cloud—the flexibility, resilience, and simplified explanations of what it’s all about. Partners need clarity on financial models and Cloud solution selling and to ratify the value they bring in providing reach for the vendors in geographic, vertical, relationship, and technology breadth that enable Cloud vendors to touch the wider market/customer base. While some Cloud will be sold online, more likely in B2C markets, there is much customer touch needed in B2B Cloud selling that creates opportunities for partners to successfully partake in the new Cloud ecosystem.