January 2013 Feature

Maturing Cloud Services and the Evolving Channel

by Anna Johnson

As technology vendors have moved solutions from an on-premise service model to a cloud-enabled model, many have found that existing channel partners have been slow to embrace this new direction. Channel Management Insights sat down with Steve Hale, practice director with Bridge Partners Consulting, to discuss how the relationship between vendors and their sales channels are evolving as technology services move to the cloud. Hale, former channel chief and VP at F5, Novell and Sophos and 17-year Microsoft veteran sat down with us to share a few insights into making the transition to the cloud a bit more effortless for the channel.

Cloud ComputingThe SMB and SME Market at the Heart of the Cloud

Historically, Fortune 500 companies were considered the early adopters of high technology. “However, what we’re seeing today is the rise of the small- to medium-sized business and enterprises as early adopters of cloud services. We’re seeing a bottom-up trend which is the reverse of what we saw during the previous heydays in high tech,” observes Hale. One reason for the trend is that SMB and SMEs don’t have the legacy of on-premise systems in place like their big company counterparts. They are more nimble and so are able to take advantage of cloud services that were designed specifically to help solve the SMB and SME business and technology challenges. “You can look at any one of the major tech players and there’s a huge focus on how to market, sell, and build a powerful services and fulfillment channel for the SMB and SME market,” says Hale.

Cloud Is More than Just a Product Strategy

“If you’re a technology vendor and you build hardware and software primarily for Enterprise on-premise and are transitioning to cloud-based services, you need to think about migrating your existing channel into the new model and incubating new ‘born-in-the-cloud’ partners,” advises Hale. The benefit of working with born-in-the-cloud partners like OpSource, Kaseya, and Joyent is that they don’t have the legacy business model to contend with. “There’s a time-to-market advantage for these types of partners and you’re seeing examples of born-in-the-cloud partners gaining traction with the big technology partners, demonstrating the success of this channel model. However, this early-to-market advantage is quickly closing because old-school channel partners are now adapting to the cloud,” says Hale.

Channel Relationship Components That Drive Growth

To make the transition to the cloud more seamless for both born-in-the-cloud and old-school channel partners, Hale suggests a three-pronged strategy that includes partner enablement, channel marketing, and partner programs and incentives. “Whatever the cloud services are, there is usually a technical and a business angle of the offering, so somebody needs to become really good at articulating the business value proposition for the customer and someone needs to be able to tell the technology story as well,” says Hale. The need to get a partner up to speed and empowered to sell the service is more important now than ever before due to the nature of the SMB and SME customer. “Because of the bottom-up market trend, the tried and true tactic of elephant hunting won’t work exclusively anymore. The problem vendors need to tackle is the issue of scaling their enablement programs so channel partners can go after the larger number of SMB and SME prospects,” advises Hale.

The second component to driving growth is improving the ability to market your new cloud service through partners to customers. In many cases, partners don’t have the marketing expertise to court prospects and create specific messaging, or have the staff to execute the go-to-market strategy required to drive demand for your cloud services. As a result, vendors need to focus their energies on providing full-service marketing logistics, services, and capabilities to the partners who need them.

The final component is most closely related to driving partner loyalty. When vendors have the scalability of the enablement program in place, as well as full-service marketing for partners who need it, the final component to drive partner loyalty is in the affiliate and incentive programs. “I don’t know if I’ve seen anyone execute loyalty programs for partners to the sophisticated level of hotel and travel programs. You can debate whether or not you like them but technology vendors would benefit by looking at hospitality best practices and emulating them to be really effective at driving partner loyalty,” says Hale. “I don’t know if anyone’s really figured it out so I think there’s a big opportunity for vendors to pounce on. Affinity and channel loyalty programs will especially promote more transactional business in the long run and cloud services will benefit from those types of incentives.”

Conclusion

There’s no one right way to ease the transition to selling cloud services for the channel. A magic silver bullet has eluded many technology vendors simply because it doesn’t exist. “Traditional channel tricks like rebate and MDF programs don’t incubate the kinds of behaviors you want to see in a cloud model. Born-in-the-cloud partners especially don’t relate to these types of incentive programs,” says Hale. Instead, focus on Steve Hale’s three components to driving growth: scalable enablement, full-service marketing, and inventive partner loyalty programs.