More members of the traditional IT channel are experimenting with adding cloud services to their portfolios. But few have the technical or financial resources to do this on their own, leading more of them to seek partnerships with large cloud service providers.
Nearly 60% of the value-added resellers (VARs) and other IT solution providers that research firm PartnerPath recently surveyed described themselves as representatives of other companies' cloud offerings, including Infrastructure as a Service (IaaS), Software as a Service (SaaS), cloud-based backup and disaster recovery services and more.
Approximately 40% described themselves as a "reseller" of those applications while 20% identified with the term "sales agent."
"Delivering IT as a service has forced partners to reevaluate their business model at a really fundamental level," explained PartnerPath analysts in its recent analysis of that data, The Biggest Cloud Winners. "Cloud leaders today come from different business model roots. Some are 'built in the cloud' with a nearly pure annuity services-and-applications model, but many more have had to retool their approach to staffing, training, marketing and revenue recognition from a legacy on-premises model."
Cloud service providers will need to rethink their entire incentive structure so that company sales people aren't tempted to swoop in on [partners'] deals to make their quotas.
Those differences mean that cloud service providers must be flexible in their approach with individual VARs, systems integrators or managed service providers (MSPs), said Jaywant Rao, vice president of global alliances for cloud service provider Savvis, a subsidiary of CenturyLink based in St. Louis.
"Every partner is slightly different," he said. "They each have a different flavor of how they go to market. That means you have to focus on which models make sense for your own business and align things from there."
Given Savvis' ties to the telecommunications model, developing a partner program was almost a given. But other companies evolved into that position.
Zetta.net, a Sunnyvale, Calif.-based provider that offers enterprise-grade backup and disaster recovery services, announced its enhanced cloud partner program last September. The company made the decision to build a channel program after experiencing an explosion of interest from MSPs and VARs that lacked the ability or resources to build a similar infrastructure on their own, according to Gary Sevounts, Zetta.net's vice president of marketing.
Regardless of the original motivation, successful programs share several common elements. Here are five best practices cloud service providers might want to consider as they develop their own channel partner programs.
1. Clearly define objectives and incentives.
Recruiting the right cloud partners is a big factor in building a successful channel program. Even though business models are slightly different from VAR to VAR, cloud service providers should draw a clear image of their ideal partner. That could mean specifying location or size. It should also consider technical skills or expertise in a given market or account type.
Zetta.net, for example, is specifically signing up VARs or integrators that already have skills in backup and recovery and are seeking a cloud-delivered option, said Art Ledbetter, the company's director of channels.
"It makes it easier for them to walk into the program," he said.
On the other hand, IaaS provider Infinitely Virtual is taking a much broader approach by creating two tiers for its program, said Adam Stern, CEO of the Encinitas, Calif.-based company.
Its entry tier pays VARs for referring customers to Infinitely Virtual, which handles all provisioning and technical support. VARs must sell at least $200 in services in a given month to earn their commission, which increases with the volume of business they refer.
Infinitely Virtual set the $200 minimum to weed out companies trolling for an additional discount to use its services internally, Stern said.
The service provider's second partner tier is meant for those that want to become completely involved in selling its offerings. Under that model, Stern explained, partners buy services at a discount and set their own prices, which means they control the margins they earn.
2. Don't get between your partners and their customers.
One mistake some cloud service providers make when structuring their channel program is offering their partners the same technical support they offer individual customers. Be aware that your partners will require a much richer set of these resources, just like your internal support team.
First, they'll need a way to manage multiple accounts. That means cloud service providers should invest in developing tools that help partners maintain a view into more than one customer's infrastructure or services simultaneously.
A major focus of Zetta.net's recent channel program revamp was creating a multi-tenant portal that partners can use to provision accounts, set (or reset) configurations, monitor service levels and make other changes, Ledbetter said.
"Previously, we were treating MSPs like they were customers, but that wasn't a very good policy for helping them manage their own customers," he said.
Savvis offers its high-level partners access to the same high-level technical resources that its internal support team uses.
"They have full access to their customers," Rao said.
3. Ensure your sales team works with channel partners.
One of the most difficult parts of the transition from a direct sales model to one that includes channel partners is putting policies in place to ensure internal sales teams work in collaboration with VARs and systems integrators, rather than treating them as competitors.
That means cloud service providers will need to rethink their entire incentive structure so that company sales people aren't tempted to swoop in on deals to make their quotas.
At the very least, internal sales employees should be rewarded in a "channel-neutral" way. That is, they should get credit for deals they help partners develop in their coverage area. If you want to develop your company's channel business more quickly, you can reward the direct sales team with something extra for working with partners, a model often described as "channel-positive."
Either way, changes need to start at the top with ensuring senior level management has bought into the overall channel strategy, Ledbetter said. "You really need to design a program that rewards your direct sales team to work with partners, not against them," he said.
4. Make sure required investments are worth the effort.
Historically speaking, IT solution providers are leery if channel programs require massive upfront investments. That means any cloud service provider's program should offer cost-effective resources for training, customer support, and sales and marketing initiatives. These sorts of resources should not be treated as a profit center.
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At the same time, though, your company's closest partners will want to be rewarded for taking extra steps to offer distinct, expert solutions based on your cloud services.
More often than not, the program will need multiple tiers along with multiple levels of incentives. Aside from the structures described above, another example is the Premier Consulting Partner program created by Amazon Web Services (AWS).
As of February 2013, just 15 VARs and IT consulting companies held the distinction of membership in the program. In exchange for building their services on top of AWS's IaaS environment, Elastic Compute Cloud, these partners get extra attention and additional money-making opportunities.
"The treatment we receive is phenomenal," said Jeff Aden, co-founder and president of Seattle-based 2nd Watch, which is the latest company to receive this distinction from Amazon. "We are able to provide different service-level agreements and highly custom solutions as a result of our investment."
5. Communicate often and early.
Channel partners must be on the front line to receive information about new product roadmaps and policy changes that might affect their business. It's a good idea to share this sort of information at the same time it is being shared internally in order to avoid miscommunication, Ledbetter said.
It's equally important that these exchanges be two-way. That means cloud service providers should offer a forum for partners -- especially the most active ones -- to offer comments about the program, both good and bad. This could be done either informally, through ongoing field discussions, or formally, through the creation of a partner council or steering committee.
"Make sure you are collecting feedback, especially information about sales inhibitors," Ledbetter said. "You need to encourage a climate of continuous improvement."
About the author:
Heather Clancy is an award-winning business journalist and an ongoing contributor for several TechTarget sites, including SearchCloudProvider.com.