… it works and how the compensation works, and just changing their outlook for the future, and quite frankly, giving them a future.
CP: With RingCentral’s ConnectCentral 2018 coming up next month, can you give us a sneak peak of the message and news for partners?
ZL: We’ve done a really good job of recruiting and supporting our partner base … and we’re taking it to another level. Obviously all of these partners have customer bases and they have customer bases that are legacy premises-based. Our initiatives that we’ve started now – and we’re gong to deepen and strengthen them as we move through [the fourth quarter] and into 2019, [are aimed at helping] these partners access their own customer bases through programs that we’re going to be launching and talking about when we’re at our ConnectCentral. But the key here is that the customer bases of partners need an opportunity to be educated. We have an opportunity to educate the customer so that the customer can make an educated buying decision on UCaaS when they’re ready. So it’s a little softer approach. The things that we’re going to be doing are going to allow those customers access to information through RingCentral. So think about webinars, calling campaigns and participation that partners will have. We want to be a trendsetter in the partner community to demonstrate that RingCentral is going to be the kind of partner that helps all partners become successful, but in particular those ShoreTel-Mitel, Cisco and Avaya partners to help them make this transition.
CP: How tough is that transformation for partners to UCaaS and the cloud?
ZL: Change is hard and it’s hard for people, particularly when you’ve been doing something almost the same way for 20-plus years. I’m selling premises-based, I’m looking at the margin I get and my profit margin is how I get paid. I get paid right now and then I get a maintenance [agreement], the same thing over and over. And now there’s the new world of monthly recurring revenue (MRR), long-term compensation that RingCentral pays for the life of the customer. So if you’re a partner of ours, we pay you a residual percentage of the monthly recurring revenue for the life of the customer. So it’s not only kind of an emotional transformation, but also financial because they’re accustomed to getting money now. Well, we’ve solved that to a degree by having compensation that also has an upfront component, and that’s what we call a SPIFF or upfront bonus. The speed by which they get that mimics what they’re accustomed to. So we pay three times the MRR upfront, so if it’s a $1,000 monthly recurring revenue deal; we’ll give them $3,000 per month plus the residual for the life of the customer. That helps mitigate the upfronts they’re accustomed to and gets them to transition into the business world of MRR. The partner community here at Channel Partners Evolution, 90 percent of them are on long-term residual plans — and let’s just say there [are] a lot of millionaires in this room.