By Rod Baptie
So what are the best practices for a partner wanting to build a cloud business? Since the launch of the Cloud Services Community, Ive been speaking to partners about this and there are a number of key lessons they have shared with me.
First, the predominant players in the cloud space remain “born in the cloud” partners. Why is that? Well if youve built a business specifically for the cloud and cloud customers, you have no baggage you understand the business model and you have a single, simple proposition to sell to your customers.
What about traditional IT partners and telecom agents? There are a number of notable exceptions, but these groups have been slower in moving to a cloud practice. Why is that? Some claim client demand is not there, some are finding it difficult to reconcile the cloud business model with the traditional way they have made money and those that want to transition say it’s hard to find the people to help.
Traditional partners that have been successful in building a cloud practice have shared some advice:
- Set up the cloud practice as a separate P&L, and make someone responsible and accountable for that P&L preferably someone dedicated to your cloud practice.
- Bring in a cloud expert. It is easier to bring someone on board with experience selling cloud than it is to transition someone to the cloud practice. This is especially true in the early business development.
- Offer both traditional and cloud offerings to all your customers, regardless of what they request. It’s important that your customers know that you offer cloud services as one major SI learned the hard way. The company was losing customers the sales team insisted would renew. When asked, customers said they didn’t know the SI had a cloud offering and went elsewhere. Since offering both traditional and cloud services, the SI has reversed the decline.
- Iterate the benefits of both a cloud and an on-premises solution. In this way you will be perceived by the customer as adding real value and expertise. As a result, they are much more likely to see you as a trusted adviser.
- Incent sales teams with attractive compensation. This is probably the hardest task of all if you are a traditional IT partner persuading your sales team to trade commission from a one-off deal for $20,000 for a smaller commission over 12, 24 months or longer. This is a major inhibitor to success selling cloud services. I am seeing a three approaches:
- Some partners paying 100 percent of the commission up front; indeed a number are offering the first months income as commission with no residual payments. The challenge with this approach is it doesnt create that behavioral change that is so crucial to building an ongoing and viable cloud practice.
- On the other end of the spectrum partners are paying commission totally on a recurring revenue basis. However, partners Ive spoken to struggled with this model unless they had employed a separate cloud sales team.
- In an approach that does more to transition sales teams to the recurring commission model, some partners are moving to a 50:50 model wherein they pay 50 percent of the first year’s commission up front with the rest based on the customers recurring revenue.
Despite the challenges, one thing is clear: There is an increasing number of both IT and telecom partners successfully moving to the cloud. As one said, “My customers are demanding it; if I dont make the move, I wonder how much longer I will have a business.” That said, now is not the time to throw the baby out with the bath water! Most partners will continue to offer both a cloud and traditional offering and ultimately the customer will decide.
Rod Baptie is managing director for Baptie & Co., an information services company organizing business-to-business conferences and communities for the IT and telecom industries, including Channel Focus, Marketing Focus, Net Focus and Cloud Services Community.
Hear more from Rod Baptie in the Cloud Services Community Discussion track at the Channel Partners Conference & Expo, Feb. 27-March 1, in Las Vegas.