Channel partners are bullish about their growth prospects. In fact, in a recently conducted Forrester survey in North America (NA) and Europe, 59% of channel partners expect to grow by more than 10% in each of the next two years. However, partners will need help and handholding as they aim for greater sophistication and higher growth targets, especially around cloud based services. Forrester research indicates that three-quarters of channel partners in NA and Europe now sell cloud-based solutions (up dramatically from two years ago). These solutions now make up 26% of their overall revenue, a percentage they expect to increase in coming years.
In my recent report, Seeding the Cloud Channel, I highlight three key areas where the partners will need support from both their tech vendors and their distributors:
- Diagnostic tools and services to assess current maturity and set a transformation road map. Partners will first have to collaborate with their principal vendors to gauge the fitness of their organizations for an annuity-based business model — and whether they can sustain that model in long run. Vendors need to create assessment tools to evaluate their partners’ business model transformation potential. For example, Cisco Systems built its OnPlus ROI Tool expressly for partners to model the myriad business model options and scenario decisions they face. This will not only help partners identify their pertinent strengths and weaknesses, but will also help them plan their future growth strategy.
- Business and operating model training on cloud and other managed services. The next step for vendors is to train their partners on their business model transition; for example, selling services, identifying skills and hiring resources, operations management, legal issues, and financial management. There’s also a need to enable channel partners to communicate and sell their value proposition. For example, both IBM and Microsoft are arming their partners with tools such as Microsoft’s Cloud Assessment Tool and IBM’s Handbooks that enables the partners to sell and market more effectively.
- Initiatives to “create-manage-maintain” an online app store/marketplace presence. With their popularity among end user organizations soaring, online marketplaces are playing an increasingly important channel role. Vendor-managed business app stores give more control to partners and their customers; they also help in overhauling the traditionally inefficient sourcing and procurement process by making it transparent for channel partners, removing bottlenecks, and increasing their revenue opportunities. For example, SAP overhauled its vendor-sponsored app store in 2012 to support its partner community focusing on managed and cloud services
In today’s highly competitive market, where channel partners’ product margins continue to fall, it’s crucial for vendors to equip and enable their partners to more effectively sell and market cloud and managed services. This will require innovative tools and enablement programs for both increasing the skills of their partners and for supporting in transforming their business model.
Tirthankar Sen is a Senior Analyst at Forrester Research