Build Channel Adoption of Your Cloud Initiatives

a1sx2_Thumbnail1_Cloud_adoption.jpgFor those vendors that rely on their channels to go to market, there is the challenge of motivating them to adopt new business, deployment and revenue models. 

In this post, we look at some of the challenges being faced and solutions to them.

Revenue Sharing

In the past a license would be sold, the customer would pay a lump sum fee and the partner would take 30% of the proceeds.

The license fee, if we were to ignore annual maintenance fees for this purpose, represented the lifetime value of the deal and all parties involved would share in it.

With the shift toward subscription based licensing models (whether on-premise or SaaS/PaaS/IaaS), the revenue sharing structures seem to have shifted with them in that vendors are reducing the percentage they offer and also it is being spread across the lifetime of the subscription … in some cases even the period of earning for the subscription is limited.

Given that we are not talking about short sales cycles typically associated with SMB Cloud Apps, the cost and risk associated with the sales process is borne by the partner and yet the return is lower and spread over a period of time … this automatically creates a barrier to them eagerly promoting the new model and where possible will always revert to the on-premise model.

To get the channel to eagerly adopt the new models, it is essential that the lifetime value of the deal be properly measured and that an equitable share be offered to the partner.

Take a look at this article for further insight into channel compensation … “Cloud Channel Challenges | SaaS Channel Compensation”

Solution Building 

The vast majority of systems sold are made up of components both from the core vendor products as well as those from development partners. Where the complimentary products are not available, a solution cannot be built for the customer and so the deal is lost.

In a study completed by the Cloud Industry forum in their white paper “The critical role of channel in driving cloud adoption” shows that end users value above everything else, the solution that can be delivered. So for the channel to be more effective, building solutions has to be very high on the agenda.

A salesperson typically spends up to 25% of his time researching solutions and 60% of all sales lost are indirectly related to not being able to build the appropriate solution.

Centralizing all the products into a marketplace makes research and consumption of these products much easier and so success rates and the time taken to build the solutions are improved.

For the channel this reduces the sales cost and increase hit rates and so improves their appetite for cloud adoption.

As a by-product, this marketplace also builds new opportunities and simplifies the sales process for complimentary product developers and so enhances their loyalty to the vendor.

Administration and Systems

Critical to the channel partner is the ability to manage his customer relationship. However, when melding this with the vendors desire to get closer to and have more control of the relationship with the end-user, the question starts to beg as to how the transactions between all the parties are managed.

The channel would not be in a position to build the platforms needed to manage the transactions and relationships so given that vendors are the glue that bring all the parties and products together, they would need to provide systems to …

  • Sell through multiple channels with multiple parties involved
  • Assign customers to channel partners
  • Provide both core vendor products as well as complimentary products (and in some cases still offer the on-premise products as a part of the solution)
  • Automate the provisioning of the solution across multiple vendors at the same time
  • Bill customers
  • Collect payment
  • Automate and manage the revenue sharing across the channel

… resulting in easily managed transactions giving both vendors and channel visibility of and control over their mutual customers.

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