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Transitioning a Partner Business to the Cloud

So what are the keys for a partner wanting to build a Cloud business?  Since the launch of the Cloud Services I’ve been speaking to a number of partners about this and there are a number of key lessons they have been prepared to share with me.  Firstly it is still the case that the predominant players in the Cloud space are born in the Cloud partners. Why is that? Well if you’ve 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. 

But what about traditional IT partners and Service Provider Agents? There are a number of notable exceptions but these groups have definitely been slower in moving to a Cloud proposition. Why is that? Some claim client demand is not there, some are finding it really hard to reconcile the Cloud business model with the traditional way they have made money and those that want to transition are often finding it hard to find the people to help with the transition.

So I thought it would be useful to share some of the things successful transition companies have done to build a Cloud practice. Some of the key things I have been told can be summarised as follows;

1. Set up the Cloud practice as a separate P & L with someone responsible and accountable for that P & L and preferably dedicated to your Cloud practice.

2. To make a Cloud practice work you need a Cloud expert. It is easier to bring someone on board with experience of selling Cloud than it is to transition someone to the Cloud practice – this is especially true in the early phase of the Cloud practice development.

3. Offer both traditional and Cloud offerings to all your customers, regardless of what they request. Clearly lead with what they asked for but offer the other as an alternative. One major SI kept losing customers yet the sales team kept saying yes they were going to renew in the traditional model. Then suddenly there was no renewal. When asked customers responded I didn’t know you had a Cloud offering so I went elsewhere – since offering both they have reversed the decline and even have customers who thought they wanted Cloud remaining with an on premise solution.

4. Really be able to iterate the benefits of both a Cloud and an on premise solution, in this way you will be perceived by the customer as adding real value and expertise and they are much more likely to see you as a trusted advisor.

5. Sales commissions – probably the hardest one of all – how do you persuade your sales team that instead of taking commission on a one off deal for $20,000 they take the commission a little at a time over 12, 24 or a longer period of time. This is a major inhibitor to a traditional Channel Partner and I am seeing 2 approached to the issue

a. Some partners are ‘fronting’ the commission – indeed a number are offering up to the whole of the first months income as commission but there is no residual commission. The challenge here is it doesn’t create that behavioural change that is so crucial to building an on-going and viable Cloud practice.

b. A couple of partners I spoke to are moving to a 50:50 model – they want to transition their sales teams and they want to change to a Cloud behaviour based on commissions as revenue paid by the customer. So they are offering 50% of the first years commission up front with the rest based on the customers recurring revenue.

c. Finally Partners are paying commission totally on a recurring revenue basis – though partners I’ve spoken to struggled with this model unless they had employed a separate Cloud sales team.

However one thing is clear there are an increasing number of both IT Channel Partners and Service Provider Agents who are successfully moving to the Cloud. As one said ‘my customers are demanding it if I don’t make the move I wonder how much longer I will have a business?’ However now is not the time to throw the baby out with the bathwater!! Most traditional IT Channel Partners will continue to offer both a Cloud and traditional offering and ultimately the customer will decide. 

Meaningful conversations in the Cloud

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