To capitalize on the growing cloud market and drive solution providers to resell cloud solutions, leading vendors are investing heavily in empowering their current partner ecosystem and finding new cloud-focused partners.
What are the vendors’ key priorities?
The vendor respondents’* top priority for growing and managing their partner ecosystems is to recruit and onboard new partners. Of the vendors eager to recruit, over 50% of them are looking for born-in-the-cloud solution providers and on average, they’re hoping to recruit and onboard about fifty of these partners in 2019. Systems Integrators and Managed Service Providers also top the list of the types of partners prioritized to recruitment and onboarding in 2019.
The vendors* changing the role they expect partners play in cloud offerings aligns with the solution providers’ indication of their changing sales. 60% of respondents indicated they’re generating more than a quarter of their sales from activities they weren’t engaged in 24 months ago. That’s nearly double the number from the 2015 report. And 75% of the solution providers indicated this would increase in the coming years. Not surprisingly, more than 40% of the solution providers indicated those new sales activities were focused on the high gross margin managed service offerings.
For the last decade, an agent model has been the easiest way vendors had to engage solution providers in cloud offerings. The shifts a cloud business model demands in marketing, sales, compensation methods and customer success are difficult for both vendors and solution providers. Thus, a simple referral or an agent model was a quick win for vendors looking to gain awareness of their cloud offerings. There isn’t enough margin available in a referral deal for the solution providers to be profitable long-term so we've seen growth in other solution provider roles in cloud models.
Focusing on customer experience and success is one way to support the solution providers’ evolution to cloud-based business models. There are a host of other barriers to their transition and the survey results show a bit of a disconnect between the vendor and the solution provider perceptions. Finding, training and retaining top talent has always been a barrier to growth for solution providers (or any company for that matter). The vendors* cited this reason the most for the solution providers struggles in growing their cloud models, but it was ranked third by the solution provider respondents. Not wanting to change their business model was the second-most cited reason by the vendors. Moving the model is tough, but there is little doubt of the solution providers’ desires to do so. This issue didn’t even make the top five barriers to transition ranked by the solution providers.
Shifting to a cloud or subscription model is a tough multi-year journey that requires changes across every department. Often the new business blooms alongside the traditional business to keep revenues flowing.
Vendors in our State of Partnering study corroborated IDC and Gartner predictions about increases in cloud revenues growing as a percentage of overall sales. However, when we removed the increasing number of vendors who are 100% SaaS or cloud-based, the lion’s share of vendor sales are still traditional on-premise solutions.
In the multi-year transition to cloud models, we've found six key trends affecting how vendors engage, enable and evolve their partner models and programs. From the data gathered in the 2019 State of Partnering study, corroborated by hundreds of partner interviews and dozens of client engagements, the themes introduced in last year’s State of Partnering Study are getting a few updates.
Back in 2015, after eight years of talking about the technology industry moving to cloud consumption models, we conducted PartnerPath’s first research on how vendors and solution providers were coping in the transition. This research led to Driving Cloud Transitions, a report which found the on-demand model was producing challenges for both vendor and solution provider partners. Both groups experienced minimal revenue and profitability impact from cloud business models. Partners needed significant help developing profitable and sustainable businesses that highly leverage cloud technologies and on-demand business models.
If a vendor makes it to the Growth stage (partners drop vendors and vendors drop partners – both at an average of 10% per year) it’s time for the partner to evaluate the relationship for future potential. At this point in the Partner Journey, they want to determine whether they’re getting the technology, experience, success and growth expected from their investment in a vendor. The hope is, as the partnership matures and mutual success is achieved, solid growth will start the partner journey over again at the Awareness stage.
At this stage of the Partner Journey, Experience, the partner is now engaging in a relationship with the vendor. The on-boarding begins with initial communications, training and introductions to field sales teams. But the experience doesn’t stop after the first 30-, 60- or 90-day steps. It encompasses all the interactions a solution provider has with a vendor, including people, communications, infrastructure systems, program elements and business planning and review meetings.
