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.
The benefits of a Partner Advisory Council (PAC) are abundant. At first blush, your executive team will be enthusiastic about connecting with key partners and provide broad buy-in. But to execute a successful PAC initiative valued by both sides – your organization and the partners involved – appropriate planning is necessary. You’ll need to consider questions like which partners to include, who on your team should attend, event length, location, timing, frequency and the list goes on. (See our guide on 10 questions to consider when designing a PAC program.) But before getting mired in the details, start with the fundamentals. No matter how you design your PAC program, remember these 7 essentials in developing a great partner advisory council.
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.
At a recent vendor conference, I presented on the significant roles vendors and their partners play in customer success. To highlight the urgency with which vendors should help their partners, I cited data from our 2019 State of Partnering study: 67% of solution providers haven’t yet invested in the people, methodologies and technologies to be effective at customer success. After what I thought was a fabulous presentation with moments of greatness, an attendee came up and asked me, “so how do I do this and help my partners invest in customer satisfaction?” Epic fail. After making sure it wasn’t a slip of the tongue, I realized the difference between customer satisfaction and customer success may not always be clear. So here goes.
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.