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Will the Transition to Cloud Ever be Finished?

02.05.18

road-cloud.jpgWe invited Jay McBain, Principal Analyst for Global Channels at Forrester and Chris Cleary, Practice Director, Channel Sales at Sirius Decisions to join Diane Krakora, CEO of PartnerPath in a 2018 predictions discussion. Our first question was: will we ever stop talking about cloud? After seven years, we’re all getting little tired of this word. When is it going to become the norm, and we're not actually going to call it cloud or on-demand or subscription model?

The general consensus is the word “cloud” is not going to be leaving the IT channels lexicon any time soon. The customers desire for business outcomes that are driven from technology solutions purchased as a subscription, or on-demand, is here for the foreseeable future. Jay added “… I think the level of conversation is getting a little deeper, so we have to ask somebody a second question, are you talking about infrastructure layer, platform layer? Are you talking about business application layer?”  And Chris provided an additional spin “ … especially with all the promise of IoT coming down the pike, but the way that it's utilized, managed and applied inside of the organization, that's what I think will change.”

 So, the word is here to stay even though we believe so many technology companies are shifting their offerings from perpetual licenses to SaaS or on-demand models. A cloud delivered solution seems to be expected or anticipated. As channel professionals, would you expect your Partner Relationship Management solution to be implemented on-premise, or hosted in the cloud? Did you even ask that question as you were deciding on a technology to purchase? Or was it a given?

 The other terminology that seems to be here to stay is business transformation. The IT vendors are transitioning their products and revenue streams to on-demand models to align with customer preferences. But the bigger transformation we’ve been discussing for nearly a decade is the channel partners transition to a cloud driven business model. We asked our panel of experts are the partners still transitioning? Have they completed the transition they’re going to make? Is it over?

 Chris first helped describe how to determine if a channel partner is making the transition – are they adopting a recurring revenue model.  “I think what you can boil it down to is the transition has happened or is in place once they've fully embraced the recurring revenue model. I think that that may be the biggest key to identifying a successful transition that's in place, because if you can't adopt that operationalized model of recurring revenue, I just don't see how you can say that you're transitioning”

 Jay launched into some numbers he had from a recent Forrester study, citing a move by the larger solution providers. “When you look at the 600,000 partners globally, or the 162,000 in North America, the top 500 are all making the transition. They've got cloud practices, they've got VPs aligned with cloud business, they've got professional management teams that are doing it, and yes, they're all at different levels of transition, but they're going to make the move.”

 However, the mid-market size partners are struggling more with the transition. Jay went on to discuss the acquisitions in the mid-market space. “In the mid-market size partners, those are the 2,000 following those, it's hit or miss. There's a lot of M&A activity right now, gobbling up those that are struggling in their transitions, you're seeing a lot of roll-ups.”

 Chris discussed that mid-market partners are transitioning if they are putting plans and processes in place. “[if] they've done some form of a self-assessment to understand their current readiness to make that transition, because that really will have an impact on the overall success of that transition, but then really putting it in place so that once they’ve adopted it, that transition, then they can operationalize it, and really start to see results”.

 And Jay gives "... a big, fat, no to the SMB partners, seeing less than 20% of these channel partners making the shift.”  Many of these smaller channel partners are struggling financially right now as the industry de-values their traditional resale model and they experience significant competition from vendors on profitable consulting, implementation and integration services. And many of them are aging out they’ve been in business for 30 years, they've gone through dozens of technology changes and another business model change is too much.  They're financially struggling right now and they're not making the transition.

Transition might not be the right word. We’re seeing many solution providers bloom new businesses underneath the umbrella of their traditional resale model. They're not necessarily taking the people and the processes that were in their older, traditional business and moving them. Instead they are starting with managed services and are introducing more cloud-based solutions in the infrastructure and platform layers. We just asked 220 solution providers in our yearly study and they all say they're investing more in cloud-based business models. But we’re not sure that they're all going to be able to make the move.

As an IT vendor, the question is where in the transition are your partners? Is your channel ecosystem segmented so you can continue to invest and support partners that are making the transition? Or are you throwing good money after bad, toward solution providers not interested or able to make the transition?

Watch the replay of the webinar:  

Watch: 3 Experts Chat Channel Trends

Topics: Channel Best Practices

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