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Brandon Mills
Manager,
ZS Associates
Jason_Bell_11099_headshot.jpg
Jason Bell
Associate Principal,
ZS Associates
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John DeSarbo
Principal,
ZS Associates
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Kyle Heller
Associate Principal,
ZS Associates

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How to Ensure Your Sales Channels Don’t Get Lost in the Clouds

Posted by Kris Bose on Mon, Oct 22, 2012

The IT forecast for the foreseeable future is very "cloudy" indeed—and it’s driving some tectonic changes in the go-to-market (GTM) terrain. The business case for the cloud is well established: ITaaS adoption is proliferating, but it still leaves the dilemma for both technology vendors and channel partners of how they should change their GTM strategy and partnerships when faced with fundamental business model changes.

Most tech vendors are offering ITaaS solutions directly to their customer base to better control the customer experience, but are also quickly realizing that they cannot cover the entire market effectively and deliver desired value propositions to all customer segments. The need for Service Provider (SP) partnerships that complement and enhance vendor offerings is becoming vital for long term differentiation and success. These partnerships require a new GTM paradigm beyond traditional channel program strategies and pure "sell-to" relationships.

If you are a channel sales manager, you’re most certainly pondering difficult questions when establishing new SP partnerships or evolving current ones:

  1. Which partner types should I bet on for my cloud (and managed services) offerings? 
  2. How are partners evolving their business models and who will be successful?
  3. How do I profile SPs and establish their GTM requirements?

Every channel partner is responding to the urgent need for services-led and recurring revenue models. However, the reality is that some channel partners are better prepared than others to embrace the transformation.

Cloud Business Models ZS Associates

  • Communication service providers lead the pack, driving a rapid shift to XaaS solutions by expanding adjacencies around well-established communication and network services.
     
  • Hosting companies, IT service providers and outsourcers follow closely, leveraging strengths in managed data centers, application or business processes management. These partners are transitioning their customers using the technological, cost reduction and service management advantages of cloud-based platforms and consolidating their hold. These partners will be critical for vendors looking to penetrate new customer segments and expand their portfolio, but will also be very demanding in their partnerships needs.
     
  • Others who have remained traditional system integrators, solution providers and resellers (and distributors) are seeing a big squeeze in margin and revenues as customers move away from their sweet spot in on-premise and capital investments into service-led and recurring revenue models. They typically need the most help from vendors to make the shift, but can develop into loyal GTM partners in the process. Not all will make it—and those who survive will have gone through the most significant business transformation in a decade. 

The ability of tech vendors to correctly profile service providers and their GTM requirements will be critical for market success. In our view, the public cloud is driving the biggest revenue, but most channel partners are more focused on targeted opportunities in the private or hybrid cloud builder space. Many also see distinct opportunities by becoming a single point of contact for their customers as a cloud aggregator and consultant. While resale of public cloud offerings model is a low-cost entry model, it does not provide any significant differentiation over the long term. 

The most important lesson we’ve learned: It’s no longer about adopting a single model anymore, but exploring multiple cloud business models (see figure above) as part of channel transformation.

All SPs, whether existing or evolving, expect tech vendors to understand their business models, build collaborative partnerships and support them through this critical GTM transformation. A failure to do so on the part of the vendors will significantly reduce partnership choices in the market and long term success with customers.

What challenges are you facing as you try to build your SP partnerships? Do some of these issues resonate with you?

Topics: channel partners, go-to-market (GTM), Kris Bose, Service Provider (SP) partnerships, cloud business models

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AUTHORS
Brandon_Mills-10924_headshot_small
Brandon Mills
Manager,
ZS Associates
Jason_Bell_11099_headshot.jpg
Jason Bell
Associate Principal,
ZS Associates
John_DeSarbo_thumbnail
John DeSarbo
Principal,
ZS Associates
Kyle_Heller_thumbnail-1
Kyle Heller
Associate Principal,
ZS Associates
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