Once upon a time, IT partners had a relatively simple life: close the deal, count the cash and move on to the next customer.
In fact, it wasn’t even that long ago that selling one-off big deals with a three-year licence was the channel’s bread and butter.
Today those three-year cycles are becoming fewer and farther between thanks to the staggering rise of software-as-a-service (SaaS), which has climbed from practically nothing to a US$100-billion market in a decade.
Improvements in hosting capability and Australia’s preference for cloud-based operational models has driven this rapid adoption, alongside pressure on traditional companies from newer vendors like Zendesk, ServiceNow and Atlassian.
In the words of Forrester analyst Jay McBain, this has created a “retention channel” that sets the clock ticking from the point of sale with just 30 days to secure that critical renewal.
“Knowing that the customer journey never ends in a subscription scenario, partners that can drive adoption, ongoing customer experience, and the ability to upsell and cross-sell become critically important,” McBain explained.
In this scenario, what has become increasingly clear -- and frequently rattled off by both vendors and partners alike -- is that simply moving products and moving on will no longer cut it.
For Norm Jefferies, managing director of Computer Merchants, customer trust and partner reliability becomes of critical importance.
“There needs to be focus on the customer experience and ensuring they are realising value.” he said. “Promises made must be kept. There needs to be someone with empathy for the customer [who is] checking promises are being kept.”
Granted this is not to say partners of old would simply walk away once the papers were signed: many of these deals were and still are accompanied by a dose of managed and value-added services.
But working from a subscription based template isn’t as simple as just throwing in some more of these extra services. Indeed, the term “value added” reseller is one already heard less today, as the terms consultants, integrators, independent software vendors, and even accountants and digital agencies increasingly appear in the channel mix.
Jefferies believes partners will need to find new ways of simplifying this process of keeping promises’ to customers, accompanied by a “constant drive towards efficiency”.
None of this is to say the transition into subscription revenue is a bad change. As Jefferies explained, the predictability of regular income provides peace of mind and creates high value customer relationships. But it does necessitate some change in mindset and some effective planning.
“It must be part of your budget and financial planning,” he said. “Cash flows are likely to be affected, so planning is critical and operational planning is necessary to ensure you have the tools to trap and manage your commitments.”
Important steps will include investing in marketing, sales training and carrying out reviews of past transactions and profitability in order to deduce which products you focus on.
And critically, consideration will need to be made as to how to remunerate staff, Jefferies added. “We pay our sales team their commissions up front and in full on these agreements,” he explained. “It simplifies some of our costs, keeps them enthusiastic for new opportunities.”
“I'm not a big fan of rebates, they tend to cloud and complicate the transaction,” he added. “I prefer to see gross profit in the deal itself. Recurring income is important to us, it provides peace of mind, predictability, stability and creates high value customer relationships.”
Having a good story
Yet the partner’s role is only one half of the equation -- just as important is that of the vendor, both in how they present themselves and their work with partners.
As McBain explains, for almost 40 years the channel has been synonymous with resellers and transacting partners, with programs anchored on precious metal “pyramid” schemes, and the partner journey has been predictably linear from recruitment to onboarding. In those programs, the partner journey has been built on incentives such as co-marketing and management.
And while this gives some of the biggest vendors partner communities spanning into the thousands, it doesn’t necessarily translate into both customer and partner engagement. As an example, McBain highlighted, Microsoft recently announced 7,500 new partners were joining its program each month, but failed to mention 80 per cent of those are non-transacting.
These programs worked well for the one-off deals, but are less of a fit for a 30-day sales cycle. Most vendors -- such as F5 Networks recently -- have altered their programs somewhat to cater to this changing dynamic.
Meanwhile, Salesforce, as McBain highlighted, has “effectively shut down its reseller program” and now needs new quantified methods of driving their ecosystem partners.
“Referral fees, finders fees, non-monetary rewards, specialisations, attribution, and points-based systems will become more important as a vendor's partner ecosystem expands and trifurcates,” he said.
Some vendors like Check Point went further and tried to shift to their program entirely by moving away from transactional rebates to issuing points based on partners’ activity, including meeting C-level executives, conducting product demos or carrying out joint planning sessions. It’s fair to say this switch-over wasn’t roundly welcomed by Check Point’s partners, and the vendor U-turned on it a year later.
For McBain, the lesson to be gleaned from Check Point isn’t necessarily that rewarding activity is bad, although partners who prefer engagement-focused metrics are in a minority. But Check Point may have had more success had they “layered the change” over time rather than dropping it then and there.
From the partner perspective, Jefferies added the onus needs to be on the vendors to have a good SaaS story or value proposition in the first place.
“[They need to make] the product easy and straightforward to sell,” he explained. “It must be easy to transact and somewhat automated. As the transaction often goes from one invoice to many, simplification to deal with multiple invoices is critical.”