Almost every technology that used to be exclusively on-premise is now available as a service, thanks to cloud and edge computing. As a result, more companies have access to technology that was previously only available to large enterprises. Everything from software to infrastructure and security can be provided through the cloud, and the market is only expected to grow.
According to Gartner, the total worldwide public cloud spending for cloud business process services, application infrastructure services, application services, management and security services, system infrastructure services, and Desktop-as-a-Service is expected to reach $482 billion by the end of 2022—a year-over-year growth of 21.7%.
For channel partners, that opens up more opportunities for recurring revenue. To learn more about how channel partners can capitalize on the as-a-Service model, we spoke with Ryan Morris, Principal Consultant at Morris Management Partners, Inc.
The Channelist: Could you tell me a little bit about what the channel of the future looks like today?
Ryan Morris: Absolutely. That’s been a conversation for several years. It’s partly to do with understanding the business outcome of the end user and being able to communicate to them more about what those outcomes are than what the technology inputs are. But it’s also a question of the business model of the solution provider.
My philosophy on it has been that the customer, the solution provider, the distributor, and the vendor are basically all in it together. If one does not perform well, then all of them pay the price. And so, as I look at it, the channel of the future is more about an integrated play across the layers of the value chain than it is just the fortunes of the individual players.
The Channelist: What are you seeing right now regarding that kind of integration?
Ryan Morris: We see that the vendors who see and embrace that philosophy get very strong buy-in from partners. If you take that business outcome approach as a solution provider with your end user, the customer prefers that. It’s the same thing when a vendor takes that approach with a solution provider. It also is a significant value and business model shift for the partner.
The Channelist: I’ve noticed that there has been such a shift, especially in the past few years. Moving from that, “Here’s the technology. Let’s implement it for you,” to, “How do we take this technology and then continue to optimize it for you?”
Ryan Morris: Yes, much more of a lifecycle approach. It’s interesting because, historically, we used to look at that as a question of the complexity of the technology. If it’s an enterprise app, it has layers, and it’s really complicated for implementation and integration, well, naturally, that begs for a phased rollout and continuous innovation. But that was never really the way people approached selling laptops, keyboards, and baseline computing technologies. That’s the big shift.
There’s more cool new technology available today than ever before, but we make lower margins on it than we’ve ever made before when we just sell the product. So whether it’s entry-level client device type things or incredibly advanced enterprise computing, it really has to be a solution approach.
The Channelist: How do solution providers shift their businesses around to meet this new model of selling?
Ryan Morris: There are three layers to it. There’s a baseline financial modeling where they have to embrace the reality of the lifetime value of a customer. You get a small upfront engagement that leads to more expansion and retention. If you do it well, that requires them to step back from that transactional model where they say, “I want to sell you five servers and five switches, and that will be $100,000.”
Then it moves to the solution-design or the solution-packaging level where you can say, “I see what problem you’re trying to solve, and it’s not an item. It’s not a product that does that. It’s a collection of products plus a bunch of services that go with it.”
Many vendors struggle with that philosophy because they become a component of a solution instead of the star of their own show. It’s a big change, but that’s the second layer.
The third layer of change is…marketing and sales. I would argue that the solution provider channel has historically been very capable at inbound transactions, but they’ve never been fully capable at outbound market engagement and initiation and then solution selling. Being great at technology is nice, but it’s not enough to be successful. You also have to be good at marketing and selling and know how to get paid the way the customer wants to pay.
The Channelist: Some vendors will provide marketing materials for their partners, but they won’t provide much more support. What’s the solution provider to do at that point?
Ryan Morris: We engaged with a big security software vendor 10 years ago. They were trying to design that online store of marketing materials—campaigns and assets and tools—and they were trying to map that so their largest partners would access the online store or qualify for a partner marketing specialist. But if you were small, you could only go to the online store. I said, I think that’s completely upside down because if I’m $100 million in annual revenue, I guarantee that I have a department of people who do marketing. But if I’m $3 million in annual revenue, there’s a group of six or seven of us that runs this business. I guarantee none of them are marketers and they don’t know how.
I get it, enablement is expensive. But the philosophy that I’ve always preached to the vendor community is what I refer to as enlightened self-interest. If you are the vendor, success for you is defined as sales through volume, right? You want to sell your stuff. Well, if you do that through a channel, then by definition, you can only grow as much as your channel can grow, so enabling partners is actually in your own self-interest. But many vendors look at that and say it’s not my job to do their marketing for them. It’s not my job to teach them to be successful. But when you go to this quarter next year and you have a 20% growth number that your boss gave to you, if you didn’t teach partners how to grow by 20%, they don’t.