As customers shift from premise-based to cloud-based IT, channel partners are evolving their business models for pricing, selling, and delivering cloud offerings across the entire lifecycle. According to Cisco’s strategic marketing organization, global spending on cloud services is expected to grow from $72.6 billion to $181 billion by 2017, representing a 20 percent CAGR. As partners begin their journey transitioning to a cloud model to capture this growth opportunity, there are five key business imperatives that they should implement:
1. Construct a Hybrid Cloud IT Business Model – Moving to the cloud doesn’t require a “rip and replace” commitment. Partners should think about architecting a hybrid cloud IT business model that allows them to evolve at their own pace, and affords more flexible consumption models for customers. Many partners still want to retain their customer premise-based equipment (CPE) business, as today most of the revenues are still driven by on-premise equipment sales. Therefore, the ideal mix includes on-premise solutions, applications, managed services, private and public cloud, packaged with professional services and different SLAs. With this hybrid approach, partners can continue to nurture and grow their core business as they transform to a cloud model, while serving customer demands for cloud solutions.
2. Utilize Experts to Prepare for Cloud Go to Market – Moving to a cloud model also requires internal infrastructure and organizational changes that partners need to plan for in order to be successful. It’s important that partners seek outside guidance from vendors and other third parties on key business functions including business model building, marketing, sales, operations, accounting, billing, and services. Recruit and hire cloud experts that can manage internal teams and run pilots in each business function. This will help foster cross-functional alignment and prepare partners to go to market with their cloud solutions. Reach out to local vendors and ecosystem partners to understand what they can offer, including sales training, services training, business process improvement training, etc. to help with the transition. Cisco also offers its Business Transformation Resource Center (Cisco partner-accessible only) as one resource for partners to tap for their cloud evolution.
3. Engage in the Right Business Conversation with the Right Customer Department – Traditionally, service providers and other partner companies have sold managed solutions into a company’s IT department. However in the new cloud world, lines of business (other departments within a company) are increasingly influencing cloud service purchase decisions. As a result, partners need to be prepared to effectively address these new buying centers. Whereas IT is moving from being a cost center to becoming an orchestrator or broker of cloud services, lines of business are increasingly deciding which cloud solutions to buy in order to address a business problem.
4. Consider Partnering with Other Partners on Cloud Offers – The cloud market also represents an opportunity for partners to collaborate on providing cloud solutions to customers. By establishing and enabling SaaS and ISV models, partners can begin to enter into two distinct discussions with the IT leader specific to productivity gains along with innovation and another with lines of business specific to resolving their business problems while innovating. As a result, cloud allows IT and the lines of business to align to a common goal of innovation for the purposes of driving profitable revenue.
5. Don’t Forget Cloud-based Customer Services – Services now account for up to 70% of partner profits (source: Services Leadership Incorporated), which is an opportunity that should not be left on the table. Before fully transitioning to a cloud model, partners should look at broadening their business model to incorporate new cloud related pre-sales and post-sales support. These cloud-centric Professional Services capabilities may include cloud assessments, application validation, business process management, and ROI analysis. Offering cloud-related Professional Services not only helps partners cater to a whole new spectrum of decision makers but it provides new revenue stream opportunities as well.
It’s clear that cloud has fueled a massive transformation for channel partners and opened up new business opportunities. With solid business planning and sound execution, partners can evolve their business models to seize this opportunity.
I would welcome your thoughts on the challenges facing your business, and where you stand on these key business imperatives. Please share your thoughts and join the conversation via the comments section. In the next few weeks, look for another GTM blog post that will be relevant for partners who are trying to determine which cloud model is best for their customers.