2112 Group's Larry Walsh: Cloud Changes the Value Proposition

CHANNEL PARTNERS EVOLUTION — Channel partners’ value propositions are undergoing a dramatic shift, and they have the cloud to thank for that.

Larry Walsh, CEO and chief analyst of the 2112 Group, used his Wednesday afternoon keynote speech at Channel Partners Evolution to describe the future profile of the most successful channel partners and cloud solution providers.

Walsh said these leaders operate in a world of complexity. Whereas the 19th century centered around industrialization, and the 20th focused on information, the 21st contains the intersection of the two in the midst of more and more complicated technologies.

“Our job is not to deliver complexity. Our job is to mask complexity with simplicity,” Walsh told the audience. “Our job is to provide that shade, that mirror of experience that makes the customer feel good about with the services and technology we’re providing.”

Walsh argued that channel partners need to rethink their value propositions. The growing popularity of subscription-based cloud services means that the most successful partners are moving from product sales and deployment to technology business services. And Walsh said it’s more than just delivering a service. Partners need to take the complexity their customers face and simplify it.

“Not only can they transfer that on-prem legacy technology into a service-based context, but also take workloads off their customers’ hands, to take on entire business processes and lessen the burdened place on the customer,” he said. “If you think about it, the customer does not wake up in the morning thinking that they want to hug a server. They don’t even want to go dancing in clouds.”

Walsh pointed out several obstacles that keep channel partners and cloud solution providers from getting to this sweet spot. One of the most glaring problems is that many of them don’t contact their clients enough. The 2112 Group found that cloud solution providers who speak to partners on a monthly basis see more predictable revenue, profit and better retention rates. But one quarter (24 percent) of respondents commonly go more than a year in between talking to customers.

“It’s amazing how many companies do not talk to their customers,” Walsh said. “They make a sale, and then they go away.”

Partners are also offering underrepresented or incomplete cloud portfolios. While productivity software (think Office 365) and backup are extremely popular at 88 percent and 85 percent, respectively, platform-as-a-service is only in 21 percent of portfolios. Hosted servers and IaaS are only in 56 percent.

Walsh argued that channel partners need to redefine their value proposition and dramatically change their mindset about how they operate.

“You are not just reselling a service. You have to identify with the outcome and articulate that outcome to your customers in order to attract and retain them,” he said. “And through that value proposition, your customers will assign a greater level of value, because if they can see you as the provider of that greater outcome, they will bypass the box slingers and packet pushers.”

Walsh visited our podcast back in May and is a frequent contributor of analysis around cloud and partnership.