Cloud and the Channel: A Matter of Trust

By Dede Haas

Cloud changes how IT is delivered in plenty of ways, but there’s one constant: Relationships matter. Technology can make or break any organization, and complexity is high, so you’d better believe decision-makers value partners who they believe have their best interests at heart. This emphasis on relationships based on trust are the essence of why the channel model will not only survive the shift to a services-based future, it will thrive. When customers no longer have that “security blanket” of a closetful of servers and storage hardware, the customer/solutions provider bond is everything.

That’s a lesson most longstanding tech vendors have taken to heart, and that cloud upstarts are learning.

A study last year by ZS Associates showed that half of all VARs selling products as cloud services are dissatisfied with how their vendors listen to and act on their feedback. Cloud titans Amazon and Google aren’t exactly poster children for channel, to put it mildly. In contrast, take F5 — at least 90 percent of its revenue comes through its channel sales partners, and the company is on record saying it would prefer it to be 100 percent. Jim Ritchings, F5’s senior vice president of worldwide channels and alliances, attributes the company’s consistent growth, from a couple hundred million to $1.4 billion, and track record of success as something it achieved by having its channel “right there with us, adding to our growth, adding to our market leadership. We could not have done it without them.”

What can cloud vendors, including service providers spinning up their own cloud-services offerings, learn from companies that, like F5 but also Cisco, HP, Microsoft and IBM, not only say they have a solid channel focus but also walk the walk?

The fundamental cornerstone of a commitment to the channel involves listening to partners. It means building and honing programs around the thought leadership that comes from that listening. It’s about keeping channel partners motivated, incented and educated. What vendors get in return is more confident, skilled and certified partner sales and technical teams, which means more investment in products and services and happier end customers. Oh, and The 2112 Group estimates that the channel generates nearly $500 billion in annual sales. So there’s that.

Make no mistake — partners will walk away from deals, even with vendors noted for great products, if the partner agreement will be bad for their business. Managed Computer Services, a cybersecurity solutions provider, did just that.

“How flexible the vendor is on discussing your concerns with the agreement will show you how flexible they are going to be with you as a partner,” says Don Weir, MCS’ CMO. “There are always other vendors with the same or similar products.”

Before metrics, before MDFs and before incentive programs there is the vendor-partner relationship. If there is no relationship …

… there is no partnership.

Building Blocks: Culture and Tools

Babar Batla, CEO and co-founder of SalesIntel – whose business is the science behind relationships – defines what makes a great channel.

“It acts like the vendor’s extended sales force, an extended arm of the organization,” says Batla. “They know the product well. They understand the customer’s pain and are able to make that match between the customer pain and the product’s value points. Additionally, they provide input to the product team to give them the visibility into what the market is saying.”

This is the type of partner program cloud vendors need.

So how does a vendor, cloud or otherwise, develop such a beneficial and sustainable business relationship? Getting there demands cultural changes up and down the organization. Listen. Listen to the partner. But not only listen, learn about your partners. Take the time to understand their business models, how they make money and how they sell. Plan to complement, not conflict with, the way they do business. Openly communicate with and support them, let them know what to expect from the relationship. Help them make well-informed and prudent business decisions that have a positive and profitable impact on both organizations. And most importantly, strive to earn their trust; it is the foundation of a successful partnership — along with increased revenues, expanded markets, a new customer base.

In addition:

“Nearly every business today – from large multinationals to small home-grown companies – is increasingly dependent on strategic and healthy relationships with their channel partners,” says Suraj Kumar, IBM’s program director for B2B cloud solutions. “Channel partners are providing more customized value-added services to rapidly help develop market differentiators for their customers. With the move to cloud computing and SaaS solutions, channel partners are playing a vital role in integrating SaaS solutions with companies’ existing systems.”

Note that channel partners are not off the hook for nurturing a relationship. But it is the responsibility of the vendor to …

… help the partner be successful. If partners are not holding up their end of the bargain, then the vendor did not do a good job vetting during the recruitment process or managing expectations once the partner was on board.

Process + Tech = Success

Once the culture is in place, there are technologies that can strengthen the channel relationship. Let’s discuss three that you may not have considered.

“The vast majority of business conducted in the U.S. and around the world still goes through channels,” says Yafi. “In the U.S., commerce derived from direct B2C is less than 20 percent of total.” And, there’s a cap on how many companies want to deal direct. In a world of constant disruption, cloud vendors shouldn’t get complacent. “At a time when competition can come suddenly and from anywhere in the world, having a strong and tight vendor-partner relationship can be the difference between a vendor’s global success and failure, because it is the partners who continue to gain the trust of the customer, deploy relevant solutions, and maintain the client relationships day-in day-out,” says Yafi. “This is unlikely to change.”

Dede Haas, CA-AM, channel sales strategist and practitioner for DLH Services, creates innovative and successful channel sales solutions for the vendor and the partner. She has developed and managed channel partner programs for enterprise and cloud-based products and services for SMBs and for industry leaders such as Intel Corp. For the partner, Haas has managed the vendor relationship, created business opportunities, and developed and conducted product training. She has also been a speaker, panelist, and moderator for various conferences and technology organizations, written articles for industry publications and is the author of “The Channel Sales Guide.”

LinkedIn: linkedin.com/in/dedehaas