Cloud, Channel, ChallengeCloud, Channel, Challenge

As channel partners become more aggressive about selling cloud-based services, one of the biggest challenges they face relates to the financial model.

Many articles were written at the end of 2012 predicting trends for 2013, most of which included predictions about how the cloud will change our lives. "The cloud" has many definitions; when I talk about the cloud it includes public and private cloud, plus hosted and managed services.

As channel partners (VAR, systems integrator, solutions integrator, reseller, etc.) become more aggressive about selling cloud-based services, one of the biggest challenges they face relates to the financial model. In the past, when a channel partner sold a business communication system for on-premises deployment, they received a large one-time payment. The model is different with the cloud, where channel partners receive payments spread over a period of time, with smaller payments on a monthly or quarterly basis.

In an effort to more closely follow the old financial model, several equipment vendors have tried to address this problem by paying their channel partners a high percentage of the total revenue up front, at the start of the contracted service term, rather than forcing the partner to rely on smaller payments over time. Some of these programs were close enough to the old model and should have encouraged the channel partner to sell the cloud offering.

Unfortunately for the vendors, there is another problem: the channel partners' skill sets need to change. The sales person that can close a deal on a "box" sale is usually not the right person to sell communications as a service. This new model requires a consultative sale, where the VAR takes time to understand the customers' needs and business processes.

In the past, this transition of channel skills has evolved in three ways:

* The channel partner transforms their business by retraining part of their staff--usually the technical side of the business including service and support. In many cases, a painfully high percentage of the sales staff needs to be turned over, creating a challenge for many incumbent communication channel partners. In other words, the financial model is usually not what's holding back channel partners; rather, it's a matter of not having the right people.

* Channel partners with different disciplines partner or merge. We saw this occur as voice and data services converged, when an interconnect company (voice) would partner with a VAR (data). The new cloud model will likely be a combination of a current voice/data channel partner working with a services company; the voice/data group would provide some of the technical expertise, with the services company providing the financial model and sales skills.

* A new group of channel partners emerges. We've seen this before, as interconnects rose following the CarterFone Decisions, while VARs and VADs (value-added dealers) evolved with the introduction of mid-range computers. It is easy to envision a cloud vendor developing programs to create a channel of agents made up of underutilized recent college graduates and a services organization to deploy the solution.

UCStrategies and Enterprise Connect are partnering to help create a dialogue on this topic. UCStrategies will be hosting a reception at Enterprise Connect in Orlando March 18-20, and a major focus of the UCStrategies UC Summit, April 28-May 1 will be on the Cloud. Let me know if you would like to join us at one or both events. Send me a message at [email protected]