by Diane Krakora, CEO

Every day we see more and more players enter the ‘cloud’ market. Be that vendors offering an on-demand/subscription based model, partners positioning data center virtualization solutions as ‘private cloud, or service providers announcing new public cloud offerings.  As the cloud lexicon becomes more confusing, we’re seeing more chaos in the market – which of course brings opportunity.  But, is anyone buying?  Gartner states that from their recent research of CIOs, one-third of respondents expect to be using cloud in the next 18 months.  What kind of cloud isn’t defined.

We still get a lot of requests to clarify what cloud means – private, public, hybrid?  It seem as though you can buy anything-as-a-service: infrastructure as a service (Savvis, Terremark); platform as a service (Force.com; VMware); Software as a service (Google, Microsoft Office 365); IT as a service (Matrix, Continuum); collaboration as a service (Jive); storage as a service.  You name it – you can buy it on a subscription usage model.

The cloud world is crowded with options. And, how you might procure those services via the cloud is just as crowded and confusing.  Most, if not all, telecom carriers are offering ‘cloud’ services to end customers – ATT, BT, and NTT as a few examples.  There are also aggregators that bundle together solutions, offer negotiated SLAs, a help desk among other services.  We are seeing the traditional IT distributors (Ingram Micro and Tech Data for example), begin to play here, and compete with other aggregators like Xerox Cloud Services (formerly ACS) and master agents, who have long standing relationships with telco’s. These ‘wholesale’ organizations engage host of companies that white label cloud solutions – what the traditional IT industry would call reseller. They negotiate the contract with the customer, commit to an SLA, and ‘resell’ someone else’s cloud services – branded as their own. Also in the ‘resale’ space are integrators that might bundle together applications (like Gmail and Workday).  Integrators create an overall solution for a specific business need and focus more on the process changes than the technology.  And on top of all those routes-to-market is the agent model.  These entities sell someone else’s products/services and simply maintain the customer relationship. Agents need sales and marketing skills, get a recurring revenue stream (not a lot) and build someone else’s brand. Of course these entities range in size from two guys and a truck to large formal organizations.

All of these models are overlapping with strengths converging from traditional IT services and bumping into the telcom business. Thus creating more intricacy in partner types and frameworks.  Gone are the days of a linear route-to-market: distributor -> reseller -> customer. It’s all a jumble with complex and confusing engagement structures, service offerings and value propositions. Technologies may be converging (à la unified communications), but the channels are getting much more diverse and disjointed.  Who wins? The next two years will tell us who will emerge from the crowd.

Beth Vanni – Vice President

This week we resurfaced the age-old channel issue of Ease of Doing Business in our most recent Webinar: How Easy Are You? Driving Simplicity in your Partnering Model. This discussion featured panelists Heidi Dethloff, VP, BP & Midmarket Marketing for IBM and Michael Sotnick, VP, Global Channels for Quest Software.

Cost of doing business and complexity factors into the overall value equation from a vendor to a solution provider. It plays into partner loyalty and becomes a part of the solution providers’ decision to invest in new product lines. Solution providers have complained for years about having to invest in staffing to “de-code” channel programs.

We first took an in-depth view on this topic when we conducted PartnerPath’s “Cost of Complexity” study. At that time, 54% of vendors indicated being easier to do business with was a top channel priority, while 35% of solution providers interviewed said the complexity of business processes across their top vendors was still fair to poor. This year, those stats continue to be reflected in our 6^th Annual State of Partnering Study as well. While Ease of Doing Business has consistently ranked in the top three vendor priorities over past three years, in this year’s State of Partnering Study, the initiative hit the #1 spot.

So What’s New About EODB?

The consumption of cloud, SaaS and highly mobile applications seems to be retraining all of us to expect accessibility and simplicity. Partners continue to report program complexity, especially in the area of training and specializations, is still high. Although many leading vendors have applied a lot of automation work to their more complex business processes and value-based channel programs become more common, we still hear complaints about administration, costs and time to market. And, while there are more automation tools being offered, automation on top of bad business processes elevates complexity. Lastly, vendors continue to look for all ways to rationalize costs in their go-to-market models.

Participating webinar attendees identified the lack of internal channel awareness, poor automation systems and rapidly expanding programs to be the key drivers of complexity within their companies.

Companies such as IBM and Quest Software are tackling the complexity beast head on with their organizations by creating cultures of complexity awareness. Quest, emerging from a legacy of acquisitions, has focused on simplification not so much as a channel-specific initiative, but as the way the company positions itself in the marketplace in general. It has worked on unifying its approach in the market and has done a great job of streamlining processes such as deal registrations. As the company’s portfolio diversified, it placed a special focus on simplicity into channel recruitment and channel enablement.

IBM has created its “Radical Simplification” initiative to make significant strides in streamlining their business process and channel programs over the last several years. The effort consists of a broad cross-functional team that analyzes results from its annual Diagnostic Partner Satisfaction study which measures how to improve business partner relationships; a number of Business Partner Advisory Councils that spend time giving candid feedback and specific requirements to pinpoint actions to be more profitable; and other research from PartnerPath as well as a profitability study to prioritize simplification efforts around incentives, pricing, investment protection, marketing programs and skills & certifications.

“We spend a lot of time prioritizing the actions we need to tackle,” adds IBM’s Dethloff. “For us, keeping a two-way dialog has made the difference. We lean on our business partners to tell our story. Many of our advisory council members are willing to speak up when it makes sense.”

This is one of those “journey” versus “destination” issues.  We’ll be talking about this for a long time, as IT vendors, steeped in building and selling complex technology and solution providers, evolving their business models and customer support processes, attempt to work together.  It’s important that vendors continue to invest, evaluate, automate and measure their processes in terms of ease and simplicity. If for no other reason that to understand the economic impact of the partners they are trying to engage. As the German artist, scientist and mathematician Hans Hofmann so wisely stated, “The ability to simplify means to eliminate the unnecessary so that the necessary may speak.” To listen to PartnerPath’s webinar dialog on this topic, click here.

by Diane Krakora, CEO

Now maybe I’m wrong (it happens sometimes), but I’ve been working in the channel for over 20 years, and I’ve always thought the primary role of solution providers (previously called resellers) was to drive sales.  I cut my teeth in this industry at Merisel (anyone remember them?) and although my memory fades from time-to-time, I seem to recall that selling was a key expected competency from people that bought from distribution. Ya, ya, they had to know how to install the router/switch/hub or implement the software, but the “reseller” couldn’t even get there without – yep, you guessed it – selling!

So, riddle me this, what is with all the buzz about “partner-led selling models” lately?  IBM announced one. VMware announced one. And Cisco declared enhancements to their partner led sales model at their Worldwide Partner Summit last week. Andrew Sage, VP of Partner-led Sales for Cisco, announced a Partner Plus program to accelerate sales in the partner-led model. Which I’ve come to realize is an industry euphemism for “mid-sized and small business.” Does that mean we don’t expect the partner to lead the sale in an enterprise account? If so, someone should tell Dimension Data that.  Should the partner let each of the vendors in the solution call on the enterprise prospect to sell their own hardware, software or anything-as-a-service offering?  Fat chance. Enterprises want full solutions to their business needs – that’s why we call channel partners “solution providers.”

Anyway, back to partner-led – which was defined by Andrew Sage as “a sales model that empowers you (partners) to lead the sale with small and mid-sized companies.”  Haven’t channel partners been doing that for 30 years? What’s different to deserve this new nebulous nomenclature of “partner-led”? Aren’t these just programs for SMB partners? Is the term “SMB” out of vogue?

I say knock if off. The primary value of most channels – reseller, agent, system integrator, consultant, cloud provider – is to lead the sale with prospects. Doesn’t the vendor community want to engage, empower and manage these partners because of their customer/prospect relationship?  If you segment out some of them as “partner-led,” what are the others, “vendor led”?

Mia Blank – Client Services Director

Year after year, Cisco has taken feedback from their partners and put it into action.  This year is no exception. With a host of new programs and offerings announced including the HCS (Hosted Collaboration Services), focus on new trends such as BYOD (Bring Your Own Device), Unified Workspace and Jabber, the partner community is all abuzz about how they can become even stronger partners with Cisco.

As a new voice on the PartnerPath team, it’s refreshing to go into this event from analyst/consulting angle versus from a Channel Sales Management angle. While other large technology companies request feedback and input from their partners, Cisco continues to set itself apart from the rest by not only requesting the feedback, but actually taking the feedback and putting it into action.

Another key differentiator is the level of access partners and analysts are offered while at the event to key Cisco executives such as John Chambers, Rob Lloyd and Gary Moore  —   CEO, EVP WW Operations and COO, respectively -  in 1:1’s and round table sessions with “lightening” rounds.  It’s unprecedented.  And, it makes Cisco partners know their importance to Cisco’s success.

Being one of – if not THE – most partner-focused company on the planet, Cisco gets the power of the channel!

Cisco Offers Free Jabber License in its Quest to Own Desktop Collaboration

Beth Vanni – Vice President

I don’t think I’m alone in my difficulty in keeping up with the leading IT vendors’ mad onrush to own the dominant market position in the secure, virtualized and highly collaborative desktop environment.  All the major network, software and device manufacturers have thrown their hat in the ring, coming at the computing problem from different angles.   Cisco has been in this space with multiple technologies, but this week made a major move with a free license to its collaboration software, Jabber, to advance its position.

Salesforce.com launched Chatter over two years ago, to move its SFA and Service Cloud users to its vision of social media for the enterprise.  And, to get broad adoption (I think they have over 3 million users at last note) they gave away the application to existing Salesforce SFA users for the first year.  Microsoft is also pushing Lync really hard both through its roll-out of Office 365 and as a stand-alone collaboration application with a defacto position that this will be “Skype for the Enterprise”.  It offers instant messaging, click to call and all the traditional application based collaboration functions.  And, of course, there’s a myriad of other independent collaboration software players, including IBM Lotus Notes, Oracle Beehive, VMware’s Zimbra and many others.  And, that’s not even mentioning today’s marketshare leaders in VDI, namely Citrix and VMware.

Cisco’s position as a major software player in the market today is largely uncontested.  So, these day when they make a software announcement (especially one that’s free) users and partners stand up and take notice.  Today’s announcement was that Jabber would be made available for free to all existing unified communications users, both at the server and client licenses.  There was a clear enthusiasm from the audience of Cisco partners, who aren’t used to the networking giant offering much of anything for free.

The beauty of Cisco’s legacy market position is that all roads, especially those in the cloud, lead to the demand for more network bandwidth. Clearly, anytime more users use high traffic (instant messaging) or high-bandwidth consuming apps (video) across any network, it creates demand for more core routing and switching.  But, now they really do have nearly all the pieces of a connected and collaborative workspace solution – the desktop virtualization software, the enterprise device/tablet, the core networking infrastructure, telepresence systems, the management tools for identity and policy management, Webex collaboration, a broad security offering and now a more invasive collaboration software platform with an SDK that can be integrated with other applications.

So what does this mean to the average solution provider – beyond all the promises of the billion dollar sales opportunity?  It seems to me the sales campaign needed to tackle this computing challenge holistically feels a bit like a boil-the-ocean sales effort for the average VAR.  And, it requires some selling and client management skills they may not have.  Collaborative workspace draws into the conversation a detailed analysis not just of integrating devices and providing multi-media collaboration functionality around the whole BYOD phenomenon, but a rework of a major computing paradigm for most companies — namely, how do users get access to their data? what applications can/can’t they use? who can or can’t they collaborate with when they’re working? (notice I didn’t’ even say “at work!”)

I have no doubt even Cisco partners with only basic certifications (non Gold) and architecture expertise can tackle an “average” SMB customers’ collaborative workspace project at the technical level.   What I wonder about more is the average regional VAR having policy discussions about data sovereignty and application support, including which applications to integrate Jabber with or not, and to what specific user benefit.  Ultimately, I still think this whole promise of highly mobile and collaborative workspaces begs the bigger question  –  namely, who’s writing the next generation of applications for these mobile workspaces?  Whether they’re highly custom applications that live only behind the firewall or public cloud applications that are “blessed” by corporate, new collaborative and mobile-aware applications will be the gasoline in the engine of the larger collaborative workspace market for Cisco partners.

As Steve Reese from leading Cisco partner, Presidio, said this week, “Let’s face it, not every device or desktop needs to be virtualized. I bought my iPad because it’s sexy, it’s with me all the time and easy to use.  But I don’t want to run Windows-modified applications on it.  Our clients’ employees feel the same way.”   Reese points out “we at Presidio start every client engagement with a discussion about productivity gains, and we set some metrics.”   Now, let’s be clear.  Presidio is not the “average” Cisco VAR by any stretch of the imagination, having won Cisco Partner of the Year on too many occasions to count.  However, Reese is right to point out the opportunity for Cisco partners to absolutely be involved in their customers’ mobile applications plan and in assessing and forecasting their real desired productivity gains in collaborative workplace.

Who will be the marketshare leader in 3 years, with a loyal and profitable channel selling the value of collaborative workplaces?   Tell me your thoughts at bvanni@partner-path.com

Beth Vanni – Vice President

It’s always unique and endearing when an IT executive can forgo discussion of their technology and market trends and really speak to their partners’ interests, from the heart.  Edison Perez, Cisco SVP of Partners & Alliances, never fails to deliver in that area.

In his keynote speech here at the 16^th annual Cisco Partner Summit, Perez continued this partnering thought leadership by redefining how the network giant will attempt to address what’s important to a solution provider’s growth and success.  Dubbed their  “Return on Cisco” measurement model, Perez described a combining of his company’s own value proposition to partners with what traditional financial investors look for when infusing capital.  He described Cisco’s appreciation for creating a sustained and robust value proposition to their channel partners but also helping them address the growth and funding challenges they experience in their local capital markets.

The four areas of the “Investor’s View” that Cisco is trying to more holistically address, include:

• Operating profit
• Growth potential
• Minimized business risk
• General sustainability

Where Cisco used to be focused on its partners’ health as measured by transactional revenue and gross margins, they evolved several years ago to encouraging partners to measure return on invested capital (ROIC).  That was a bit of a heady financial metric for many partners, designed mostly for CFOs and Controllers.  So, this next evolution to a more traditional investor view should make Cisco’s business development assistance more approachable and accountable to a larger community of partners.

The real question on this new partner value equation is how Cisco will measure itself on its contribution to partners’ increased operating profit, top-line growth, business risk levels and sustainability.  Certainly any Cisco Gold and Silver partner today would tell you they get measured on enough things already.  So, it will be interesting to see how they work the Return on Cisco model into their annual partner satisfaction and/or profitability studies and give themselves a grade.

So, why is Cisco pushing this model now with its partners, as it comes off strong economic and marketshare growth rebounds?   My guess is that it helps them anticipate more business model transformation among their traditional infrastructure VARs, which they desperately need right now as they continue to urge their partners to stretch into selling their architectures and building cloud services.  Plus, it perpetuates their partner-centric approach, which will continue to differentiate Cisco.

Will this new philosophy help Cisco achieve its goals with partners?  Tell us what you think?

by Diane Krakora, CEO

In our last webinar, we invited Mont Phelps, CEO of NWN Corporation and Simon Palmer, CEO of STA to share their perspective on our 6^th Annual State of Partnering Study findings. Teaming up with MarketStar and PureChannels, this study queried 98 vendors and 250 solution providers on their investments, priorities and challenges for 2012.

Both NWN Corporation and STA are focused on selling services — both managed services and professional services in 2012. In terms of the cloud, our State of Partnering Study showed that vendors are moving from expecting partners to only act as sales agents to performing multiple selling and service roles around their cloud services. STA claims it is a neophyte in this area.

“Cloud and managed services are a significant and strategic goal for us in 2012,” said Palmer. “We have more of a toe-in-the-water approach to our cloud practice this year. We are helping our customers understand how they can develop a roadmap to get to the cloud. They have to evolve their current infrastructure to get to the cloud to provide the cloud delivery framework to their customer. We see the mid-market is intrigued with the cloud delivery framework as a way to deliver apps to their end-user customers environments. I can see us used more as an aggregator to sell a variety of cloud solutions in the future.”

“We are flailing around in the deep end. We have taken the plunge,” said Phelps. “We have set up a Cisco-Hosted Voice Collaboration solution. We have customers up and running, and we are seeing a tremendous pipeline and opportunity there. We also have a robust managed services business. We see relatively less value in repackaging and reselling someone else’s solutions. In terms of how we deliver these services, we have a high-level of competence and capabilities internally. A dedicated team of resources –we expect our sales force to find the opportunities and we have a deep set of resources to actually sell it.”

Beth Vanni – Vice President, PartnerPath

This month, we released the results from our 6^th Annual State of Partnering Study, titled, “2012 Channel Year of the Dragon.” As with the Chinese Zodiac, where the Year of the Dragon is considered a year of bold action, 2012 is expected to be a year of renewed growth for both IT vendors and solution providers. With the help of MarketStar and PureChannel, we gathered insights from 98 global vendors and 250 North American solution providers to identify their key priorities, challenges and spending plans for 2012.

In some ways, the challenges and investments required to make IT partnering really impactful have not changed at all.  We’ve seen the same challenges around getting partners the right skills, helping them evolve their business model and spending dollars in the right way to help them go to market most profitably.  On the other hand, a lot has changed in the last five years. Vendors now recognize partner value on multiple levels, and the concept of a “value added reseller” has become more that of a “value added relationship.”  With IT delivery models more transparent and flexible than ever, the average channel partner has had to redefine how they add value, and where they invest.  Intellectual property now takes the form of depth of customer insights, understanding of key business processes and services delivery expertise.  That evolution changes the way that vendors and partners rely on each other, and how they go to market together.

This year’s study focused on several key partnering topics including enablement, cloud and professional services engagement models, field sales coverage and organization models and channel spending trends.

In previous years, getting required sales and technical training and obtaining vendor certifications was both the leading indicator of partner value as well as the leading driver of channel complexity for many solution providers.  Ease of doing business has reemerged as a top priority for vendors.  Vendors have increasingly recognized that their business process complexity makes partners unable to quickly and effectively navigate the vendors’ training and certification programs and effectively sell and market.  So, despite the fact that vendors expect to continue to fund new business incentives and will significantly increase MDF spending in 2012, the business processes that underpin these channel program elements are still being overhauled for increased simplicity.

Despite solution providers’ optimism for renewed sales growth in 2012 study respondents did note concerns with their staffing model. IT sales and technical staff today are expected to have strong foundational IT solution skills, but also the appropriate vendors certifications and specializations specific to their markets and solution focus areas.  Further, this staff needs to now know how to have the business-relevancy conversation around outsourcing and cloud services with line-of-business decision makers.  This is a rare combination of skills in today’s market, and for which solution providers cannot always recruit.  If they don’t have the cash flow to afford it, they have to retrain their existing people to be emerging technology evangelists and understand how to sell annuity services.

This year, we expect to see a keener focus by both vendors and partners to get really close to customers’ technical and business pain points – and listening more closely than ever.  We expect to see managed and cloud services demand and investments grow steadily, but not at the apocalyptic rates industry pundits project.  In fact, on average, 65% of solution providers with <$50m in annual revenues said they were “unlikely” or “not at all likely” to invest in a cloud practice in 2012 time.  Partners cite a lack of fit with their business model, lack of customer demand, data security concerns and finally lack of technical and sales expertise as their biggest barriers to cloud service delivery today.  So, while vendors and distributors invest and go all-in with cloud investments, solution providers are still buying their time.

As for channel spending, nearly 30 percent of solution providers indicated that increasing their marketing and lead generation activities were the leading strategies to increase revenue in 2012. The market pressures for solution providers to have a real marketing strategy and execute it through a diverse set of vehicles are stronger than ever. We predict that vendors will begin to refocus on partner-led marketing and higher level of accountability to joint lead generation activities.   We expect social media and web-based marketing vehicles to continue to be a big focus for vendors in their outbound partner communications as well as in the co-marketing tools like content syndication they push their partners to utilize.

“We are moving from the mindset of a ‘Marketing to’ to a ‘Marketing with’ our partners. The more we can help our partners with virtual marketing, and reward them with deal registration and rebate incentives the better position we will collectively have,” states Bob Skelley, Executive Director of Global Certified Partner Programs for Dell.

This is the year that solution providers of many shapes and sizes will be forced to define their real core competencies and differentiate in quantifiable ways, both to their customers and their suppliers.  This is the year where partners might have to invest ahead of their revenue to make a big bet for the next three years; otherwise, their competition and the demands of their customers will ride right over them.

What is the State of Partnering in 2012?  We expect a year of bullish, bold growth with solution providers taking a proactive role in helping their customers define their next level of using IT as a competitive business advantage. Vendors are ready to get out of their partners way by reducing complexity, being flexible in accommodating multiple business and engagement models and recognizing (again) their partners’ value in managing the customer relationship.  But, it’s up to solution providers to take their honed skills and specializations to market in a very proactive, focused and well-differentiated way.

An Executive Brief of this study is currently available on PartnerPath’s website.

Download the replay’s of the 2012 State of Partnering Study: Vendor and Solution Provider Discussion

by Diane Krakora, CEO

In our last webinar, we invited Mont Phelps, CEO of NWN Corporation and Simon Palmer, CEO of STA to share their perspective on our 6^th Annual State of Partnering Study findings. Teaming up with MarketStar and PureChannels, this study queried 98 vendors and 250 solution providers on their investments, priorities and challenges for 2012.

Ease of Doing Business has been listed over the past four years as an important priority for vendors. This year, it actually was the top priority. We think this is due to the need to help partners leverage skills investments to accelerate top-line sales growth such as technology capabilities and certifications. How big of a problem is channel program complexity still? Are you seeing vendors becoming easier to do business with?

“I think every vendor we deal with across the board is hard to do business with,” Palmer candidly said. “What we want to achieve and what our vendors want to achieve need to be better aligned.”

Phelps adds, “Quite a number of vendors say they want to be easier to do business with. Cisco even said they would cut a percentage out of the cost of doing business. This would benefit us all. The vendors are trying, but they still have a long way to go. We had to hire people to help manage the programs and certifications we hold, all 350 of them. There has to be an easier way. I think we can work together to smooth out some of the rough edges in the relationship.”

by Diane Krakora, CEO

At this year’s PartnerWorld Leadership Conference, IBM touted their commitment to radically simplifying the way they do business with partners. They are right in line with the rest of the vendor community.  The 100 vendors represented in our 2012 State of Partnering study ranked “ease of doing business” as their top priority for 2012.

The North America partner team in IBM has 5 initiatives they are implementing to make doing business with IBM easy and straight-forward.

1. Pricing – everyones favorite topic. IBM is increasing visibility of the overall effect of special bid codes on approved discounts and providing more insight on complex bids.
2. Incentives – the second favorite topic after pricing.  IBM has streamlined three key incentive programs :

• Consolidated and eliminated a number of partners in the STG incentives – launching consistent incentives across multiple IBM brands
• Reduced the complexity and administrative burden around the competitive incentives
• Simplified Maintenance and Technical Support Services incentive framework that pays from “dollar one” with accelerating payments for year-to-year growth

1. Deal Registration – always a love/hate relationship for solution providers

• Streamlined and consolidated registration under a consistent framework for the same rules and tools for System x, Storage, Power and Services registration program (not software though… which is going to make it difficult for them to track and manage the new Solution Accelerator program)

1. Skill Certification – which we find to be one of the main areas of complexity in most vendors program

• Eliminated overlapping and inconsistent requirements and reduced the number of requirements for  some certifications

1. Marketing Programs – one of the most under-utilized areas of any vendors programs

• Reduced the administrative burden with the new Co-Marketing Center (an on-line marketing campaign tool)

And they have good reason to think these initiatives will pay off.  They highlight that last years’ ease-of-doing business initiatives saved each Business Partner an average of a week per month of administrative workload (7.75 days to be exact). How much more you could sell if you had a 5^th quarter in every year?