Presented at 2010 Sage Insights Partner Conference by Laurie McCabe, Partner, SMB Group

1. Perspec'ves on the Business Model of
the Future:
What Does Cloud Compu'ng Mean for the
Channel?
2010 Sage Insights
Laurie McCabe
Partner, SMB Group
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2. Agenda
• Pu5ng Cloud Compu:ng in Perspec:ve
• What Does Cloud Compu:ng Mean for the
Channel?
• Crea:ng Value in the Cloud: Top Success Factors
• Summary
• Q & A
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3. PuDng Cloud Compu'ng in Perspec've
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4. Cloud Compu'ng—PuDng it Simply
• Cloud compu:ng is a compu:ng model that lets you access soJware,
server and storage resources over the Internet, in a self‐service manner
• Instead of having to buy, install, maintain and manage these resources on
your own on‐premise servers, you access and use them over the Internet
through a Web browser
• Some:mes you might need to download a small piece of client code, but
for the most part, the real horsepower is supplied from the cloud
Cloud Computing Data Customer Site
Center
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5. But We Can’t Keep Anything Simple!
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6. Cloud Compu'ng Takes Different Shapes…
Infrastructure‐as‐a‐ PlaRorm‐as‐a‐Service SoJware‐as‐a‐Service
Service (IaaS) (PaaS) (SaaS)
Amazon EC2, (AppExchange, Intuit (Salesforce.com,
OpSource, Rackspace, Partner PlaRorm, NetSuite, Success
etc. MicrosoJ Azure, etc.) Factors, etc.)
SoJware + Service
Connected Services
“Hybrid” Model
(MicrosoJ, Intuit, Sage, etc.)
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7. Cloud Compu'ng Evolu'on
Workflow-
enabled
Business
Process Hubs
Marketplaces
Pre‐integrated
“Cloud” Cloud/on‐
SaaS premise
On‐premise solu:ons
SaaS (Ver:cal Appliance
solu:ons “Hybrid”
PaaS
IaaS
SaaS (More
integrated
horizontal
Hosted ASP solu:ons))
model
Early mul:‐
On‐Premise tenant SaaS
Client/Server
1990 2000 2005 2010
Wave 3
Wave 1 Wave 2
• Integrated suites • Hybrid
• Standalone apps
• Vertical solutions • Ecosystems and marketplaces
• Horizontal solutions
• PaaS • Pre-integration
• Multi-tenancy as an option
• IaaS • Community access
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8. One Thing is Certain‐‐Cloud Compu'ng
Adop'on is Growing
• Cloud infrastructure will grow to
116.5 B by 2014: Forrester
• 20% of all businesses will own no
IT assets by 2012: Gartner
• Cloud compu:ng market growth
28% annually to $126 B by 2012
• “Hockey s:ck growth for cloud
compu:ng” ‐‐ Steve Ballmer
(Informa0on Week 4‐19‐10)
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9. What’s Fueling Cloud Compu'ng Growth?
Customers
“Faster, Cheaper, Easier”
• Technology is ge5ng more complex
• Eliminates capital investments for infrastructure
• Eliminates ongoing technical managementand update costs
• Reduces financial risks—predictable subscrip:on v. large upfront costs
• requirements for internal IT exper:se
• Speeds :me to solu:on value
• Increases vendor accountability and service
• Evolves more flexibly
• Provides connec:vity and collabora:on advantages
Organiza:ons are focused on business results—not on
technology, applica:ons or infrastructure. IT is a means
to an end—the value of IT lies in how companies can
apply it to meet business objec:ves.
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10. What’s Fueling Cloud Compu'ng Growth?
Vendors
“New revenue streams and more efficiencies”
• Reach and penetrate new markets by lowering costs and reducing
technology barriers to solu:on adop:on
• Enables easier, faster prospect trials
• Provides a predictable and stable recurring revenue stream
• Provides a real‐:me pulse on customer behavior and requirements
• Enables cross‐selling opportuni:es
• Centralized controlled environment reduces support calls and costs
• More manageable upgrade cycle
SoJware vendors want to capitalize on the Internet,
digital technologies and “the economies of scale and skill”
that cloud and SaaS compu:ng provide.
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11. It’s Going to Be a Hybrid World
for a Long Time
• Most customers want a blend of
soJware and services
• Cloud compu:ng will complement
rather than replace tradi:onal on
premise compu:ng solu:ons
o Security
o Compliance
o Network performance
o Hybrid or soJware plus services
model offers choice and flexibility
o Beyond a certain number of users,
on‐premise solu:ons can be more
cost effec:ve
o Reliability (poten:al network/data
center outages)
• Combina:on of cloud compu:ng,
SaaS, on‐premise and virtualiza:on to
deliver solu:ons
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12. What Does Cloud Compu'ng Mean for the
Channel?
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13. Channel Adop'on of Cloud Compu'ng
Drivers Inhibitors
Customer/account
control‐‐disinterm
edia:on
Customer demand
Compensa:on
Annuity revenues
Selling services inst
ead of
soJware
Business consul:ng
opportunity Limited customiza:
on
opportunity
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14. Tradi'onal SoWware Channel Model
• Indirect channel is an integral part of the sale, delivery and
support of on‐premise business soJware
• Complements soJware developer with sales, implementa:on,
support and service
• Tasks are divided and there is limle overlap between soJware
develop and channel roles
Indirect End‐user
SoJware
Channels Customer
Developer
VARs, SIs, Distributors, etc.
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15. Cloud and SaaS Channel Model
• Cloud compu:ng and SaaS doesn’t align with the tradi:onal IT
channel provider role
• SaaS or cloud provider delivers many of the things that IT channel
has tradi:onally provided‐‐soJware and hardware sourcing,
installa:on, management, etc.
• Line is oJen blurred between soJware developer and channel roles
Cloud
Traditional IT End‐user
SoJware
Channels Customer
Developer
Channel
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16. Changes in Partner Role and Opportunity
Task On premise Cloud/SaaS Change in revenue opportunity
License/ Partner as reseller Partner as catalyst Smaller ini'al deal sizes (.
subscrip'on Lengthy sales cycle Shorter sales cycle 5‐1.5x"
service sales High customer IT involvement Lower customer IT involvement Upfront revenue, but
10%‐30% margin paid upfront One 'me referral fee/up to 30% can be recouped via annuity
ongoing annuity stream
Implementa'on Lengthy dura'on (weeks to Shorter dura'on (days to weeks) ”Time to value” is generally
and training months) Partner doesn’t install anything shorter
Partner provides product sourcing, Partner can manage project and may
installa'on, configura'on, provide training
training Partner adds value “on top”
Partner adds value “underneath”
Integra'on, data Integra'ng local on premise Integra'ng on‐premise with SaaS/ Integra'on of SaaS to on‐
migra'on, etc. systems cloud solu'ons—hybrid model premise, SaaS to SaaS can be
more complex
Business process Modifying soWware to fit business Aligning business processes to “best Favors business, industry
consul'ng processes prac'ces” domain exper'se
Solu'on OWen extensive Usually limited to configura'on Code is usually “locked down”
customiza'on/
configura'on
Add‐ons, Good opportunity to resell, Growing opportunity to resell, Cloud plahorms, APIs, etc.
extensions, etc. develop and integrate develop, and integrate ease and speed development
OVERALL DEAL SIZE 3x – 5x license sale .5x – 1.5x license/subscrip'on sale Decreases
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17. Cloud Compu'ng Requires Changes—But
Doesn’t Eliminate the Need for the Channel
Myth! • Cloud/SaaS vendors have focused
more on direct sales to establish a
strong customer base and
demonstrate viability and scalability
SaaS and Cloud • But‐‐direct sales alone can’t fuel the
future growth curve
vendors can effec:vely • The cloud and SaaS eliminate/reduce
penetrate the market technical barriers to adop:on—but
through direct Web customers s:ll need help to:
o Evaluate and select the “right”
channels alone solu:on
o Tailor the solu:on
o Integrate legacy and third‐party
solu:ons
o Adapt business processes
o Train people
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18. Cloud and SaaS Vendors Need the Channel to
Bridge the Last Mile to Mainstream Customers
• Early cloud and SaaS growth
fueled by evangelism
• Direct model works with early
adopters but doesn’t scale for
the mainstream
• Lacks trusted advisor to help
customers evaluate alterna:ves
• Doesn’t do enough to address
concerns that many customers
have
• Overcomes technology barriers
but not lack of business process
exper:se required to extract
business value from the solu:on
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19. Require Channels to Fuel Growth
• Direct sales costs unsustainable
to influence, sell and serve the
broader market
• Cloud and SaaS vendors need
to leverage channel/trusted
advisor rela:onships to scale to
a broader market
• Vendors need indirect channels
to:
o Catalyze sales to a broader
market that channels have
served for years
o Minimize customer churn
o Op:mize renewal rates
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20. Vendor Channel Programs are S'll Evolving
• Direct/indirect sales • Service and support
• Compensa:on models o Joint customer
o Referral commission only services tools
o Referral + annuity • It’s s:ll early
• Rules of engagement o Most are struggling to
formulate a win‐win
• Billing models channel formula
• Channel programs o Fight for channel
o Joint marke:ng and sales partners will intensify
programs o Programs will change
through
o Educa:on and training experimenta:on
o Partner program fees
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21. Crea'ng Value in the Cloud: Top Success
Factors
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22. #1: Think Solu'ons, Not Products
• Focus on understanding
ShiJ from
customer needs
• Adjust for the shiW from IT to
business decision makers
solu:ons • ShiW mix towards services and
away from license/subscrip:on
reseller to sales
• Enhance consulta've sales
solu:ons skills
• Deepen business process and
catalyst industry exper'se
• Concentrate on customer
results, not technology
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23. #2: Capitalize on Economies of Scale
• Ramp up lead genera'on
and sales volumes to reach
Prepare for new customers/markets
• Add/improve online
smaller deal marke:ng, telesales, etc.
• Reformulate skill sets‐‐
sizes and mul:‐tasking sales and
project managers
faster • Reformulate
methodologies and
deployments approaches for service
delivery
• Revise compensa'on plans
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24. #3: Think “And” not “Or”
• Non‐biased advisor to help
educate, assess evaluate
Posi:on for and select
• Provide customers with a
a hybrid “one‐stop shop” for both
on‐premise and cloud
“soJware + solu:ons
• Strengthen/develop new
services” integra'on exper'se
(legacy to SaaS, SaaS to
model SaaS, etc.) and security
capabili:es
• Develop virtualiza'on
exper'se
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25. #4: Strengthen Your Role as Trusted Advisor
• Tailor the solu:on to specific
customer requirements
Customers • Hone ver:cal, domain and geo
and local business knowledge
s:ll need • Provide flexibility and services
that cloud/SaaS vendor doesn’t
your domain • Choice (aggregate apps from
different vendors)
exper:se • Data migra:on
• Integra:on
• Change management
• Etc.
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26. #5: Extend the Solu'on
Capitalize on
the growth customer needs
• Tailor the solu:on to specific
opportunity help customers evaluate/select
• Become an expert source to
capabili:es for a more
to resell, • Provide extensive integra'on
comprehensive solu:on
develop and services (on premise to SaaS/
SaaS to SaaS)
integrate • Develop ver'cal or niche
horizontal func'onality
addi:onal
func:onality
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27. #6: Look for a Channel Friendly Vendor
• Evaluate strategies, offerings,
pricing, etc.
Cloud and • Vet vendors’ partnership DNA
SaaS vendor
• Reputa:on and trust
• Direct/indirect channel focus
• Clear rules of engagement
channel • Educa:on to help shiJ business
model and build new skill sets
programs • Rewards for high levels of
customer engagement and value
vary add
• Par:cipa:on fees
significantly
• Joint marke:ng and sales
programs
• Customer‐facing tools and
dashboard
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28. #7: Adjust Your Business Model
• Need to align business model with
with vendor(s):
• Referral fees
Align skills, • Annuity fees
• Renewal fees for contract renewal
metrics, etc. • Coop marke:ng funds
• Plan for different cash flows
to op:mize
• Smaller, more frequent
compensa:on
• Less money upfront, but
your “smoother” annuity revenue curve
over :me
opportunity
• Consider crea'ng a separate
organiza'on for cloud/SaaS
business—since it tough to align
skills, compensa:on, metrics, etc.
across these different models
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29. Summary
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30. Cloud Compu'ng is an Opportunity
for the Channel
• Cloud compu:ng and SaaS are not a fad
o Cloud and SaaS compu:ng vendors are growing more rapidly than
conven:onal soJware businesses
o Will be the only way some businesses will be able to consume
increasingly complex technology they need to run their businesses
profitably and compe::vely
• Customers need help in choosing, implemen:ng, tailoring and
managing cloud and SaaS solu:ons
o Many customers are s:ll confused
o Cloud compu:ng models are con:nuing to evolve
o Hybrid model will be the norm for the foreseeable future
• Indirect channels are cri:cal to fueling future growth
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31. Remember that Customers S'll Need Help!
• Evalua:ng and selec:ng the “right” solu:on
• Implemen:ng and tailoring the solu:on to
their specific business and technical needs
• Integra:ng third‐party applica:ons to extend
the solu:on
• Changing business processes
• Training people to become produc:ve on the
solu:on
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32. Look for the Opportuni'es
1. Think solu:ons, not products: shiJ from solu:ons reseller to
solu:ons catalyst
2. Capitalize on economies of scale: prepare for smaller deal
sizes and faster deployments with higher volume strategy
3. Think “and” not or: Posi:on for a hybrid “soJware +
services” model
4. Strengthen your role as trusted advisor: customers s:ll need
your domain exper:se
5. Extend the solu:on: Capitalize on the growth opportunity to
resell, develop and integrate addi:onal func:onality
6. Look for a channel friendly vendor to partner with: Cloud
and SaaS vendor programs vary significantly
7. Adjust your business model: Align skills, metrics, etc. to
op:mize your opportunity
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33. Thank You!
SMB Group, Inc.
508‐410‐3562
informa:on@smb‐gr.com
Website: www.smb-gr.com
Blogs: http://sanjeevaggarwal.wordpress.com
http://lauriemccabe.wordpress.com
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