Show Me the (Cloud) Money!

One of the topics I also raised in my last blog was the process issue, in this blog, I’m going to discuss the channel issue. 

As most of you reading this will be selling through the indirect channel, I see the complexity of the channel model as one of the biggest challenges. Moving to cloud subscription or consumption usage model requires just as much planning around engaging your channel as the process piece.

Basically two key issues to address are:

1)      Developing new incentive programs that the channel will respond to

2)      Building the fundamental “zero touch” mechanics to collect data and bill accordingly

Regarding the first issue – incentive programs, I’ve always found anything related to incentivizing people internally or externally to your organization potentially controversial. My suggestion is that before you sign, seal and deliver, socialise your ideas with your channel partners across the world and seek their input, something that may seem obvious but rarely do vendors solicit this feedback BEFORE launching programs. The best way to get anyone on-board with a new strategy is to ask them for help.

Incentive programs can be two things though, the incentive to promote and the incentive paid upon completion of a sale. To be honest, the incentive to promote should be there – customers are asking for it. But if the incentive paid upon completion of a sale doesn’t back it up, you potentially face the issue of a channel partner persuading the customer to choose an alternative.

Since most partners will have been used to one-off lump sum payments, incentives (in this case margin) paid monthly understandably causes much anxiety. Perhaps a rebate on the first few sales will motivate them to make the transition. Over time your partners will become used to it, but just like you they are facing a big change in their financials but they are not working on the same margins that a vendor does.

In terms of billing, under a cloud consumption model, usage is generally reported monthly. You will now be relying on your reseller partners or service providers to supply you with the usage data every month – how will you know that they’ve done it?  Do they even have the systems in place?

Cloud revenue is much lower than annual product or service sales so it’s critical that that all levels of the supply chain collect every cent every month. Many companies tell me they can manage these processes via excel, I’m telling you now that you will struggle. Excel does not scale in the same way a purpose built system can and cannot provide the alert notifications and reporting (without significant manual intervention) to make it efficient.

For those that have read the book - the cheese has moved. So are you Hem or Haw?