(Stephen Parker, Head of Cloud Strategy)
Where are we?
Cloud sales are growing and being revised upwards all the time. However this is driven by a relatively small number of partners. For the investments made by the major vendors to be justified they need their partner communities to incorporate the Cloud into their day to day businesses on mass.
(Source: IDC, 2010)
To this end there has been a huge investment in Evangelism activities to address the “Why should I care about the Cloud?” questions. To a large extent this has been successful with growing numbers of partners concluding that the Cloud is more than just the latest fad and represents a major industry shift that they cannot ignore. These partners have then signed up to the vendors respective partner programs or sales agreements.
However despite this growing volume of “sign ups” there has not been a corresponding growth in partners who have “Activated” and are actively selling the vendors Cloud offerings.
Sales growth is still focused on the few who have been creative with their business plans and made the commitment to the Cloud. Whilst this will ensure growth in the short term it will not scale to meet the mass shift that the vendors need. This is not about one vendor or a specific geography but globally across most of the major vendors (multiple sources, from multiple vendors across various geographies – all who would be pretty hacked off if I divulged any specific numbers!!!)
Why is this happening?
In short because this is a period of disruptive change rather than an evolutionary change.
Evolutionary State (more of the same please, just make it better)
Despite the IT industries confident statements about being based on constant change, the reality is that for most of the time the basic underlying business models don’t change. Businesses are set up by copying other successful businesses. This means that business plans do not in general need to explore the new or unknown and in many cases do not exist in any detailed form at all. When new products are offered by a vendor the effort is about convincing the partners that this new release can do more, faster and for less money. Partners who have been “early adopters” are held up as examples and they are seen as people to aspire to because they are recognised as “one of us”. Once the evangelism has worked the vendor offers services to support the technical, sales and marketing teams to address the “How do I evolve my existing skills and processes?”. The partner can now slot the new vendor product into their existing business models. The sales people work the same and are commissioned the same they just have some new fact sheets and battlecards. The developers have some new features to use but essentially are working in the same development model. Finance still invoices in the same way and accounts as before.
For most of the time new vendor offerings are just more of the same only slightly better.
Disruptive State (I’ve got the will, but not sure about the way)
Now lets compare the Evolutionary State to the Cloud shift. There are still “Why?” objections that need to be overcome, although the partners are potentially more sceptical. Evangelism is used to show that this is a fundamental shift. New business opportunities and models are demonstrated. New “startup” partners tell how they are being revolutionary with new approaches and skills and through this changing the market. Customers talk about how the Cloud has changed the way they view IT and how they have worked with the new “startup” partner to achieve success. Although a greater level of evangelism is required the “Why do I care about the Cloud?” barrier is overcome and the partner signs up to the new program and goes back to the office with determination.
However when the partner starts to think about what needs to be done to make the Cloud part of their business the “How?” blockers start mounting up:
- The example “startup” partners are not someone they recognise, they are in reality the visible incarnation of the threat to their business.
- Unlike the evolutionary state they cannot simply emulate the example partner because they have a different business model, with no legacy and this will mean a major shift in their business plans (and developing fundamentally new business plans may not be a skill they have developed during the evolutionary state mode).
- Even if the management team know they need to change, what about the staff?
- Have they go the new skills required, will they feel threatened and resist change?
- Will the sales team accept a shift to trailing rather than upfront commissions and can they work in the world of smaller repeat business vs large enterprise sales?
- Can the vendor/3rd party be trusted to deliver the underlying service ?
- Even if they can does that provide the partner with enough control over their own destiny?
- How and where will they make money and with what pricing models?
- Will they be cannibalising existing business or can they have a model where the old and new to co-exist?
Even if all this can be addressed is the new world order one where they get disintermediated anyway?
With all these largely business blockers the Cloud excitement dwindles and ends up in the “too difficult” bucket. The “How?” barrier stops progress to Activation.
What can be done?
Unless the vendors are happy to grow a new partner community based on startups and those few existing partners who have the capability and commitment to make the business shift then they need to offer additional support. It is not enough to just offer Evangelism to overcome the “Why?” barrier. Vendors need to help their partners address issues such as:
- Business planning
- Organisational change
- Risk assessment and management
- Market positioning and messaging
During Disruptive Change there needs to be recognition that there are 2 barriers, the “Why?” AND the “How?”. Vendors need to provide partners with much deeper education and training support to progress through the business blockers and overcome the “How?” barrier.
Come back for more posts that will expand on the issues raised here and additional information about what can be done.