Is the Cloud making channel partners less necessary? How does the incentive structure for cloud products differ from traditional incentive structures?
The answer to your first question is quite the opposite. Ten years ago, vendors went to market through the channel because it was cost effective. Today vendors can sell their software solutions in online marketplaces (e.g., AWS Marketplace), so it would seem partners may be less necessary. However, while you can purchase SFDC online and run it yourself, you will definitely need SFDC partners to come in and reconfigure and integrate your instance around your unique and specific needs. You need to keep the end customer top of mind as you develop your go-to-market strategies—so, in the Cloud, who is better suited to offer a cloud solution to an end customer than that local partner?
The Cloud requires channel partners; that model doesn't change. What changes is the partner type. Where you once had a transactional partner, now you're dealing with an entirely different type of partner. Most companies are going through this churn of partners as they move to the right partner type. So, the need for channel partners is still there. By the way, distributors will definitely become less necessary.
Now, the answer to your second question, is that the incentive structure will change for cloud services. Transactional incentives are successful when you deal with transactions such as having a partner sell a backup and recovery system for a bank. You are selling hardware with software valued at a million dollars, for example. Great, you can put incentives behind that and you're going to be very effective. But today, you're not going to sell a backup and recovery storage system to a bank. You're going to deliver backup and recovery as a service, and you're going to charge them on a monthly recurring basis.
So, if you run an incentive strategy based on the monthly recurring revenue of a cloud-based storage solution, you are not going to motivate anybody. First of all, it's not a big transaction. It's a very small transaction that happens over at least 36 months. So, you must move from a transactional incentive model to understanding what the activities and behaviors are that lead to that transaction and move to a behavior-based incentive model. In the Cloud, it's all about behaviors. In the hardware space, it's mostly about transactions.
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