Channel empowerment, customer outcomes, solution labs, orchestration, partner ecosystem, and frictionless access for business scale are a few of the twelve essential components for a future-ready partner program. VMware is systematically addressing each one of these. In February 2019, I spoke at an IBM event during IBM’s Partnerworld conference and presented the above components. Unfortunately, IBM has chosen to be extremely slow to go down the path of the imperative future direction. In direct contrast, VMware is using the right words and is traversing a measured way to put words into action.
Cloud has fundamentally reshaped the consumption of IT resources. By providing buyers with variable-cost access to software, software development environments, core processing, storage resources, and even specialized skills, the cloud’s Anything-as-a-Service model prompts a massive shift in IT spending from traditional products and to on-demand alternatives. As a result, the transition from conventional products to aaS is fundamentally disruptive to the IT channel.
Business infrastructure is no longer procured solely through asset purchases – there is an accelerating trend towards aaS procurement. The direction means an increasing proportion of single large transaction sales spreads across a multi-year period for a channel partner, which stresses sales management, compensation structures, financial management, and cash flow. It also places strain on the professional services group by changing/expanding the requirement for technical skills. Buyers increasingly need support for hybrid IT environments spanning conventional and cloud infrastructure. To remain viable, channel partners and vendor suppliers need to align scarce resources with shifting customer demand. Channel executives need to guide their businesses through the transition to hybrid/cloud, maintaining account relationships as customer expectations evolve from ‘what can you deliver?’ to ‘how can you support my business in a shared-risk environment?’ VMware has begun the shift to being a guide and partner enabler for an empowered future.
First announced in 2018, VMware re-introduced its Partner Connect program in 2020 with a shift to SaaS. One year later, I find that it is in touch with reality, successfully transforming for the future. VMware plans to achieve 40% revenue from SaaS and subscriptions by 2025 compared to 18% in 2020. It knows that efficient SaaS transformation begins with a practical engagement with the partner ecosystem and is doing so by transitioning from product sale focus to creating customer value and aligning with delivering customer business outcomes.
Creating Customer value
In the last 20 years, we have seen the channel that builds value from the vendor out. Vendors and partners have generally sold technology with the promise to help businesses cut costs, accelerate cycle time or expand reach and revenue. Once a transaction is complete, the onus for realizing these objectives has rested with the customer. However, our recent research shows that 79% of end customers engage with partners who can deliver business outcomes and create customer value. VMware is on a path to ensure that partners’ sales and marketing resources and customer commitments align with business outcomes rather than technical thresholds, and supporting this by positioning solutions in business language and business-relevant SLAs. In an era of good enough technology, customers are not especially interested in optimizing the performance of their hardware and software widgets – they are focused on improving the performance of their businesses. The changes are central to transitioning to where channel opportunity is growing, which, more than any adherence to tried and true practices, is the goal of channel management looking to position their businesses for long-term viability. VMware’s channel partner team is working hard to drive customer value as opposed to partners doing value-addition.
Orchestrate with partner model to drive services-led opportunity
Among its three partner models – Sell-through, Orchestrate with, Build with – orchestrate with will likely see the most growth and acceptance, whereas build with will face tremendous competitive headwinds.
Sell-to and sell-with are the two sales approaches most preferred by the channel. Sell-to is especially popular with MSPs, 40% of whom report that sell-to is their preferred vendor supply model. Similarly, 37% of resellers prefer it. Co-selling, which offers both advantages and exposure, is becoming very popular in the channel, with a substantial percentage of partners.
But orchestration is where the future opportunity lies. The ‘new turnkey solution’ is based not on a defined hardware/software configuration but the orchestration of multiple on-demand services integrated with existing legacy systems. Techaisle channel survey research data shows that a critical enabling technology in hybrid environments, cloud orchestration, is less widespread than other channel solution niches. But at least, within 42% of channel partners, some orchestration skill sets are available. However, over time, this will become a critical capability for most channel organizations. Due to its complexity, cloud orchestration will require easy-to-deploy packaging, easy-to-communicate operational instructions, and delivered via P2P relationships. However, Channel P2P partnerships go beyond service delivery. VMware is investing in P2P partner experience and ecosystem, but its initial focus seems to be on alliances rather than P2P.
To deliver on its goal of 40% of revenue through SaaS and subscription services by 2025, VMware plans to create a substantial services-led partner opportunity. In an aaS world, IT-enabled services are consumed throughout the customer’s organization and purchased by many different individuals within the business. Therefore, an effective services strategy is not limited to finding accounts that are willing to pay for services but identifying as many potential services buyers as possible within a customer account and selling to many/most/all of them. Service delivery to the IT department is an integral part of the puzzle, but numerous other pieces exist.
Enablement to partner empowerment
As I mentioned earlier, an essential aspect of partner transformation is transitioning from enablement to empowerment. From a vendor perspective, enablement is a matter of resource allocation. In theory, any vendor could identify and then replicate, at least to some extent, industry-leading practices across all direct sales and marketing areas. The problem, though, is that it would incur an unsustainable level of cost. Therefore, vendors need to cover all primary bases but allocate the highest proportion of resources to the areas that significantly impact their partners. The first question that vendors must ask about enablement and empowerment is, then, isn’t ‘what might we invest in?’ but ‘what programs are most important? I am happy to note that this is the first step that VMware is taking towards partner empowerment.
Incentive programs, lead generation, online marketing/sales tools, and post-sales technical support are cited as necessary by 40%-46% of channel firms surveyed by Techaisle. As one VMware partner described to me: “does VMware plan to have better revenue streams for us as partners, how do partners leverage that in future - we want a better experience, how can we have more revenue streams; enable us to create more opportunities; it is not only about discounts, we want to understand that if it will create more opportunities for our growth as partners.” Partner interest in fees and activity-based incentives is driven primarily by firms with traditional channel business models used to traditional channel management practices/programs/incentives. Future-ready programs need different incentive schemes. It is almost as if VMware is beginning to listen to partners. VMware is revamping its incentive structure. There are now thirty incentives across the entire customer lifecycle. In addition, VMware is taking a Solution Lab approach for the next level of joint solution development. This type of co-innovation program helps partners differentiate themselves through the development of unique IPs.
Final Techaisle Take
A critical factor in translating the benefits of program attributes and brand position into strong partner performance is the human aspect of channel relationships – the ability of the partner team, from channel chief to partner account managers, to work effectively with their channel counterparts. Techaisle’s survey investigated key channel expectations to understand the specific attributes and activities that positively impact vendor channel chief and channel relationships. Two attributes – “trustworthiness and accountability” and “setting a clear overall strategy” – are most frequently cited as essential elements in successful vendor/channel relationships. Many vendor organizations assume that they fulfill the terms of at least the first attribute. Unfortunately, they evaluate their actions and positions from an internal perspective, with the benefit of understanding internal operations in great detail. Vendors looking to be the next relationship partner for channel partners need to carefully plot their approaches, considering ways of emphasizing compelling benefits that will drive consideration and make the engagement process as straightforward and painless as possible. VMware promises less friction.
VMWare partners have high expectations. As another partner told me, “We want to offer utility model to our customers. Hence, the expectation is for an easy-to-use commercial model. It’s an expectation which the VMware partners have for the future, that there will be better utility models for the end customers from VMware.”
I will repeat what I said at the start of this article. Channel empowerment, customer outcomes, solution labs, orchestration, partner ecosystem, and frictionless access for business scale are essential components for a future-ready partner program. VMware is systematically addressing each one of these. VMware is not in a hurry, not yet. It wants to do right by the partner, systematically.
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