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Channel programs News

COLUMN: Missing Out On The Everything-As-A-Service Boom

Steven Burke

CRN Executive Editor Steve Burke says some vendor channel programs and compensation models favor direct sales and are holding back the Everything-as-a-Service model.

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There is no greater channel maxim than compensation drives behavior. That age-old rule applies to every job in every industry, but in the channel it is absolutely sacrosanct.

As the pandemic has accelerated the channel’s move to Everything as a Service, there are some vendors stuck in pre-pandemic mode with compensation models that have not kept pace with the demand. These vendor channel programs and compensation models favor direct sales and are holding back the Everything-as-a-Service model.

In that model, customers are looking to strategic service providers to deliver a single monthly invoice where they pay only for what they use across their entire hybrid IT estate, including the public cloud.

Ironically, public cloud providers are at the top of the list of vendors holding back the Everything-as-a-Service model with their online marketplaces. The problem is that these public cloud provider marketplaces have in many cases not worked out ISV models that take into account the solution power of strategic service providers.

The public cloud providers have come up with revenue share models with ISVs but have failed in many cases to build compensation models that reward strategic service providers delivering Everything as a Service. They have flat out ignored the scale and solution muscle that strategic service providers bring to the game. One reason certainly is the huge profit and high profit margins these public cloud providers are delivering quarter after quarter.

But here’s a message for them: Those profits and margins would be even higher with the full weight of the strategic service provider model behind their marketplaces.

It is not just the public cloud providers holding back the Everything-as-a-Service model, however. There are many ISVs and Software-as-a-Service providers that are sticking to the old subscription model and refusing to let partners provide a single invoice.

A heated market with out-of-control demand from customers looking to accelerate their digital transformation amid supply constraints also is fueling the failure to incent strategic service providers with appropriate compensation models.

The other side of the compensation conundrum is that many vendors have put in place direct sales models that incent the vendor sales reps to go direct. That is a model that has failed time and time again. It is basic economics. Go it alone, you lose. Build out a scalable channel model, and you put in place a force multiplier that drives huge growth.

The channel model has driven every major technology shift since the PC boom. Those vendors that leverage the channel always end up taking market share from those vendors that sideline it.

The bottom line: Vendors that put in place compensation models that incent partners to drive the Everything-as-a-Service revolution working hand in hand with their direct sales teams are going to see big market-share gains. Those that don’t will find themselves on the sidelines of what is by all accounts the biggest market opportunity of our time.

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