The Cloud, ERP and the Channel Partners (Part II)

Cloud solutions are impacting application software ecosystems. Channel partners will need to change several aspects of their businesses to optimize their revenues and profits. This is Part II of a series.

This is Part II of a series on the implications of cloud software on ERP channel partners.

The last point also shows that geography will no longer be as big of a factor in ERP ecosystems. The day when an ERP solution provider defined themselves as “a South Side Chicago reseller of one vendor’s product to any small business within our 10 mile driving range” are over. Buyers will want the core ERP solution but they’ll also want an implementer that truly knows their vertical. Since the solution is in the cloud, integrators won’t need to spend so much time on site. The configuration, data cleansing, etc. will be done remotely.

In fact, the sale may be done remotely, too.

The best channel partners will be those that can implement twice as many products in half the normal time. Their references will drive the word of mouth and deal flow needed to win lots of work. Selling channel services and products at local Rotary Club meetings is becoming passé. The best channel partners will also learn to sell like the best cloud software vendors. Take a look at Sonar6. This is a New Zealand based SaaS firm that can’t afford to send sales people, demo divas and implementers all the way from Auckland just because a prospect wants a demo. They put all their selling in their website. They publish their costs online and don’t negotiate. They learned how to sell SaaS software less expensively. Implementers need to do likewise for services.

Today, channel partners, et.al., have some tough structural questions to address. These include:

- Do we create a separate business unit for the cloud business? Many channel partners I spoke with are doing just that. The differences in sales, services, support and implementations are so different for the cloud solutions they offer that they believe a dedicated group is the best way to attack these opportunities.

- Do we cannibalize our existing on-premise customers to get the cloud business going? No. Virtually no partner I’ve spoken with is doing this. Not only is this harmful to the reseller’s top line, it’s also unnecessary. Not every customer wants or will go with a cloud solution.

- Which verticals should we pursue? Some partners are jack-of-all trades and a vertical business focus is a tough path for them. If your competency is HR or Finance, for example, staying focused on those horizontals may work, but, don’t be surprised if customers would rather talk to a different partner that understands the unique and specific inventory nuances of their cupcake baking industry. Get vertical and get vertical now.

- Do I really have to become global? Yes. Go read (or re-read) Friedman’s book “The World is Flat”. My firm is global and yours should be, too. Just create some product extensions for a new cloud solution and see how fast your global presence grows.

If yours is a large, multi-national service firm, you have some additional re-work to do with your practice. Your issues include:

- What do I do with my investment in people, data centers, etc. in India, China and Eastern Europe that support old-school ERP products? Pray. Pray the market takes a few years to move off this data model while you re-tool some of this capacity to cloud solutions. Some of the majors are already doing this. They’re using workers in some locations to perform low-cost solution configuration, data cleansing, data migration and other tasks. They are leaving certain functions, like solution sales and project management to local, client facing executives.

- What do I do with my application maintenance outsourcing business? Prepare to see it shrink over time. CIOs are going to look at this part of their budget more closely. They’ll want to know why vendors are automatically maintaining their cloud-based email, CRM and other systems but they or their outsourcer still have to maintain older ERP products. The market will demand that vendors maintain all applications not just a few categories of applications.

Channel partners seem to be making the transition to the cloud rather well. They know the market is shifting and all the wishing in the world that it wouldn’t isn’t going to help. They are accepting the change that’s coming and they seem to be seeing this moment as a time to restructure and reposition their firms for another wave of growth. I personally think is a healthy, and probably productive, outlook to possess.

Click here to read Part III

Click here to read Part I

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