Techaisle Blog

Setting the Pace

Amazon AWS lets a thousand flowers bloom, Microsoft Azure has curb appeal, Google Cloud is the new gold rush. Google Cloud reported Q3 revenues of US$4.99B, an increase of 45% year over year. During the same period, Google Cloud's operating loss has narrowed from US$1.2B to US$644M. Partners are optimistic. Although Google's partner program may be nascent, it is evolving rapidly, setting a frenetic pace and speeding down the right track. The partner management team within a vendor organization is responsible for the quality of partner relationships, a critical responsibility. Ramping up new partners is expensive and time-consuming. Partner portfolios deliver the most significant returns when vendors achieve high buy-in levels and mind share within their partner communities. Partner management isn't defined solely by relationship quality, though. The effectiveness of individual relationships and partner programs and activities can be measured in terms of sales impact – and sales impact itself is generally driven, at least in immediate terms, by the quality of sales enablement and support

Kevin Ichhpurani, Vice President, Global Partner Ecosystem & Business Development at Google, is creating a partner differentiation strategy. The strategy includes a no-services friction partner first approach, developer training, selling to line of business buyers, incentives alignment, and driving marketplace revenue. Carolee Gearhart, Vice President, Global Channel Sales & SMB Sales at Google, takes the strategy further by clearly defining fundamental tenets of partner advantage – simple, collaborative, innovative, and built for growth. Google never built Google Cloud as a channel business. To begin with, Google Cloud is enabling partner transparency, increasing visibility of information, and simplifying lead registration.

Google Cloud has two main product lines: Google Workspace, a subscription SaaS solution, and Google Cloud Platform, a cloud consumption solution. Since they are different products, they have different buyers, buying economics, and competitors. To have an efficient partner program, Google is building a program that meets where the customer is buying rather than changing the sales motion. Instead of creating a partner program for different partner types, Google is developing a program based on engagement models. Early on, Google realized that it does not have an installed base to which partners can sell renewals. Partners, therefore, have to visualize compelling economics to invest in Google Cloud Platform and Google Workspace. Hence, Google has invested in activity-based incentives in the pre-sale stage. Incentives that drive customer demand and lead to sales. Partners have differentiated motivations that drive new customer acquisition, upgrades, and multi-year contracts for Google. It has attractive deployment incentives and recently introduced adoption and consumption incentives, giving partners incremental profitability and incentivizing them to grow their book of business.

Partners are listening

Partners are listening and increasing their resource investments in GCP. Techaisle data shows that 58% of partners are building in-house expertise in Google Cloud. And 62% of SMB-focused partners are either currently offering or planning to offer Google Workspace solutions. We have spoken with many AWS, Azure, and Google Cloud partners in the last six weeks. As one partner put it most eloquently, "…but the reason we are standardizing on GCP is that it offers some of the best incentives that are out there. We used to work with AWS as well. And previously, my last organization worked heavily with AWS and Azure. We knew that Google had one of the best hosted Kubernetes offerings that are out there. Once we started working with Google, we found out that not only were we right, but Google also can manage Kubernetes clusters across all the clouds. And we also wanted to get into a little bit more data analysis and, in some ways, machine learning. Google has its Cloud Vision API, its natural language processing engines, Big Query, and just a mighty engine for any data analysis services. Microsoft, Amazon likes to say that they offer a better ecosystem, but we wouldn't necessarily consider that ecosystem a mature one just yet. There are not as many integrations as they are marketing. And Google has so far stayed true to its word on what they were able to promise as far as just raw processing power."

Thoughtful incentives enabling partner engagement

A key enabler for partner intimacy is the alignment of incentives for the entire customer lifecycle – from demand generation to customer adoption and cloud consumption. Google's attention to detail for both pre-and post-transaction is a vital partner empowerment lever. It naturally has a tremendous revenue flywheel effect for the partner. Google's deep focus on pre-sales incentives for partners has the partners excited. When PoCs make or break customer relationships, pre-sales funding is essential. As another Google partner told us, "Our incentives primarily come in the form of PSF and leads that Google funnels our way. So, during the SOW process, a significant portion of the SOW is paid for by Google. We do a lot of proof of concepts and pilots and just set them in secure landing zones. And I'd say probably say the large majority of PSF probably goes towards those types of engagements."

Sales incentives are one of the areas of highest vendor channel investment. Techaisle's partner research shows that fees and activity-based incentives, solution development funds, and deal registration are necessary enablement incentives for 40% to 50% of partners. Over 60% of partners prefer Sell To/Sell With sales models, indicating the need for co-sell, co-marketing, and IP-led solutions. Data shows that 29% of partner revenue is coming from IP-led solutions. The steady rise in demand for solution development funds and the decline of market development funds shows that partner IP-led solutions are becoming front and center. Recognizing the trend, Google has devised incentive programs to engage with different partner business models and partners selling Google Workspace and Google Cloud solutions.

'Knowing what we don't know' is often the thorniest complication in decisions. A unified and contextual insights strategy mitigates this risk by ensuring that data from within the organization is aggregated, giving decision-makers the most complete and up-to-date information possible. Zoho One promises to deliver contextual critical business insights for Midmarket firms and SMBs.

Zoho has 500,000 customers, over 70 million users, and 40,000 customers on Zoho One, a product introduced to the market in 2017. One of the customers has 32,000 employees using Zoho One. What is Zoho One? It is a collection of 45 apps that span all primary business functions, with CRM, analytics, and communications being the most used, followed by accounting, helpdesk, and Sales IQ. Driven by the need for increased team collaboration and conversation in the last year, Zoho Cliq, a chat app, has become the third most used app within Zoho One. Having great success in the services vertical industry, Zoho is making quick inroads into the real estate, banking, and other financial services market segments.

Do businesses subscribe to Zoho One all at once or plod and pedal from one app to many? The answer lies in the market segment. Small businesses adopt and use all apps simultaneously, mainly because they see Zoho One as a path to transformation and digitalization with the least friction. It is relatively easy to adopt a single app, connecting its inputs and outputs to relevant internal systems and processes. Likewise, it is possible to adopt a handful of apps, hand-wiring the interconnections between them and adjacent applications. But this craft-built approach to digitalization is not aligned with longer-term visions of scale, flexibility, and agility. It creates management overhead and performance and security risks for small businesses. Zoho One, an integrated platform, quickly offers a cohesive approach to addressing several business pain points concurrently.

Midmarket firms often explore multiple apps before committing to Zoho One. Either through experience and education, one or several Zoho application parleys to adopt Zoho One or many midmarket firms prefer to work with only a few apps. Zoho's integration with its competitors helps the midmarket firms immensely, making it a more straightforward decision than identifying resources for automation and integration.

While we generally consider "SMB" as a single segment, there are often differences between the "S" and "M" segments – and their approach to cloud business application adoption illustrates one such difference. Midmarket businesses usually have complex deployments. The most common midmarket cloud application workloads provide a technology platform for enabling processes rather than an application platform for expanding the depth of specific tasks within the organization. Small businesses look to the cloud to primarily enable agility, while midmarket firms are also interested in improving IT efficiency.

What is next for Zoho One? There are five new apps, three new services, and seven platform enhancements to help "businesses unify systems, data, and teams." Two announcements interest me the most because they are universally applicable to all small and midmarket businesses regardless of cloud maturity, size, and vertical industry.

One of the most exciting insights available from Techaisle channel partner survey research and corresponding SMB and midmarket survey research is the extent of divergence between what customers value in their relationships with channel partners and how the channel presents its value to its customers. The extent to which the two sides do – and don’t – connect is again diverging, first noticed by Techaisle in 2012. Data shows that the channel is emphasizing benefits that have relatively minor effects on customer/channel relationships.

As seen in the data, quality of services provided by the partner and technical expertise are the most important reasons why customers embrace their channel suppliers, followed by industry knowledge and long-term relationships, understanding of business needs, deliver business outcomes, and pricing. On the other hand, “features and functionality,” “affordable price,” and “availability as a subscription service” are messages used by more than 50% of the channel, “ease of use,” “robust security,” and “industry/vertical-specific relevance” by about 40%, and “affordable maintenance and support,” “customizable to meet business needs” and “deliver business outcomes” by 30%-36% of channel members. Thus, the messaging by partners differs from what customers value.

Another interesting pair of findings from the channel survey compares customers’ most critical technology requirements with the positioning channel firms strive to attain within their customer bases.

It was once thought that the cloud would reduce the technology deficit SMBs face relative to larger firms – but it is difficult to say that this has proved to be the case. Indeed, the cloud has lowered the barriers to adopting new systems, giving SMBs access to applications and infrastructure resources that would have been well beyond their means five years ago. However, Techaisle’s SMB and Midmarket Cloud adoption trends research data show that cloud, and hybrid IT, has posed other challenges: difficulties in integrating systems with each other and with business processes, and in integrating data across applications (ensuring that data created by one application is input automatically into others); difficulty in securing systems that are based in multiple locations and managed by various organizations, each with their own set of operational rules; difficulty in applying appropriate levels of security and governance to an ever-expanding pool of data that moves at accelerating pace through an ever-more-complex constellation of systems, users and locations. Large organizations have IT teams dedicated to addressing specific issues within this shifting and complex set of requirements. SMBs rely on limited internal resources (often, small groups of generalists), supplemented by fractional headcount support from third-party channel members, to keep pace with the change that results from the constant advance of cloud and hybrid.

Despite these challenges, though, evidence suggests enormous scope for cloud growth in the global SMB segment. Data indicates an apparent leader/laggard dichotomy between midmarket and small businesses concerning IT-enabled innovation. Over 20% of midmarket firms have internal teams dedicated to “finding ‘what’s next?’ technology-driven innovations,” and 40% “have IT budgets specifically for technology-driven innovation;” 11% report that they have embedded IT professionals charged with finding innovations into business units. Small businesses are, on average, about half as likely to have taken these steps; instead, nearly half of firms with 1-99 employees state that their organizations do not expect IT to drive innovation actively.” Making the assumptions that a) midmarket firms will benefit from the express linkage of IT and innovation, and b) that the gap between large enterprises and midmarket firms is likely as significant as the delta between midmarket and small business. Additionally, large enterprises will, over time, capture IT-enabled business innovation benefits even more rapidly than midmarket competitors. Data illustrates the foundations of a cascade, where IT-enabled innovation drives business success and further cloud investments in larger firms, defining success patterns that small organizations then adopt.

The findings also expose the uncertainty that SMBs face as they structure their IT/business strategies. The most significant proportion of SMBs – 42% of small businesses and 32% of midmarket firms – state that they are unsure of what the next 10-15 years will look like for their industry. Other SMBs worry about their ability to cope with the pace of change: an average of about 25% of SMBs report that they “are struggling to keep up with the pace of change,” and nearly 20% state that they “do not know if they will be able to complete over the next decade.” Against this backdrop, a cadre of forward-looking organizations – 15% of small businesses, roughly a quarter of midmarket firms – “are battling barriers to become a digital business by 2030.” The successes that these firms realize over the next several years will increase their appetite for further cloud investments and encourage their peers to commit additional resources to cloud-based business initiatives. Techaisle expects that if and as these digital leaders realize tangible benefits from cloud and hybrid, the cloud will become an essential element of SMB business operations. As a result, SMBs will become a significant force in the cloud market. Moreover, suppliers to the SMB market and the SMBs themselves can align to bring about this positive change. Techaisle believes that mutual benefit will drive commitment and innovation on both the supply and demand side of the cloud equation.