In the early days of the cloud, companies could easily hook customers ready to try it by simply offering them access. However, in today’s maturing cloud market, providing cloud access is not enough of a competitive advantage for companies to sustain or grow their market share.
A fully realized go-to-market strategy is pivotal to capturing market share, building partnerships, and sustaining revenue. Whether you entered the cloud game early and want to remain competitive or your company is putting together its first cloud program, you will benefit from taking a client and partner-centered approach with your cloud go-to-market strategy.
How the economics of cloud sales affects your go-to-market strategy
When considering your cloud program’s go-to-market strategy, remember that cloud offers a different revenue strategy than traditional software sales. Under traditional software sales, a customer buys a software license for one hundred employees at a set price per user and receives the software they need to run their business, while the cloud provider receives the dollar amount for the sale.
With cloud, companies often start new contracts at a loss, then recoup expenses months after converting a client. On average, it takes nine to ten months for a cloud contract to become profitable for the provider. Yet, once the cloud contract reaches profitability, it can offer you exponentially more revenue than a single product sale.
With an effective cloud go-to-market strategy, partner relationships must focus on the longtail payoff rather than the transactional sale. This mindset shift is easily comprehendible, yet challenging to implement with partners.
With a compound annual growth rate of 24%, the cloud market is projected to be worth $411 billion by the end of 2020. According to the State of the Cloud Report 2020, the cloud industry is expected to grow over several decades, and the COVID-19 outbreak will potentially drive a significant increase in public cloud spending.
Your 7 steps for success
To create a robust cloud offering, cement partnerships, and garner market share, you must have an effective strategy. To find success in today’s maturing cloud market, we recommend the following 7-step go-to-market strategy.
- Clarify your cloud strategy
- Determine the partner relationship structure
- Analyze the ecosystem and identify potential partnerships
- Create a cloud offering
- Pilot your cloud program
- Launch official cloud program
- Evaluate the program and adjust the partnership
Clarify your cloud strategy
According to our research, late adopters and enthusiastic clients, who are eager to upgrade services, are expected to make up 85% of cloud demand. As late adopters flock to the cloud or scale up, they will exhibit different needs. At this stage of market maturity, you will gain stability by identifying the market you can best serve, then clarifying your cloud strategy to best suit the market’s needs.
When your approach has clarity, you can target the right customers and guide your partners accordingly. Your program will not be able to meet everyone’s needs, but by focusing on a clear strategy, you can market to the right customers and find your niche.
When identifying a cloud partner, it is critical to define your objectives and strategy at the outset. This will allow your company to identify the right partners for deployment. Keep in mind the long-term opportunities for profitability when developing your cloud strategy. For instance, cloud programs typically have a higher sales and marketing cost compared to other products, and the cost to acquire a client is often front-loaded.
When clients come on board, they may start small and scale over time. In a partnership model, this adds up to several touchpoints that require more service over time. Acknowledging this at the outset will allow you to develop a strategy to best support your partners and clients through the extended transition. A mindful cloud strategy can also help you get to the payoff point sooner by ensuring clients have positive partner experiences.
Determine the partner relationship structure
One common mistake with cloud go-to-market execution is failing to understand the inherent needs of partner relationships, which differ fundamentally in a cloud deployment. In the cloud environment, sometimes partners should work together fluidly to continually ensure needs are met. Yet too often, companies wind up treating cloud partners the way they would treat those in an on-premise relationship, companies and partners are misaligned, not accounting for the differences and causing frustration.
You have several options for monetizing the cloud offering that not only increases profits, but accurately meets evolving partner needs:
- Resell: In a resell model, partners take a referral fee for each sale. These partners may find it less appealing to earn a smaller payout for reselling a cloud service, as compared to the larger cut of a licensing fee. However, the resell model can still work with cloud.
- Sell-thru: In a sell-thru approach, cloud partners retain ownership of relationships and billing while selling your service.
- Upsell: In the upsell approach, cloud partners grow the sale through complimentary services. Since upselling provides a way to offset customer churn, some see it as a more reliable way to structure cloud partnerships.
Any of these monetizing strategies can work for a successful cloud partnership, so determine the right relationship structure for your enterprise needs upfront and build consensus before continuing with your cloud go-to-market strategy.
Once you know the type of partnership you want to target, you can start identifying potential partners. Partners all have their own value-add and business models, so some may naturally align better with your objectives. Knowing ahead of time which relationship model you can offer will help you select the strongest potential partners for a mutually beneficial relationship.
Analyze the ecosystem and identify potential partnerships
Once you clarify your strategy and determine the relationship structure of your partnerships, you can move forward with partner selection. This stage often represents winnowing down your existing partners to determine which players will deliver the most value with cloud sales. In some cases, none of your existing partners may be the right players for this initiative.
The 5Cs method provides a useful lens for your analysis of partners: contribution, consumption, coverage, capability, and commitment. Examining these different attributes will help create a well-rounded partnership network to support your program.
Spur Reply has written extensively on the 5Cs:
- Contribution: Contribution assesses not only revenue, but the frequency, reach, and yield of sales. More frequent sales indicate a partner prioritizes you, while occasional sales suggest opportunistic transactions. Remember, with cloud as a scalable solution, avoid focusing on big-ticket sales, rather the scope of adoption. Therefore, the frequency may be more important than yield.
- Consumption: Consumption determines how effective the partner is at driving customer adoption and usage. If contribution represents revenue, then consumption is the increase in the average customer’s lifetime value through affiliation with the product or service.
- Coverage: Coverage examines the reach and impact of your partners in a market. With cloud go-to-market, you should identify partners that offer early exposure in the market segments where you wish to grow (for instance, geographically) or in a particular niche.
- Capability: Capabilities capture the knowledge and effectiveness of a partner. Once you understand the role you want a partner to play, you can look for areas where they can naturally assume this role. This assessment is more subjective than assessing contribution.
- Commitment: Commitment evaluates the loyalty of a partner in terms of how many of their deals to include your offerings. Since cloud is a relatively new offering, the level of commitment matters less than usual.
Frequently, only a handful of partners make the transition, so it’s crucial to quickly identify the ones who are most likely to move forward with your cloud offering. The time you spend working through the 5Cs now will pay off in the future with a reusable matrix for assessing partner performance and strategy refinement.
Create a cloud offering
A robust cloud offering has four components: training, monetization, incentives, and benefits. These components help your partners find their footing, provide motivation, and reward success and loyalty. They play a significant role in partner retention.
Training ensures your technical and sales staff can meet customer needs and solve problems, even as their roles change. Training for sales staff should focus on a user experience perspective, so staff can answer questions about the cloud and allay customer concerns. From a technical standpoint, training should also focus on shifting partner roles, which may move away from a technical integration toward something broader.
Monetization thresholds encourage partners to promote the cloud offering and provide goals. Remember, for cloud offerings, the size of the deal matters less than the scope and potential for scaling, so thresholds do not need to be particularly high to be effective.
Incentives spur sales, reward desired behaviors, and keep your partners motivated. They should always be part of your cloud go-to-market strategy. You may offer incentives for new customers, market share, or depth of cloud consumption.
Along with incentives, benefits keep your cloud partners engaged over the long haul through deepened relationships.
Pilot your cloud program
The best program launches come from tested and refined pilot approaches. Before launching your cloud program, understand the challenges in the field and those affecting your partners, as well as the best practices that will lead to effective growth.
Familiarity with partner challenges allows you to solve problems and build trust before launch, which can bolster loyalty and sales right away. If you do not take the time to identify field support challenges, you will struggle to overcome market share, momentum, and scale issues. Finally, the pilot phase will help you develop ideal cloud partner profiles — the partnerships that have a greater chance of success.
Launch official cloud program
Even when it is anticipated, moving to the cloud can be challenging for vendors and partners. As with any business shift, the process can be riddled with anxiety about change and immediate revenue loss as you focus on long-term growth.
Customer service is also essential for success. In the old model, a partner might sell a software license and move on to the next customer without providing ongoing customer support. With cloud services, ongoing customer success is essential for satisfaction and building long-term relationships (and long-term revenue).
To launch with the least amount of anxiety and difficulty, focus on getting your partner enablement activities to get the field ready for this change. Before launch, ensure everyone is trained on the new systems, products, and policies. Clear communication channels that focus on pathways to success and strategies to support clients will help all parties thrive through the cloud shift. When you provide your partners with the tools to keep clients happy, everybody wins.
Evaluate the program and adjust the partnership
After the launch, continue to monitor and adjust the program. A strong cloud program evolves as market and client needs change to continually deliver the best service.
At a minimum, use partner performance to see where your strategy needs improvement and which partners are performing well so you can reward them. Then adjust incentives and training to alleviate any gaps and keep partners striving. This will help your cloud partner program grow effectively, further increasing your market share.
Let your go-to-market strategy set you apart
Spur Reply believes fit is key to strong partner relationships and performance, especially with cloud strategies. We developed a proven framework for identifying partnerships using the 5Cs and a 7-step philosophy for cloud partnership improvement. Our experience demonstrates the most effective cloud providers do not necessarily have a product advantage. What sets them apart is their go-to-market strategy, which includes a mutually beneficial, robust partnership program. You can position yourself for successful growth and meaningful partnerships that mature as your cloud program does.