Skip to main content

    MarketBridge Charts B2B Channel Cloud Challenge

    Bob Apollo
    Post by Bob Apollo
    April 15, 2011

    I’ve written before - quoting Forrester Research - about how SaaS is blowing storm clouds over the IT channel. Now the latest survey results from MarketBridge serve to quantify the challenge - but they also show how channel partners that are able to adapt their business models have the potential to generate new sources of revenue...

    RainstormIn “SaaS Blows Storm Clouds over the Channel”, I suggested a number of strategies that traditional IT channel players may need to adopt to deal with the growing trend towards cloud-based solutions. The latest research from MarketBridge highlights the pain of failing to adapt to these changes - as well as the gains that can be achieved from embracing appropriate business models.

    Average Deal Values Are Halved

    MarketBridge’s research - drawn from benchmarks spanning hundreds of channel players, and presented in a webinar earlier this week - shows that average deal values for cloud-based solutions are half that for classic “on premise” software sales - yet average sales cycle lengths have not changed significantly. So it’s taking the same time (and effort) to generate half the revenue.

    Margins are Flat

    MarketBridge found little variation in average gross partner margins between “on premise” and cloud-based solutions. So it doesn’t seem that a decline in average deal sizes is going to be compensated for by increased average partner margins - but that, as we’ll learn in a moment, margins varied significantly between different partner business models.

    Experienced Cloud Partners Offset With Services

    Conventional VARs and System Integrators - models that represent the bulk of channel business models today - have struggled to boost cloud margins, but managed service providers have successfully managed to wrap high-value services around the core cloud-based solutions with average margins that are twice as high as traditional channels.

    The Future for the Channel?  

    MarketBridge anticipate a series of channel transformations. Some of the key new roles include “Applications Aggregators” that integrate multiple cloud-based solutions - often with the addition of specialised vertical market expertise. They also talk about traditional local VARs facing increasing competition from about national/international “Category Champions” that dominate specific vertical markets on an increasingly global scale.

    This, of course, will be associated with specialised human resources being accessed and delivered through the cloud, opening up opportunities for outsourced/rightsourced BPO vendors who can call upon a global pool of talent whilst at the same time driving down the cost of expertise.

    With all these changes going on, only one thing seems certain: that channel partners who fail to evolve and adapt will face increasingly challenging times. But there's a real question as to whether current players can reinvent themselves by embracing new business models.

    How Are the Changes Affecting You?

    If you’re a corporate consumer of IT services, how do you see these changes affecting your buying behaviour? Are they causing you to re-evaluate your existing suppliers?

    And if you’re a provider of corporate computing services, have these changes affected your business model yet? And if not, how do you anticipate they might do in the future? You might want to apply our Business Model Framework to your own organisation.
    Bob Apollo
    Post by Bob Apollo
    April 15, 2011
    Bob Apollo is a Fellow of the Institute of Sales Professionals, a regular contributor to the International Journal of Sales Transformation and Top Sales World Magazine, and the driving force behind Inflexion-Point Strategy Partners, the leading proponents of outcome-centric selling. Following a successful corporate career spanning start-ups, scale-ups and market leaders, Bob now works as a strategic advisor, mentor, trainer and coach to ambitious B2B sales organisations - teaching them how to differentiate themselves through their provably superior approach to achieving their customer's desired outcomes.