Transition to recurring revenue models resulting in a move from transaction to a consumption focus
As we come to the end of Q2’21, I am happy to report on the tremendous momentum we have experienced alongside our partners during the first half of 2021. As the world emerges from pandemic-driven lockdowns and economies both here in the U.S. and around the globe begin to re-open, we also have much to look forward to in the last half of the year.
Recently, I was a presenter at the Baptie Channel Focus North America event where we discussed how partners are continuing to accelerate their journey into the cloud. Remote work and now hybrid work/work-from-anywhere scenarios have put many businesses on the fast-track to the cloud, if they weren’t already headed in that direction. As IGEL continues to transition from a transaction focus to a consumption model, recurring revenue models are becoming key to success with our partners.
During the Baptie event, we also discussed how hand-in-hand with renewals comes the customer experience. Customers need to see high value in the software solutions they are purchasing. This means that the roles of Customer Success Manager, and even Consumption Manager, are starting to become more prevalent and important for channel partners.
With that in mind, (smart) VARs and solution providers are looking at their own business models and P&L, and aligning to a recurring revenue model that focuses on SaaS and the consumption of cloud applications, services and desktops. Channel partners are also looking to their software vendors to provide programs to support and reward this type of focus on customer success, renewals and recurring revenue.
The message to the vendor community that came out of Baptie Channel Focus is that we need to invest in enablement, program dollars and incentives to support partners in being success with this new model driven not by transactions, but by customer success. Some examples of this are providing funds to support a customer success manager, or a renewals program, and providing incentives partners that move beyond revenues to provide value throughout the entire customer lifecycle — from deal registrations, demos and proof-of-concept, to post-sales support and deployment, and last, but not least, customer satisfaction. Smart vendors and smart partners are rapidly moving to this type of model and engagement.
Beyond that, there are a few updates I want to also share with you from the IGEL Velocity Program, including our recent North America Partner Advisory Council (PAC) meeting.
Q2 PAC Takeaways
We were delighted to host our second North America PAC on May 20. In attendance were seven partners: Coretek, CPC, Entisys360, Intrasystems, Presidio, Sirius and ThirdOctet.
As I mentioned in my Q1’21 blog post, an important tenet of our PAC is that it’s intended to be “forward looking.” In other words, strategic in nature and not a QBR or operationally focused. During the Q2 PAC meeting, we conducted several polls, one of which was on Renewals (no surprise there!), Incentives and Customer Lifecycle, Digital Marketing, and Diversity and Inclusion.
Renewals. We found that 67% had a team dedicated to renewals. Additionally, half reported having renewal rates of greater than 91%; A third (33%) reported renewal rates of 61% to 80%. Furthermore, 67% said renewals were 21% to 40% of total revenue. What we took away from this discussion is that consumption and adoption are key focus areas for our partners, and that investing in customer success resources are important. Additionally, we are seeing more vendors and OEMs requiring channel partners to have a plan for customer success and adoption in place.
Incentives paid on Customer Lifecycle. Most (80%) thought it was a great idea, but to keep things simple for partners, we are looking at this more closely and expect to make program changes in 2H of this year.
Digital Marketing. When asked, 86% responded that they have a dedicated marketing team, and 71% said they would welcome some type of “certification” in this area. This led us to the idea of creating a webinar for partners to be held twice a year that would provide tips on how to drive success in digital marketing from experts in this area.
Diversity and Inclusion. There was strong interest from partners in this initiative and we are going to discuss this topic further at the next PAC meeting and bring in some experts to share tips and ideas to build awareness and engage employees in this effort.
Other topics we discussed at the PAC included Routes to Market. Some of the interesting take-aways from this discussion were that public cloud will drive the adoption of Desktop-as-a-Service (DaaS) solutions and that DaaS will begin to dominate in a few years due to OPEX. Partner are also seeing opportunities for DaaS in the SMB space, while VDI remains prevalent in typical mid-market and enterprise accounts.
Hearing from our partners is always a valuable experience. We are looking forward to implementing many of these recommendations in the coming weeks. Happy selling!