Evolving partner incentives for subscriptions and services

Vendors everywhere are expanding the number of channel routes to market, and the unified partner program model has now become an industry standard for both hardware and software vendors. Vendors are evolving them to satisfy the needs of next-generation partnerships, which are no longer characterized by just transactional upfront sales but opportunities to deliver value across the entire customer lifecycle. They are embracing new routes to market and partnership models: cloud marketplaces, digital and ecommerce platforms, agencies, ISVs, MSPs, and cloud and SaaS distributors. And as they pivot more heavily toward services and solutions, some are also reimagining their value propositions for their partner competencies and specializations to better reflect partner skills.

When it comes to subscription-based incentives, most vendors are redesigning their incentive models to reward partners beyond the initial sale, as partners become critical to driving activation, adoption, usage and renewal. This includes non-transactional activities, such as brokering meetings, technical assessments, customer workshops and even deal registrations for deals closed by them but fulfilled by other partners. Cisco, Microsoft and VMware are among those vendors redesigning their incentives for the customer lifecycle journey, and more vendors are following suit. Land-adopt-expand-renewal incentives are evolving and Canalys is studying what is on the market today.

Alongside reseller rebates, other subscriptions and services incentives available on the market today include:

• Referral and facilitator fees, for example, referring leads, brokering meetings, engaging in pre-sales activities.
• Technical assessments and customer workshops, for example, VMware, Microsoft.
• Lifecycle incentives aimed at activities such as attach, growth and expansion, for example, Cisco, Schneider Electric.
• Deployment and consumption incentives, for example, VMware is incentivizing partners for driving deployment, cloud activation and consumption as it aligns its partner program more closely with the customer lifecycle journey.
• Influencer incentives, which reward services that have no actual transaction between the vendor and partner, such as professional advisory. These can bring operational challenges, including influence attribution, activity verification and customer acceptance. Today, partners typically submit proof of execution to vendors to claim these incentives.

• Cloud migration and acceleration funds. These represent an incentive that infrastructure vendors currently lack. Cloud vendors have a reputation for generously subsidizing customers’ initial cloud adoption with these funds, whether the move is from on-premises or competitors’ clouds to their own. Infrastructure vendors, in contrast, have made fewer strides in their evolution of services incentives, leaving them at risk of being less attractive to partners.

Co-selling remains underdeveloped for most vendors

Another benefit pushed to the forefront by the growing importance of services, SaaS and subscriptions is co-selling. Co-selling effectively means strengthening the pre-sales motion by incentivizing a vendor’s own sales teams to sell a partner’s solution or service or incentivizing other partners to do this. For many vendors, it remains underdeveloped, partly because of the complexity of processes involved and the need to change sales behavior. Vendors have typically focused on facilitating the ease and accuracy of such matches so far, whether that is co-selling with the vendor or partners. P2P co-sell incentives, depending on the nature of the co-selling, can help keep customers within vendors’ own channel ecosystems while expanding the customer reach of their partners.

Examples of co-selling incentives available today include:

• VMware’s P2P incentive is aimed at matching resellers’ customers to best-in-class service partners.
• Cisco pays co-sell incentives in the form of MDF (market development funds) to Developer and Advisor partners.
• Microsoft cloud solution providers (CSPs) get a 10% rebate when they successfully sell ISV solutions. Microsoft pays its own salespeople the same reward for selling a partner’s solution.

Subscription incentives will add to the existing arsenal that partners get today

Partner incentives for subscriptions and services are challenging to implement because vendors must consider the roles that partners play as well as their level of expertise or commitment to the vendor. Other factors, such as channel-centricity, ease of business, service availability, customer leads and pricing assurance, are vital for many vendors to establish greater trust and credibility first. Subscriptions, if the consumer space is any guide, can cost customers more than just pricing once they become reliant on their products. On the other hand, they are helpful for businesses seeking to reduce their regular cash outflow. Subscriptions and services delivery necessitate an ecosystem of mechanisms and channel partners. Vendors are investing in their partner compensation schemes and those new incentives will add to, rather than replace, the existing arsenal partners can earn when they sell. Incentives are not the only thing needed to drive partners’ change in behavior toward subscriptions and services, but they are certainly a vital one.

For more insights, Canalys clients can read the full report “Partner incentives evolve with subscriptions and services”.