co-seller modelsThe way IT vendors have historically sold products and services has revolved primarily around models where a channel partner either resold the product after acquiring it from the vendor or acted as an agent on behalf of the vendor. But, with the rise cloud computing services the relationship between IT vendors and their channel partners is evolving. Many of those vendors are working more closely with channel partners using a co-selling model.

In that model, the channel partner gets paid based on the value of a services contract over several years. In some instances, the partner is paid upfront based on the lifetime value of that contract. More commonly, the partner is paid a percentage of the value of the contract and then tasked with making sure the software is activated and the license is renewed.

Benefits of the co-seller model

The co-seller model enables the channel partner to rely more on sales and marketing resources provided by the vendor. A new survey of 250 senior channel partner executives conducted by Wakefield Research on behalf of Concur finds that 96 percent of respondents said a co-seller model is more profitable for them than reselling. In fact, the survey finds that almost 90 percent of partners believe traditional reseller models require significantly more time and financial commitment than co-seller models.

The top benefits cited include freeing up employees’ time to focus on other tasks (63 percent); the ability to employ more highly skilled sales and marketing support than their company has on staff (59 percent); avoiding having to train employees on a reseller model (53 percent); and adding more perceived value to their customer base (49 percent). A full 97 percent said a co-seller model enables them to grow their business faster.

Channel partners that have based their business on this model are often referred to as being born of the cloud. They are not reselling software in the same way most solution providers approach an on-premises deployment. As opposed to merely acting as an agent, their business can increase its equity value because they can demonstrate recurring revenue.

The future of co-selling

Sachin Vora, senior director of global business development at Concur, says the company now has more than 300 partners participating in a co-seller channel program it launched last year. Most adoption of software-as-a-service (SaaS) applications is driven by business executives rather than IT professionals. Vora says SAP has more experience targeting those individuals than most channel partners. SAP also provides all the backend systems needed to manage the renewal process as well as all the software updates.

These days solution providers that are born of the cloud are the among the most sought after by IT vendors. Longer term, there’s no reason why co-seller agreements might not also be extended to on-premises software.

Regardless of approach, the shift to consuming software as a service is transforming business models all across the channel. Very few solution providers today rely on any one model. Most employ a mix of models spanning everything from classic reselling to managed services. The challenge and opportunity now is striking the right balance across them all.

State of North American Managed Services report

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Mike Vizard

Posted by Mike Vizard

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications including InfoWorld, eWeek, CRN, Baseline, ComputerWorld, TMCNet, and Digital Review. He currently blogs for IT Business Edge and contributes to CIOinsight, The Channel Insider, Programmableweb and Slashdot. Mike blogs about emerging cloud technology for Smarter MSP.

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