For far too many channel partners making the transition to the cloud requires major changes to their existing business models that winds up dampening their enthusiasm for actually selling cloud services.
Moving to address that issue head on, Axcient, a Mountain View, California-based provider of a recovery-as-a-service offering in the cloud, on Wednesday launched a SaaS:FLO channel program under which it will compensate partners upfront for sales of its software-as-a-service (SaaS) application.
Axcient CEO Justin Moore said its time the industry as a whole recognized that requiring channel partners to alter their business models just to add cloud applications to their portfolio only serves to slow down adoption for two reasons. Most sales people working in the channel prefer to get paid upfront so they tend to focus most of their efforts on solutions that run on premise. At the same time, while cloud applications may be more profitable over the long haul for owners of solution providers, the hit that switching to the cloud has on the balance sheets of traditional resellers results in many owners of the those companies making a much slower transition to the cloud.
Fresh off of raising another $25 million in funding for Axcient that was also announced today, Moore notes that whenever a channel partner sells anything they have to incur all the sales and marketing expenses associated with closing that deal up front. As a result, they might not make enough money on that deal to make up for those expenses into the second year of the cloud application contract. To take the sting out of multi-year contracts, Axcient is allowing partners to keep 100 percent of the revenue generated through the first five months of a service contract.
Moore said it really is incumbent on the provider of the SaaS application to make sure customer satisfaction is high enough to make sure the contract gets renewed every year. However, most SaaS vendors don’t make money off a service contract in the first year, so Moore notes that it requires a vendor with deep pockets and high quality software to be able to compensate partners up front and entice customers to keep renewing the service.
Naturally, Axcient is expecting that this new compensation model will drive a few of its competitors out of the market. In the last several years there has been an expansion in the number of vendors delivering some type of data protection as a cloud service. Many of those providers, notes Moore, are already operating at a loss that prohibits them from altering their compensation models in a way that matches up with how most organizations in the channel do business today.
The degree to which other providers of cloud services will start compensating their channel partners up front remains to be seen. But all things being equal in the channel, the vendors that do will no doubt soon find themselves as the very top of the proverbial channel line card.