Outdated Channel Programs Leaves SMB Revenue Lost In the Cloud

Vendors need to do a better job training its VAR partners on providing cloud services to SMBs. If not, the ire of dissatisfied end users will continue to hurt the channel.

That’s the conclusion of a new report from ZS Associates called “Diamonds in the Rough: SMB Cloud Channel Preferences.” The report’s intent is to assist vendors in identifying VARs with the background and expertise needed to help SMB customers choose, implement and maintain the right software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS) solutions. The problem is that not enough of them exist to properly satisfy SMB demands for the latest cloud technologies.

“I had been hearing a lot that companies trying to form cloud services can’t find born-on-the-cloud resellers,” said John DeSarbo, a ZS principal and co-author of the report, in an interview with The VAR Guy. “So we asked SMBs how they find and choose successful resellers.”

ZS surveyed 250 U.S. SMBs in Q3 2014 that purchased cloud services (mainly SaaS and IaaS) from a VAR in the 12 months prior. Overall, the firm estimates that 45 percent of U.S. SMBs bought or subscribed to SaaS and IaaS services during that period, with 53 percent of the companies buying them through a VAR.

The survey, however, found that most VARs played a minimal role in shaping their SMB customers’ purchasing decisions, leaving most of them to research cloud services on their own. Many turned to vendors for help. To build a stronger, more lucrative channel, the report urges vendors to build partnerships with VARs that can influence the SMB decision makers and create demand for cloud services, instead of just fulfilling orders for customers who have already decided what to buy.

The lack of strong VAR cloud consultancy practices has lead to “lukewarm satisfaction—and more alarmingly, lukewarm loyalty—for their cloud service resellers,” DeSarbo wrote about SMBs in a section in the report aptly titled, “Not much love for cloud service resellers.”

While it’s not clearly stated in the report, vendors are a big part of that problem, DeSarbo told us. Instead of offering the consulting, product and technology training VARs need to create effective cloud service divisions, vendors still focus too heavily on the sales and marketing programs that have dominated their channel strategies for the last 15 years.

“You have a channel that wants to play a role but isn’t getting enough new capabilities from the current programs,” he said. “There needs to be some innovation in the way partner programs are structured for these types of services. The vendors aren’t doing enough to make the VARs self-sufficient.”

In many cases, that leads to the vendor taking on the consulting and pre-sales roles that SMB customers are used to VARs handling in traditional on-premise technology sales. The reversal of roles ends up hurting the VAR’s reputation.

“SMB customers have the experience and expectations of what resellers can do for them before and after the sale. Now they’re finding resellers can’t play that role,” DeSarbo said. “They’re dissatisfied not because what they’re buying is not working; it stems from misaligned expectations about the buying process.”

Vendors should quickly change their channel programs before the damage already suffered by the channel gets worse. The survey found that only 24 percent (the Net Promoter Score) of SMBs would refer the VAR they worked with on cloud solutions to others. Vendors and consultants receive much higher Net Promoter Scores.

“Getting the presale engineers to help the customer early on is the secret sauce,” DeSarbo said, referring to the need for VARs to establish stronger cloud service consulting practices. “Vendors should find companies (VARs) with those resources or help them bring those resources on board.”