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Channel Darwinism: How Traditional Resellers are Adapting to Survive


“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”   Charles Darwin.

Since joining the HPE Indirect Channel team in 2015, my top priority has been working with strategic partners to help transform their business from a traditional hardware/software resell business model to a more services focused business by adding cloud services to their portfolio.  These partners are seeing the shift in the market and the changing customer behavior as their customers increasingly want to consume pay-per-use IT services instead of purchasing capital assets to build out their own datacenter. In a recent survey of partners by 2112 Group, 56% of partners that have shifted to be more services-led expect profits to increase and nearly half of these partners expect profits to increase by 15% or more over the next year. The percentage of services-led partners expecting an increase in profits is significant, since less than half, only 25%,  of traditional resell partners expect their profits to increase.

In working with partners going through the transformation journey, we’ve evaluated their strategic alignment and commitment, technology and go-to-market partnerships, commercial model needs that tie investment to capacity and revenue, defined how the transformation will impact their sales and marketing activities, and assessed what type of people skills are required.

We see some common threads across all partners who are facing the same transformation challenge. Here are some of my insights and recommendations for other resellers planning to transform and become a service provider.

Strategic alignment is a must

Business Transformation takes dedicated effort, patience and relentless focus.

  • Develop a business strategy and differentiated cloud offerings – define the target customers, what are the main products or services that play upon partner strengths, understand who is the competition and identify how to differentiate the offerings – in short, what makes the partner unique from everyone else
  • Understand the impact that moving to a more services oriented business model will have on the existing business. How will revenue change?  Who in the company will dedicate time to the transformation process, since it will require the focus and commitment of key personnel in the company, or does the company need to hire new personnel to help drive the transformation?  Without dedicated effort and focus, the likelihood of success is very low.  
  • Transformation requires complete alignment at the executive level, including desired business outcomes, success metrics, boundary conditions and roles and responsibilities, to name a few. The company needs to allocate the adequate resources and budget that is required to grow the business.

The right partnerships can make or break you

No one is successful alone.  Channel partners need to choose the right cloud partner, with the expertise and capabilities to help them transform successfully, and thoroughly evaluate all they have to offer.  Establishing the right relationships and building trust is a key to success.

  • Does the cloud partner have experience and knowledge with business and technology transformation? What is their track record?  You don’t want to partner with someone who has not done it before.
  • Understand the cloud partner portfolio capabilities: be able to demonstrate how the partner’s portfolio adds value to your proposed services. Is their vision consistent with your vision?   Is their partner program, compensation model, etc. supportive of your service offerings and go-to-market plan?
  • Your sales team needs to understand how to sell cloud services – make sure your cloud partner can help you develop sales material and training so your sales teams can engage with their customers.
  • Commit to engaging with the cloud partner executive and sales teams for joint planning, GTM.

Sales and Marketing are critical components of your strategy

Channel partners need to develop an effective marketing plan to (1) redefine the company’s identity and competitive differentiation to reflect the new business portfolio (2) drive awareness and preference to their new solutions and (3) drive customer engagement to the new cloud services portfolio that may include a  consumption-based, recurring revenue model.

Your new identity as a cloud services provider:

  • Evaluate messaging – how does it need to change?
  • Is the brand appropriate for the new portfolio?

Drive preference and engagement:

  • Is the website and assets reflective of the new company direction?
  • What is your plan for engaging customers effectively in the always-connected, mobile world?
  • Are you funding the right campaigns to drive leads to your sales teams?

Sales considerations:

  • Does your sales approach need to change with the new model? How will you interact with the cloud partner sales teams?
  • Is your sales team trained and prepared to sell the new services?
  • Do you need to change your compensation model?
  • How do you build a closer relationship with your cloud partner, so they bring you sales opportunities?

Post-sales – don’t forget delivery, adoption, and expansion for long-term success:

  • Post Sale engagement is important – what is the onboarding and customer success plan to drive cloud usage and adoption?
    • How will your company and sales teams minimize customer churn in a subscription-based model?
    • How will you expand the customer opportunity with new services?

It’s all about having the right people in the right jobs

Define and develop the skills and expertise needed for the new business model.  This includes not only the technical skills needed, but the sales skills as well.

  • Define talents needed across the board.
  • Are the right people part of your organization? If not, develop a training or recruiting plan to gain the new skills needed.
  • Tie training to compensation and continuously improve.

Commercial model is the silver bullet for accelerating growth

Evaluate whether the financial model that supports your current business is the right model for your new business.  What may be right for a traditional reseller business may not be appropriate for a consumption based business.

  • Develop the right commercial model to match the new services oriented model, to support consumption based / annuity type revenue. Tie investment to projected revenue.
  • Share risk – identify partners that you can leverage to share the financial risk. For example,  determine what IT capacity you need initially and work with your suppliers to scale the capacity as your demand grows (i.e. do not over-provision, or worse, under-provision capacity.  Have the flexibility to scale as needed.)

We have helped many partners successfully transform and grow their business with cloud services.  We expect many more to do so, and have tailored our HPE Partner Ready Program to meet the needs of these partners.  For more information visit the HPE Partner Ready Program for Service Providers page.  For more information on how the market is driving channel evolution read my blog in the Evolution of the Channel series.

About the Author


Edward Choi is the Vice President of WW Cloud and Indirect Channel Programs. Choi is an accomplished, results-focused executive with a passion for driving large-scale strategic initiatives and solution delivery transformation. In his current role, he is responsible for the cloud channel strategy development and execution to drive market testing and scaling of a collaborative ecosystem of service providers, VARs, and ISVs that will leverage HPE and 3rd party technologies, JGTM motions, and financial innovations to build/sell/deliver differentiated services-led hybrid-Cloud solutions. Prior to his current role, Choi was the Vice President of Cloud Customer Success Management. He was responsible for the “One-HP” client experience for the delivery of cloud services across all HP business units.

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