XaaS Channel Optimization

What is Partner Success?

Best Practices for Reaching the High End of the Partner Success Spectrum

The technology industry has been responsible for broadening many terms, such as mouse, cloud, desktop, cookie, virus, etc.  As XaaS and subscriptions are disrupting traditional business models, a similar semantic shift is taking place with yet another term.
 
Partner Success is becoming a frequently used industry term, evolving from a simple word-conjunction of successful partners to something much more critical in the delivery of XaaS and the LAER (Land, Adopt, Expand, Renew) model.
 
Today, there is a vast spectrum of how Partner Success is being used by technology vendors. Over the next few sections, we will explore different interpretations of the term and critical success factors implemented by companies on the high end of the Partner Success spectrum.  

What is Partner Success?

Customer Success was originally an informal conjunction used to simply describe successful customers.  Today, the meaning of customer success is much more advanced. It can be used to describe a professional (e.g., Customer Success Manager), a department (e.g., Customer Success Organization), and/or a corporate philosophy. 
 
Common to all modern meanings of customer success is having an orientation toward customers achieving business outcomes.  Similarly, Partner Success covers a wide range of meanings; how it is used often depends on where a vendor is in their journey to XaaS with their channel partners.
 
At one end of the spectrum, roles and responsibilities associated with traditional Partner Management are being rebranded as Partner Success. These are well intended, but do not amount to much change from the status quo.
 
Common elements of a traditional partner program include tools, training, certifications, incentives, and enablement. Additionally, organizations and departments dedicated to partner management are typically made up of employees who enable partners with demand generation campaigns and other initiatives.
 
Partner enablement is an integral part of a successful channel program. Partners might be enabled with sales playbooks, marketing materials, online portals, and partner search tools that enable customers to easily locate partners who meet their search requirements. Partners might also benefit from sales training, webinars, and technical resources that enable them to build solutions for customers. Finally, a host of technical, role-based certifications might be available for technical professionals: architect, data analyst, solution engineer, network administrator, etc.
 
On this end of the spectrum, Partner Success is more of a buzzword. Essentially, the highest performing partners are those who deliver the most transaction revenue for the vendor. 
 
In the middle of the spectrum, Partner Success is oriented toward the customer. Vendors have recognized the need to evolve from a transaction-focused business model to a subscription-based business model, and they are investing in Customer Success resources to support the end-to-end customer lifecycle. However, with an indirect selling model, these vendors face a complex challenge—how will they deliver LAER through their channel?
 
While some of their best partners may have independently developed capabilities to deliver business outcomes for customers, the vendor lacks the formalized enablement, incentives, and resources to help their partners close the capabilities gap associated with LAER. As such, Partner Success is used in the context of partners driving Land and Renewals, while the Adopt and Expand functions are oftentimes handled directly by the vendor. 
 
Closing deals and renewing maintenance contracts are generally areas of strength for channel partners, and the vendor is developing new muscles for Customer Success. This strategy seems to be a natural evolution for technology vendors pivoting to XaaS; however, these vendors may not yet recognize a fiscal problem looming on the horizon—how much headcount will be required to deliver Adopt and Expand at scale? 
 
Answering that challenge with budget dollars is not easy, and vendors often realize it is cost-prohibitive to drive Adopt and Expand directly. So, they turn to their channel to deliver the entire LAER model, which opens a new world of business challenges. It also broadens the scope of Partner Success. 
 
At the most progressive end of the spectrum, Partner Success refers to enabling the channel to deliver business outcomes for customers, while strengthening the financial health of partners. These companies are developing channel partner programs that offer partners a compelling value-exchange.
 
As vendors progress along the Partner Success spectrum, they make accommodations to sharpen their focus on the three critical elements of channel partnerships: growth, loyalty, and profitability. Without growth, partners must make difficult decisions to remain financially healthy. Without loyalty, partners leave when the going gets tough.  Without profitability, partner businesses shutter their doors. The proliferation of new XaaS vendors means partners are gaining the power of choice. Therefore, successful XaaS channel partner programs nurture profitability, growth, and loyalty.

Partner Profitability Is King

In 2019, Thomas Lah introduced two simple maxims, which he called Lah’s Laws. These principles also hold true when applied to channel partner programs:

•    Law #1: “Unsustainable business models are unsustainable.”
•    Law #2: “Companies do not abandon unsustainable business challenges until they are unsustainable.”

When it comes to indirect selling models, partner profitability is king.  Successful XaaS channel partner programs enable partners to be profitable through financial incentives and partner-branded services revenue.  Partner programs that do not enable partner profitability are unsustainable.

Financial incentives and potential pull-through services revenue are critical success factors for partner profitability. Financial incentives are intended to drive desired behavior.  While traditional partner programs were designed to reward partners for closing transactions, successful channel partner programs today reward partners for managing the entire, end-to-end lifecycle of a subscription and customer health. For XaaS partners, the new desired behavior is twofold: sell recurring revenue and keep revenue recurring.

Growing Through Enablement

Partner Success involves proactive efforts to ensure growth, enabling partners to drive adoption, expansion, and renewals. As highlighted in The State of XaaS Partner Channel Optimization 2021 paper, an industry best practice is to align partner incentives to growing annual recurring revenue. This includes paying partners for performance tied to incremental customer spend—upsell, cross-sell, and renewals—above the initial contract value.
 
In the book B4B – How Technology and Big Data Are Reinventing the Customer-Supplier Relationship, TSIA outlines the new skills that are required to drive adoption, expand, and renewals. End-to-end subscription management requires people who “have [the] unique ability to think like a businessperson but also be a product expert.” For many vendors, this is a problem, and the skills gap gets expanded when it comes to channel partners and partner account managers. Without training on the new skills requirements, partners will maintain their focus on landing subscription deals and lose out on potential growth opportunities. 
 
Successful XaaS channel partner programs close the skills gap with training and enablement: 36% of companies have developed training on these new XaaS capabilities (e.g., Customer Success), while 21% have developed certifications on these new capabilities. Training and enablement help partners bring a balanced focus on increasing adoption and securing timely renewals, leading to overall growth.

Partner Loyalty

At the end of the day, customers have the power of choice. They want simplicity and expect results, with subscriptions empowering them to leave and go to a competitor if they are dissatisfied. The same holds true for partners. With the proliferation of cloud-based software companies, partners have a broad choice of which software vendor to build their solution around.  
 
In addition to profitability and growth, here are some simple best practices to strengthen partner loyalty in your transition to XaaS: 

• Listen: proactively seek feedback from the channel.
• Communicate: clearly outline new partner requirements needed to execute the LAER model.   
• Enable: provide tools, training, and resources to help partners meet the new requirements. 
• Time: give partners sufficient runway to meet the new XaaS requirements.
• Rewards: align incentives to reward the new desired behavior. 

 
Transforming from a traditional model to a subscription model is an opportunity to strengthen partner loyalty with programs that drive revenue growth and profitability. 

The Future of Partner Success

Right now, Partner Success carries a range of meaning—from a casual rebranding of partner management to an alignment of programmatic resources focused on customer success and partners’ financial health. In the future, look for Partner Success to crystalize more formally around partners delivering business outcomes at scale. 
 
Vendors would be well-served to develop training, enablement, and financial incentives that reward partners for driving the entire, end-to-end subscription lifecycle. Leading XaaS channel partner programs are strengthened with a mechanism that validates their partners’ Customer Success capabilities, which includes post-sale revenue growth from adoption, expand selling and renewal motions.  

If these critical success factors are in place, then vendors will enjoy a future painted by Ralph Waldo Emerson, “Build a better mousetrap, and the world will beat a path to your door.” 
 

  August 26, 2021