IT and Business Insights for SMB Solution Providers

Joining the Salesforce Economy: Page 2 of 3

“Born-in-the-cloud” vendors like Salesforce partner with channel pros in unfamiliar ways. Those who can handle the differences, though, stand to profit handsomely. By Rich Freeman
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BORN-IN-THE-CLOUD VENDORS like Salesforce share little to none of their sizable licensing revenue with partners.
THEIR PARTNERS TYPICALLY EARN 40 to 75 percent margins on integration projects, however.
BECOMING A SAAS INTEGRATOR typically means hiring new architects, designers, developers, and strategic business advisers.
SPECIALIZATION AND RELATIONSHIP-BUILDING SKILLS are essential to prospering in a cloud-only vendor’s channel.

For channel pros used to more traditional channel programs, however, partnering with a company like Salesforce can be disorienting. “Salesforce doesn’t have a channel at all,” says Alex Solomon, co-president of [email protected], a Salesforce partner with locations across the country and headquarters in New York. “The only thing the channel does for Salesforce is implementations. They don’t sell software.”

Nor do partners make any money on licensing. “They own 100 percent of that revenue,” says Casazza of Salesforce. Their partners, however, pocket all of a customer’s services spending. “It’s a fairly clean kind of split,” Casazza observes.

That tidy division of labor all but eliminates friction between Salesforce and its partners too. “There’s no competition between their professional services and our professional services,” says Samir Kumar, president of Cloudaction, a cloud solution provider and Salesforce partner based in Tulsa, Okla.

“The only thing the channel does for Salesforce is implementations. They don’t sell software.”—ALEX SOLOMON, CO-PRESIDENT, [email protected]

Kumar is one of many satisfied members of the Salesforce channel. “They invest in partnership,” he says, noting that the company assigns success managers to integrators and provides comprehensive training and certification for free. “They don’t see us as a reseller,” Kumar states. “They see us as their extended team.”

Solomon applauds NetSuite’s dedication to its channel as well. “They have a very good understanding of what your business goals are, the verticals you’re going after, [and] the strategy you’re going after,” he says. Unlike Salesforce, moreover, NetSuite pays commissions to channel pros who resell its software. On the other hand, it also competes with those resellers sometimes. “They have an entire direct team that goes after business,” Solomon says. “There’s more channel conflict.”

Making the Journey

Still, channel friction is hardly unique to cloud-only vendors, and the rewards of partnering with such firms can be substantial. On average, according to McBain, MSPs today collect 17 percent margins on the services they provide. Partners of born-in-the-cloud vendors, by contrast, routinely make 40 to 75 percent. “Demand far outstrips the supply today for good people,” he notes, which keeps prices on implementation services high.

Adding support for a product like Marketo to your current lineup of offerings can help you attract and retain good people as well. “They get exposure to more than just one platform,” Casazza says.

Yet there are also downsides to integrating born-in-the-cloud software. For one thing, while the work may be profitable, it doesn’t provide the recurring revenue tech companies look for when evaluating potential merger and acquisition targets. “It’s different from a managed services model,” Casazza observes. “This is more project-based work.”

Plus, the more product lines your company sells, the more solutions it must promote to customers and learn to support. Smaller channel pros in particular, Casazza notes, can quickly find themselves spread too thin. “It can be challenging to be broad and deep,” he says.

About the Author

Rich Freeman's picture

Rich Freeman is ChannelPro's Executive Editor

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