Secrets of Profitable Cloud Resellers

CAPTURING THE SMB CLOUD
OPPORTUNITY AND
UNCOVERING SECRETS FOR
PARTNER PROFITABILITY
AMI-Partners
546 Fifth Avenue, New York
New York, Houston, Singapore,
Bangalore, Kolkata, London, Tokyo
www.ami-partners.com

Source: AMI-Partners (www.ami-partners.com) 2014
 AMI Background
 Capturing the SMB Cloud Opportunity
 Benchmarking Against Best-in-Class Cloud Partners
 Q&A
2
Agenda

Source: AMI-Partners (www.ami-partners.com) 2014 3
Actionable Global Market Intelligence, GTM Strategy & Implementation Support
- 18+ Year History -
AMI Tracking Surveys Cover Countries Driving over 90% of
WW SMB IT/Telecom Spending
(SB = 1-99 Employees, MB = 100-999 Employees)
 SMB End User Tracking
 Channel Partner Tracking
 Global IT/Telecom Market Sizing
 Actionable Market Segmentation Model &
Predictive Analytics
 Go-to-Market Consulting
 Strong Global Presence Across Americas,
Europe & APAC
AMI: Extensive Global Footprint

 We must understand SMBs’ needs, mindsets, and challenges:
 Internal Constraints: Managing Cash flow, Talent/HR, Weak Economy
 External Environment: Pricing/Competitive Issues, Response Time, Savvier
Customers
 Key IT Purchase Drivers: Affordable, Simplicity, Productivity, High Performing,
Ensure Customer Loyalty
 Position our solutions and messaging to address SMBs’ needs
and challenges.
How Can We Capture the SMB
Opportunity?
SMB = Companies with 1-999 employees

Concerned about
economy
Conditions will
improve
81%
23%
Economic Impact on Business
49% 48%
41%
27%
Slower receivables Decreased revenue Restricted cash flow Pricing pressure
Business Pain Points
51%
45%
27%
21%
17%
Improve customer experiences
Reduce costs
Expand into new mkts
Launch new products/services
Leverage more technology
Actions Planned
5
U.S. SMB Perceptions & Pain Points

Small Business Medium Business
71%
59%
45%
40%
39%
37%
37%
Improving bandwidth
On-premise data back-up & disaster
recovery solutions
On-premise data security & privacy
for PCs/network
Security for mobile devices
Data Loss Prevention (DLP) solutions
CRM (Customer Relationship
Management)
Hosted data back-up & disaster
recovery solutions
Applications
Connectivity/
CommunicationsIT Infrastructure Mobility
Source: AMI ICT Tracking Studies 6
74%
74%
73%
72%
71%
68%
68%
Improving bandwidth
On-premise data back-up & disaster recovery
solutions
Security for mobile devices
Server virtualization
On-premise data security & privacy for
PCs/network
IT systems mgt tools
Data Loss Prevention (DLP) solutions
SMB Strategic IT Imperatives and Investments
Technology remains a strategic focal point for SMBs

$45
$82
$235
$277
2014 2019
(In$Billions)
On-Premise
Cloud
Migration to Cloud
$281 B
$360 B
CAGR: 12.8%
CAGR: 3.3%
(% of Total)
7
Source: AMI Global Model 1H14
US SMB ICT Transformation

8
$5.6
$15.8$4.4
$10.9
$2.7
$5.9
$8.7
$10.1
$ 0.0
$ 5.0
$ 10.0
$ 15.0
$ 20.0
$ 25.0
$ 30.0
$ 35.0
$ 40.0
$ 45.0
2014 2019
In$Billions
Web Hosting &
Development
UC Services
Software-as-a-Service
IaaS
$21 B
$43 B
$1.6
$3.8$1.8
$4.5
$2.3
$4.2
$5.5
$6.4
$ 0.0
$ 2.0
$ 4.0
$ 6.0
$ 8.0
$ 10.0
$ 12.0
$ 14.0
$ 16.0
$ 18.0
$ 20.0
2014 2019
In$Billions
CAGR (%)
2.9%
13.3%
19.5%
18.4%
CAGR (%)
23.0%
16.8%
19.6%
23.0%
$11 B
$19 B
Source: AMI Global Model 1H14
US Cloud Spending

12%
77%
11%
Small Business
19%
74%
7%
Medium Business
Increased need for
support
Remained the same
Decreased need for
support
9
Shift to Cloud Has Not Drastically Reduced the
Need for Service and Support

$7
$735 $846
$5,383
$8,533
$7,252
$10,769
$11,950
$16
$868 $1,820
$10,900
$14,869 $14,941
$18,061
$20,806
Retail DMR (no rerail
presence)
System
Integrators
Telcos/Cable Vendor Direct MSPs Channel Partners Hosters
2014
2019
10
Channel Partners and Hosters continue to be
Cloud RTM-of-choice for SMBs through 2019

 We have quantified the addressable opportunity and uncovered
the challenges faced by SMBs.
 How do we target and segment these end-users?
 Introducing AMIs SMB Segmentation Model…
 Allows us to uncover who the key decision makers are and how we can connect
with high value customers.
Targeting High Value Customers

Tier 1 SMBs
Cloud Integrators
Tier 2 SMBs
Cloud Innovators
Tier 3 SMBs
Cloud Pragmatists
Tier 4 SMBs
Cloud Minimalists
% PC SMB Firms 10% 20% 30% 40%
% of Cloud Spend 40% 30% 20% 10%
ICT Mindset Process Experimental Risk Averse Get by
View of Cloud
Integral to growth &
operations
Enables agility Means to simplify Point Solutions
Decision Making
Structured
Multiple BDM-TDMs
Systematic
Mainly BDMs, Some
TDMs
Adaptive
BDMs
Reactive
Owner-Manager
Cloud Mindset & Purchase Process Implications
12
AMI’s WW SMB Segments: ICT/Cloud Needs, Adoption
& Behavior Based
Mindset, Decision Process & Cloud Implications – Identifies High Value Segments

Tier 1 Tier 2 Tier 3 Tier 4
SaaS
Acctg/Financials
Payroll
HR
CRM
ERP
Proj Mgt.
Bus Intel/analytics
IaaS
Storage
Servers
Security
UC
Audio Conf.
Video Conf.
Web Conf.
Hosted VoIP
IM
25%
48%
22%
37%
13%
25%
28%
39%
34%
56%
75%
48%
64%
24%
73%
21%
33%
3%
8%
1%
3%
2%
32%
14%
28%
43%
18%
23%
37%
59%
6%
7%
2%
1%
4%
13%
8%
15%
18%
17%
12%
7%
57%
3%
9%
1%
1%
1%
5%
3%
12%
26%
25%
17%
7%
34%
13
Cloud Applications/Services Usage – Tiers
1 and 2 are Principal Drivers

 What steps are partners taking to drive success & profitability in
the cloud and what metrics should we track to benchmark
ourselves against them?
 AMI has segmented and benchmarked partners based on how far
they are along the cloud transformation journey.
How to Measure Yourself Against Best in
Class Partners?

Cloud Partner Segmentation Cloud Transformed
Cloud Migrating
Cloud Emerging
Cloud Emerging – 27%
 Have not allocated adequate investments to cloud
 Lack expertise needed to effectively sell cloud
Cloud Migrating – 24%
 Have begun to take steps necessary to be
successful in selling cloud, but have not yet met
their goals
 Some cloud expertise, but require additional
vendor support
Cloud Transformed – 13%
 Have taken steps necessary to successfully sell
cloud
 Meeting and exceeding their cloud sales goals
15
AMI’s Partner Transformation Model
Only 1 in 10 partners are fully Cloud Transformed
Non-Cloud Partner– 37%
 Exclusively on-premise focused; no cloud
investments
Non-Cloud Partners

Cloud
Partner
Metrics
Sales
Expertise
Technical
Expertise
Cloud
Revenue
Model
Marketing
Expertise
Vendor
Engagement
Customer
Engagement
Cloud Sales Goals
Cloud dedicated
sales staff
Cloud marketing
activities
Cloud certified
emps
Cloud biz. modelsCustomer Sat.
Customer demand
Cloud vendor
partnerships
Marketing funds for
cloud
Cloud Models
Offered
% of revenue
from cloud
Cloud Partner Benchmarking Metrics
16
Partner Benchmarking Approach & Metrics
There are several business areas that are key for partner transformation

Cloud Transformed Cloud Migrating Cloud Emerging
Average Changes in Revenue – Last Year vs. Next Year
Proportion of Sales from on-Premise vs. Cloud
18.2%
21.5%
11.4%
27.6% 26.2%
10.2%
Avg. Growth in Last Year
Avg. Growth in Next Year
42% 52%
66%
58% 48%
34%
Cloud-Based solutions and services
On-premise solutions and services
17
Firmographic Comparison of Cloud Partners
Transformed partners are generating significantly more revenue from cloud and growing faster

Steps Taken by Partners to Drive Success When
Selling Cloud Solutions & Services
Have a dedicated cloud marketing team
Employees Have achieved Cloud certifications
Integrated cloud into primary sales & marketing motions
Specify sales goals for Cloud solutions/services
Installed a separate Cloud services business unit
Steps Taken by Most Successful Cloud Partners

44%
39%
38%
Cloud Marketing
programs
Cloud Sales reps
training
Cloud Customer
Support
39%
32%
32%
Cloud
partnerships with
vendors
Cloud Sales reps
training
Cloud Technical
expertise
45%
40%
36%
Cloud Sales reps
training
Cloud Customer
Support
Cloud
partnerships with
vendors
Cloud
Transformed
Cloud Migrating Cloud Emerging
19
Critical Cloud Investments
Critical Investments Necessary to Drive Cloud Sales
The most successful cloud partners are focused on improving their cloud marketing programs to
generate greater demand for cloud in order to accelerate cloud sales

Cloud
Transformed
Cloud Migrating Cloud Emerging
Our customers are more satisfied 69% 49% 51%
Closer relationships with vendors for sales
and marketing support 69% 53% 40%
We generate strong overall margins and
profitability 64% 61% 44%
There is strong demand among our SMB
customers for cloud 64% 53% 40%
We have well-defined cloud services value
propositions and pricing 59% 48% 44%
20
% of Respondents answering 4+5 on a scale from 1-5 where ‘1’ is Strongly Disagree and ‘5’ is
Strongly Agree
Transformed Partners Are More Successful
Transformed partners have more satisfied customers, closer vendor relationships, and generate
stronger profitability than other partners

Perform Marketing
Activities On a Daily
Basis
20+% Marketing
Budget Dedicated to
Cloud
Work with IT Vendors
for Marketing
Has a Dedicated Cloud
Sales & Marketing
Team
Marketing
Approach
21
AMI has developed a predictive model that correlates partner
marketing activity with partner segments and cloud revenue
generation

52%
46%
45%
41%
41%
36%
35%
33%
33%
32%
26%
Online marketing tools
E-mail Campaigns
Hosting on-site events
Attending conferences or tradeshows
Online banners ads
Publishing Articles/Ads in IT mag.
White papers or data sheets
Direct Mail Campaigns
Hosting webinars or webcasts
Case studies
Using social media
65%
52%
50%
45%
45%
34%
31%
30%
29%
27%
27%
Online marketing tools
Online banners ads
E-mail Campaigns
Direct Mail Campaigns
Hosting on-site events
Case studies
Hosting online webinars or webcasts
White papers or data sheets
Publishing Articles/Ads in IT Mag.
Using social media
Attending conferences or tradeshows
Sales and Marketing Activities Generate Strong
Success
Frequency
Others
Sales and Marketing Activities Frequency
Transformed
22
Partners are overlooking potentially high
impact marketing activities

Cloud Transformed Cloud Migrating Cloud Emerging
Direct/Face-to-face Via Field
Salesforce
67% 49% 55%
Direct Through Telesales 56% 52% 50%
Indirect via other channel
partners/resellers
36% 42% 44%
Indirect via App Stores/
Aggregators/Brokers
28% 37% 36%
Via our website 47% 50% 48%
% of Respondents answering 4+5 on a scale from 1-5 where ‘1’ is Not at all Effective and ‘5’ is Very
Effective
Top Cloud Sales Methods
Transformed partners are self-reliant whereas other partners prefer indirect sales tactics

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