There is no question that Google Apps represents a sea-change shift in how organizations approach computing and productivity. The question is how to build a profitable and sustainable business around the new cloud-based IT modality.

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Building Revenue
from Google Apps

2. Building Revenue from Google Apps 02
Table of Contents
Summary/Questions 03
The Google Apps (Limited) Opportunity 04
The Other Factor Creating an Opportunity 05
Utility vs. Value 06
Four Core Services 07
Make it So 10
About the Author 10
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3. Building Revenue from Google Apps 03
Summary/Questions
As we move further into the 21st century, overheated server rooms are beginning to
cool down as Wi-Fi networks heat up. For more and more organizations, cloud
technologies are replacing on-premises software and hardware solutions—and
leading the pack is Google Apps. This productivity suite is rapidly becoming the
poster child of how IT energizes and transforms business.
There is no question that Google Apps represents a sea-change shift in how
organizations approach computing and productivity. The question is how to build a
profitable and sustainable business around the new cloud-based IT modality.
Not everyone is riding the clouds. Traditional IT VARs still approach cloud services
as if they were products. When an IT reseller sells a product—say, a printer—the
value lies in immediate functionality, and then it decreases over time. With every
product the reseller implements, its revenue annuity increases with a cycle of sell,
fix, and replace. As product values wane, the reseller’s value to the customer as well
as its revenue increases thanks to updates, repairs, and eventual replacement.
This inherently flawed interpretation of “rinse and repeat” is fueling the adoption of
cloud services such as Google Apps. Cloud services such as Google Apps get better
over time. Plus it offers end-user organizations a compelling opportunity to reduce
costs. But what does it offer the reseller partner? Very little: $10 per user per year.
There is a way to ride the cloud into a sustainable channel partner business. Since
the revenues associated with built-in obsolescence disappear in the cloud, the
product-oriented business model needs to be thrown out. The modern cloud-partner
adheres to a new philosophy. These partners realize the solution to building a
healthy, sustainable business lies in making cloud services work together. The
opportunity lies not directly within the cloud applications, but rather between them.
To illustrate the point, consider the diagram below. Asked to describe the graphic,
people commonly mention lines, crosses, and circles. Wait—circles? There are no
circles in the diagram.
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Building Revenue from Google Apps 04
The cloud can be visualized similarly. Think of the crosses as the cloud-apps. The
circles represent the integration opportunities, known as middleware. They are as
clear as day, yet many can’t see them—yet there are more circles than there are
crosses.
Most people are focused on the lines. Yet these cloud apps provide the foundation,
not the solution, for a sustainable channel partner business. To achieve success
requires connecting Google Apps to other critical cloud-related services such as
UCaaS and CRM. It isn’t a matter of simply adding more apps, but interconnecting
them. This way, cloud services provide organizations with a totally new and often
shocking transformational advantage. Delivering customers true value lies in
building on these advantages, not depreciating assets.
This paper examines the pitfalls and the opportunities for Google Apps partners. It’s
a path worth pursuing, because the rewards are significant. The cloud-focused
reseller can deliver incredible value to customers while simultaneously building its
own revenue and ensuring longer term renewals.
The Google Apps (Limited) Opportunity
It’s time to rethink the technology VAR. The term, which stands for value-added
reseller, was popularized when PC resellers replaced factory-direct mainframe sales
teams. VARS are from a different era—back when products were things. Today, the IT
channel is about services and the cloud. The “value add” part remains critical, but
the “reseller” element is more for linguistic convenience. The modern IT channel is
about Value Added Services.

5. Building Revenue from Google Apps 05
Not only IT, but all kinds of channel partners across industries are undergoing
transition. In the past, the channel focused on physical goods. Newspapers relied on
distribution partners such as retailers and paperboys, as well as suppliers for paper
and ink. When newspapers became virtual, these partners largely disappeared. The
same occurred with music stores (CDs to MP3s), travel (local agents to e-tickets),
and movies (video rental stores to movie streaming).
Channel partners in most industries are distancing themselves from physical goods
and focusing instead on helping customers realize the benefits of services. This is
especially true for the IT VAR because cloud-delivered services are changing
everything. Cloud services are far more than simple alternatives to products. The
cloud offers compelling new ways to work, especially in the areas of mobility and
collaboration.
Thus, Google Apps presents a compelling value proposition for VARS, especially
those selling to businesses, schools, and government offices. The Google Apps
channel opportunity offers revenue from the initial implementation and then
recurring revenue through renewals. The problem is that it is hard to build a
sustainable business based on $10 per user per year. This margin may not even
cover the marketing and sales costs associated with the initial customer. A viable
business needs additional revenue streams.
The traditional IT VAR thrived on the initial transaction. The software and hardware
along with installation services. IT servers in particular were the gift that kept
giving, each one sold provided the dealer a revenue annuity. Actually, the constant
costs associated with server upgrades is one of the factors driving the adoption of
Google Apps.
So this begs the question: how does the new channel replace the hardware revenue
that nourished the old channel? The answer lies in broadening the Google Apps
conversation. Successful Google Apps resellers offer complementary solutions that
leverage a customer’s Google Apps deployments. Customers win with a truly
integrated solution that only cloud services can provide. The partner is rewarded
with expanded implementation services, recurring revenues, and improved account
defenses leading to higher retention and renewal rates.
The Other Factor Creating an Opportunity
Two major factors are creating an attractive opportunity for Google Apps partners.
The first and obvious factor is the appeal and low cost of Google Apps. The second
comes from the inability of traditional channel partners to adapt. Together, these
factors are creating a lucrative opportunity for the cloud-savvy.
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6. Building Revenue from Google Apps 06
It is a recurring theme: when business models change, major players are unable to
make the transition. Think of Blockbuster, RIM, and Borders, all leaders that fell
from glory in the face of a major industry transition. The IT channel is going through
a disruption that is sending users to cloud services. As cloud services move in, IT
VARs see declines in upfront revenues. As the big sales fade away, so do the
associated revenue streams (troubleshooting, upgrades, backups, HVAC issues, and
repairs).
It is a disruptive change. The traditional IT VARs require large upfront transactions.
These fuel the entire business, including compensation plans, management
expectations, and cash flow requirements. These entrenched processes are difficult
to change. The emerging cloud partner nourishes its business by broadening
recurring subscription revenues, together with custom integrations and support.
The differences are not minor and represent a difficult transition that many
traditional VARs will never make.
In this environment, IT channel partners that focus exclusively on delivering
cloud-based services have the advantage. Hardware sales, particularly under
internet pricing pressures, are low-margin commodity business liabilities. The IT
VAR is far more agile and focused on value through cloud services.
Utility vs. Value
The Google Apps solution is actually reasonably simple to implement. Many
customer organizations do so without any outside assistance whatsoever. As with
many cloud-based services, self-service is inherently built in. So it begs the
question: why does Google even have a partner program? The answer: because it is
not about Google Apps.
Sure, there’s opportunity in reselling and implementing Google Apps, particularly
for small business customers. Many small business customers don’t have the
technical expertise to implement the solution, and these organizations frequently
work with partners. It’s perfectly reasonable for a partner to provide basic
assistance with initial setup. And then the project ends, and the customer becomes
self-sufficient. It’s called a utility sale, and there’s no shortage of utility-class
resellers. But the utility model is not sustainable for most partners. It requires a
constant search for new customers, and someone is always willing to do it for less.
The trick is focusing more on the value-add part of the VAR equation. It is not about
reselling, nor about cutting costs—it is about creating value, and this focus extends
to more than small business customers.
Q: why does
Google even
have a partner
program?
A: because it
is not about
Google Apps
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7. Building Revenue from Google Apps 07
Here’s the secret: customers tend not to pocket potential savings. Instead, they
more often prefer increased value. It is a phenomenon called Jevon’s Paradox, which
states that technological progress that increases the efficiency with which a
resource is used, tends to increase the rate of consumption of that resource. It isn’t
particularly intuitive, but holds true with many examples. Consider gas prices: when
prices drop, people drive more. Simply stated, the higher the savings, the more the
customer is willing to spend. The mistake utility partners make is reducing costs and
then walking away, in a hurry to find a new customer.
Google encourages partners to pursue a value sale. Google Apps provides the
foundation to upgrade not just core components like email to Gmail, but rather
entire business processes. The cloud enables opportunities for unprecedented
efficiencies and capabilities, allowing organizations to upgrade internal processes
in ways that most businesses can’t even imagine.
The opportunity exists because typical business process reengineering efforts focus
only on the features of specific business applications, ignoring the human
inefficiencies between processes. For example, emails often require a follow-up call,
but email systems typically are not integrated with phone systems, contacts, or CRM
systems. Business processes should be integrated with communication channels.
Communications-enabling processes mean better connections, improved response
times, and overall greater efficiencies. To get here requires four core
complementary components.
Four Core Services
Four core services, when combined with Google Apps, create a unified solution for
the customer, increase customer loyalties and renewals, and create a path to
sustainable profitability for the reseller. The four components are: broadband
networking, UCaaS, business apps, and middleware.
Google
Apps
Broadband
Business
Apps
Middleware UCaaS
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8. Building Revenue from Google Apps 08
Broadband: The fundamental shift that is occurring is from premises-based
solutions to cloud services. This means the internet and access to it becomes
mission critical. Business customers often make the transition to the cloud without
giving network connectivity proper consideration. Consumer-class services or coffee
shops are fine for an individual, but not acceptable for the modern, cloud-based
business. Keep in mind we are talking all communications here—voice, email,
calendaring, office productivity apps, even SMS will utilize the broadband
connection in a modern cloud-based business. The internet no longer can be an
afterthought.
If a customer’s internet experience is poor, so is their perception of Google and the
reseller that provided it. Even worse, the perception of the customer’s customers
also drops with poor-quality interactions. Partners need to be prepared to design
and size reliable and sufficient network connections. Partners should establish a
relationship with a master agent that offers multiple carrier services. As an added
bonus, carriers and master agents offer recurring commissions.
UCaaS: Unified Communications (UC) combines traditional voice communications
with additional, modern forms of real-time communications such as IM/presence,
video, mobile solutions, and messaging. UC is about multi-modal communications,
not just voice. The traditional approach for voice communications is similar to
mainframes—on-site, proprietary equipment and networks. Now, organizations are
moving toward a service model known as unified communications delivered as a
service (UCaaS). This approach aligns nicely with Google Apps.
Google Apps resellers should establish a relationship with a UCaaS provider. There
are thousands of them, and there’s no need to restrict partners to local options.
Despite the quantity of providers, they all build their infrastructure from only a
dozen or so configurations. The most prevalent are providers that use BroadSoft
software, which can integrate to Google Apps.
Google Apps inherently provides some UC components including IM/presence,
video, email, and SMS. Where Google falls short is with voice solutions, including
business-class features, devices, and applications such as a contact center. Leading
a client to UC will offer rewarding improvements in communications, flexibility to
use mobile devices, support for remote working, and improved interactions with
customers. Integrating Google Apps with UCaaS delivers improved revenues and
customer loyalty.
Business Apps: Google Apps facilitates a business, but doesn’t run it. For that, most
organizations rely on specific applications such as customer relationship
management (CRM) and financial/accounting packages. Like Google Apps, general
business applications are also in the midst of a mass migration toward the cloud.
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9. Building Revenue from Google Apps 09
Solutions such as SalesForce.com and Zoho.com provide advanced features for a
fraction of the cost of on-site servers.
The practice of assisting with this migration is not only lucrative itself, but highly
complementary to Google Apps. In both situations, the customer already trusts the
cloud and has moved past the emotional need of on-site servers. Many of these
solutions, such as Zoho, offer agent commissions, and the setup and migration
often require outside expertise the partner can provide. The best part of these
applications is they can interface with Google Apps including Gmail, Calendar, and
Contacts. Even Docs can connect to most cloud-based business apps, creating
exceptional value for the customer.
Middleware: This last category is the secret sauce. It’s the most critical, the most
misunderstood, and the simplest. Google Apps, UC, and CRM are core to the
growing trend of cloud adoption. Obviously, the three categories are stronger when
tightly integrated, but that’s rarely the case. Instead, the major cloud application
providers offer APIs so that customers can perform their own integrations, but that’s
also rarely the case.
Middleware provides integration between these critical applications. Middleware is
not another cloud service, but instead makes cloud solutions more valuable.
Multiple middleware vendors offer an assortment of integrations. Most relevant here
is gUnify, which connects Google Apps with UC and CRM solutions.
gUnify is not another piece of premises-based software that gets installed on
desktops; instead, the Google Apps administrator enables it. A Google Apps gadget,
gUnify brings communications-enabled processes to your inbox. Once enabled with
Google Apps and a BroadSoft UCaaS provider, the user can, for example, click to dial
a number in an email as well as click to hang up. Connect it to a popular CRM like
Salesforce.com or Zoho, and the user can enter CRM call notes directly from email.
Where the traditional IT reseller found servers to be the gift that keeps on giving, the
modern Google Apps reseller should look to middleware. It is more than just another
revenue source because it solidifies the others, creating additional value and
improved customer retention. By extending Google Apps across business processes,
resellers provide customers phenomenal improvements in productivity.
With these four core services, a small business can have the same integrated,
communications-enabled business processes that large enterprises implement. The
difference is that instead of involving millions of dollars and hundreds of servers,
the Google Apps partner delivers it all without a major upfront capital investment or
on-site servers. All four core services work in harmony to deliver true value to the
customer, recurring revenue to the partner, and long-term customer relationships.
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Make it So
As the IT channel changes, some things never change. Selling on price is a sucker’s
game. There’s always someone’s nephew who “knows Google” and who will do it
cheaper. Instead of worrying about driving down to the lowest cost, partners need to
build long-term business relationships that create mutual value. The opportunity to
specialize in Google Apps isn’t as much about Google Apps, as it is about
understanding how to leverage the value of a specific product or technology within
a broader solution.
To put this plan into action, start with gUnify.com for referrals and best practices.
About the Author
Dave Michels is a principal analyst at TalkingPointz, focused on business
communications. Dave focuses on research and writing about telecommunications
and unified communications market trends. He offers an irreverent, incisive take on
the industry, TalkingPointz has become one of the most influential and
often-quoted/linked blogs in the enterprise communications industry.
Dave has also become one of the most popular contributors to the enterprise
communications industry’s leading independent websites, including NoJitter.com
and UCStrategies.com. He also contributes to the GigaOm Pro, TechTarget,
CloudAve and Voice Report websites. Finally, Dave is a key participant in the
enterprise communications industry’s leading conference, Enterprise Connect. In
addition to delivering presentations on major topics, Dave also oversees Enterprise
Connect’s Innovation Showcase, which spotlights new and innovative vendor
companies within the industry. Dave is also a frequent presenter at other industry
events, and routinely attends and covers vendor conferences for analysts and
consultants.
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