I came across a good quote by Nora Jones of Netflix that’s stuck in my head -

“ Chaos doesn’t cause problems, it just reveals them”.

This is so true when it comes to the evolving IT market.The IT Market is transitioning from a CapEx intensive project based solution to a more OpEx based Consume model. This model could be with Cloud or with traditional infrastructure. The mix of hybrid architecture in the enterprise data center has been steadily increasing and in the 900B$ market of IT Infrastructure; hybrid will continue to evolve as a key strategy for almost all enterprises.

Recently Antonio Neri, the next CEO of HPE announced HPE GreenLake at HPE Discover, a unique suite of on-premises, consumption based solutions for workloads such as big data, backup, database platform, SAP HANA, edge computing etc. HPE GreenLake leverages HPE GreenLake Flex Capacity, a service from HPE PointNext that lets customers consume their choice of infrastructure. Read more about HPE GreenLake here: https://www.hpe.com/us/en/services/it-consumption.html

With the evolution of hardware vendors to consume; it will make it extremely simple for enterprise customers to move to a true ‘Hybrid’ architecture leveraging the best of both public cloud and on-premise infrastructure.

However, for most enterprise customers the first point of contact for any of their IT needs is really their solution provider or the “Channel Partner”. Channel partners are extremely important because they hold they key to building the customer relationship, understanding the customer infrastructure and more importantly being the one point of contact and support for the customer. Companies like HPE, AWS, Google Cloud believe that the channel partners are the most trusted advisors for their customers and leverage them to sell their solutions.

There is however a problem with the ‘selling’ piece. Traditionally most channel partners have had the sales plans for their employees based on selling infrastructure. More recently, this plan has evolved to also help the “resellers” evolve from just reselling hardware, software and services to a more “solution” centric model.

The real challenge however is how can channel partners evolve the sales plans so that it caters to the new “Consume” model or to a “Cloud” model. In the world of “Consume” the sale is NOT a CapEX; it is a monthly recurring stream of revenue (MRR). Obviously the above sales plans will not be suitable for the sales person.

Here are some of my learning working both internally within HP (in early 2014) helping move some of its sales teams to sell cloud (for the hpcloud.com - one of the early entrants to public cloud) and working with some of the key channel partners (partners evolving to become a service provider or a Managed Service provider) to help them move their sales to a consume model sales plan. The picture is not all ‘rosy’. There has been a lot of failures, but we managed to take the initial learnings and evolve the thinking. I believe that there is no ‘perfect solution’ but know for certain that being stagnant is certainly not one of the solutions. We as an industry must come together to share these learnings with the broader ecosystem and our channel partners to help them evolve and not repeat some of the mistakes.

1) Understand the motive of moving to a Consume or Cloud model: This may seem trivial but is probably the most important thing to consider when moving the sales reps to a Consume sales plan. The organization should consider the main reasons for the transition and clearly communicate to the sales teams. The type of sales plan will also depend on why the change in the plan. There can be 5 main reasons to move to a consume sales plan, that includes:

• Revenue Generation: Is the organization moving to a consume model to drive incremental revenues? Is it moving to fuel recurring revenue growth by closing new business on service contracts?

• Improving Profits: Is the organization moving to consume or cloud to offset the decline in hardware profits? Is it to drive incremental services that will help drive the bottom line?

• Improving customer retention: Is the organization moving to cloud to improve the install base? Or is to go after the new greenfield accounts? Is it driving to a consume model to improve current customer retention due to commoditization of hardware?

• Customer Requirements: Is it simply moving because the customers are asking for a Hybrid IT approach? Is it to improve the satisfaction of the customer to be a one stop shop for all their needs?

• Strategic reasons: Is the reason for moving to consume aligned with the business strategy? How aggressively should the salesperson promote costume sales? Should they lead with it or should they drive it as an attach? Should a salesperson not target customers who are not interested in moving to a consume model?

• The answer to many of the above questions maybe a resounding ‘yes’ but it’s critical for the organization to prioritize on what is the most important reason and communicate it and make it part of the plan. This is clearly influence how the sales plans get structured. For instance, if the primary motive is driving bottom line or profits, then maybe adding metrics around profitability makes more sense than moving to a consume sales model; on the other hand if it is for driving short term revenue then maybe a bonus structure will work better than a metric in a sales plan.

2) Ego plays a big role: Ego? How? That’s probably your first question. From my past experience I found that it is indeed one of the factors to consider when you build a sales plan especially if you are looking at retaining senior sales folks. Consider this: If you are a salesperson who is used to closing 10M$ of enterprise deals, it’s considered normal. Most Enterprise Account Managers have quota anywhere from 2M$ - 20M$ depending on the size of the company. This is also a matter of pride for the sales person. They prominently display this on their CVs and also constantly talk about the multi million dollar deals they closed. Trust me! I used to do this too in my sales role! However, when you move them to a cloud or a consume plan and tell them that their Monthly Recurring Revenue (MRR) quota is 50K USD or 10K USD, imagine what they will feel. It’s not so much about what quota you assign but really the messaging you build around the Job Description and how you deploy the messaging in the sales letter. Consider using phrases like 5 year Annual revenue of xM$ or consider including attach components as part of the sales letters. It’s a simple thing around messaging but playing to a sales person ‘ego’ is important! :)

3) Up-front sales plans: You can use this sales plan to make a large up-front payment based on the size of the contract. The pros of such a model is that it is very similar to a salesperson selling a large traditional hardware deal. If a salesperson plans to say close a 5M$ deal for hardware, in this model you would essentially calculate the total revenue for the contract period or the TCV (Total Contract Value) and pay the commissions for that amount. Culturally, it is a easy shift for a salesperson coming from selling hardware. The disadvantage of this model is that commission is paid upfront before it is actually ‘earned’. It incentivizes the sales teams to be in a hunter model but on the downside, they may not be interested in actually being a long term advisor to the customer. This can lead to cancellation of contract and you’ll need to figure out the tricky part of sales clawback.

3) Residual Sales plans: This is a ‘month-to-month’ sales model. Each month the sales rep will receive a small payment for the length of the term contract. This will ensure that the salesperson is looking at the long term interests of the customer, being their trusted advisor, at the same time also hunting for new business. This can be a god model also to make sure that the expense of the commission is paid by the revenue of the sale. The disadvantage of such a model obviously is that the commissions are slow for the salesperson and it decreases the motivation of a salesperson to sell consume and may resort back to selling traditional hardware. There is also not a lot of incentive to acquire new customers. This can easily be changed with an add-on accelerator.

4) Coverage Models: One critical element when it comes to selling cloud is making sure that the sales plans are aligned not just to the Account Manager but to the entire ecosystem in question. This means, making sure that the specialists who are covering the account, the presales and the SAs who are covering the account are equally incentivized to sell ‘consume’. I have seen that with some partners, this has led to failure when only one of the teams was incentivized to sell cloud whereas the rest of the teams were still following the old traditional model. It is really critical to map out the entire ecosystem and make sure the roles are clearly defined and map out who takes ownership of the farmer role vs. the hunter role and assign the sales plans accordingly.

5) Referral based sales plans or Bonus: In some situations, especially when it comes to just selling services from another organization with little or no value add; the referral based sales plan maybe the best method. In this sales plan, the salesperson will simply early ‘referral points’ or a bonus for selling consume services. This may not be the most effective, but is certainly the easiest to implement. The vendors can also provide additional rebates and backend incentives to the partner and help with all of the enablement activities. Do not underestimate this to be a simple trivial plan. I have seen great success with some partners as it is easy to educate the sales teams and they get it as soon as you put it in front of them. Certainly not a long term solution but easy to get started.

6) Continuous Improvement and Continuous Development (CI/CD of Strategy): One of the most important lessons that we learnt during the process was that changing sales plan also means changing culture. It’s critical to adopt a DevOps style model to strategy where MVP (Minimum Viable Product) is built and then evolved. It should not be a one time, yearly structure where the sales plans are evaluated and changed yearly. The time frame is too long and hard to measure. It’s critical to try out different types of plans with different sales teams and see what works and evolve it gradually. A process must be put in place to build a sales plan, do some sort of A/B testing (example: Deploying a different type of sales plan in region A vs. Region B or territory A vs. B) and improve on what works and continually develop the sales plans. This may seem odd but success comes from building on top of learnings.

7) Culture Shift: This one should not be underestimated. I have seen that it is really hard to just build a sales plan and ask the sales teams to go out and sell. Engagement, Enablement and setting Expectations are the 3 key elements to a good culture shift. Making sure that the sales input is heard, understanding how the field behaves, what the sales pipeline process looks like, what are the customer needs are critical first step. The second step is making sure that they are included in the sales plan change process and a clear enablement plan is put in place to make sure they understand what the compensation structure looks like. The last and most critical element is setting the expectations. Why is a sales plan structured the way it is? What are the expectations from the sales teams? Is it to sell more services or more attach? What are the expectations from the sales teams during the first conversation with the customer? Is it to lead with infrastructure or lead with consume? Etc. All of these expectations must be clear if you are expecting a culture shift. Always follow the KISS model when it comes to sales plans, Keep it Simple Stupid - the more complex the model; the more you need to enable and educate; more time the salesperson spends getting trained instead of actually selling.

This may seem like a lot of Chaos to move from what’s working today to a consume model. But this is a critical step in the evolution and it’s better to go through the chaos, learn from experience and evolve now rather than die a slow death.