SAP Offers 'Cloud Choice' Initiative To Expand Ranks Of Cloud Channel Partners

Making good on a promise made during the company's Sapphire Now conference in May, SAP has launched the first phase of a partner program specifically targeting partners who work with the vendor's cloud software products.

The initiative, SAP PartnerEdge Cloud Choice – Profit Option, is the first component of what is expected to be a multifacted cloud partner program.

Some SAP partners said that while they may tap into the services offered by the program, they saw it as geared more toward recruiting new partners who haven't really made the move to selling cloud services.

[Related: SAP Partners See Opportunities, Challenges In New HANA Releases]

"It has some positives," said Tomas Fertig, CEO of Seidor, a Spring, Texas-based solution provider and SAP Platinum partner. He said that by handling the contracting and billing for cloud software subscriptions, for example, SAP is assuming more of the risk. "We'll probably adopt it in some parts of the world," Fertig said, noting that he's still reviewing the program details.

SAP, once largely known for its ERP and CRM software for big corporations, has been aggressively expanding into cloud software in recent years with software developed in-house and through such acquisitions as SuccessFactors, Concur Technologies and Ariba.

In the first half of 2016 SAP, Walldorf, Germany, recorded 32 percent growth in cloud subscription and support revenue to 1.40 billion Euros ($1.58 billion), But it's still relatively small compared to the company's software license and support revenue, which reached 6.81 billion Euros ($7.71 billion) in the same six months.

At SAP's Global Partner Summit in Orlando, Fla., in May, company executives unveiled plans to recruit both born-in-the-cloud strategic service providers and current solution provider partners to add SAP's cloud applications to their service portfolios. But few details were disclosed at the time.

SAP PartnerEdge Cloud Choice - Profit Option is part of SAP's overall PartnerEdge partner program, rather than a completely separate effort. It's the first of what's expected to be several Cloud Choice programs accommodating different partner models for working with cloud software.

"We're going to attract a new set of partners to us [with the new program]", said John Scola, SAP vice president of cloud channels and transformation, in an interview. But he also expects current SAP partners to leverage it to get into cloud computing.

The program applies to SAP's stable of cloud software including SuccessFactors human capital management, Ariba commerce network, Hybris omni-channel CRM, the Business ByDesign cloud application suite, and the cloud version of the S/4HANA application suite.

Under the Cloud Choice - Profit Option, partners drive the sales cycle, including identifying customer prospects, and then provide post-sale implementation and support services, Scola said.

SAP signs the subscription contract with the customer and handles the customer billing. Partners are rewarded with a percentage of the initial deal (which Scola declined to disclose) and, importantly, also a percentage of ongoing contract renewals and service upsells.

"We expect the partners to be actively engaged with the customers through the entire life cycle," Scola said. "That's why we have partners, to drive that relationship with the customer."

The program will provide partners with a recurring revenue stream without having the hassle or the risk that go with the contracting and billing processes, Scola said.

But the program appears to be particularly geared toward solution providers who have yet to make the transition to cloud computing, says Grant Fraser, president and CEO of Navigator Business Solutions, a Salt Lake City-based solution provider and SAP Gold partner that works with the SAP BusinessOne and Business ByDesign suites.

Navigator Business Solutions has largely moved its business to cloud services with fixed-price implementations: 100 percent of new customers are using cloud services while the company still supports customers with on-premise implementations.

"In most cases we're reselling the subscription to the customer," Fraser said, and so his business' approach would not generally fit with the Profit Option model. (Resellers earn discounts of 30 percent off list price, Scola said.)

"We'll employ this occasionally when the circumstances make sense," Fraser said, such as when contracting with exceptionally large customers or when a customer already has an SAP relationship.

Still, Fraser praised the new program as a way for cloud newbies to take the first steps toward developing a recurring revenue stream. "I think it's a great option for partners."

Fertig at Seidor said he had to learn more details about the program before concluding if his company would benefit. Like Navigator Business Solutions, his company resells licenses cloud SAP software, including Business ByDesign, SuccessFactors, Ariba and Hybris, as well as for on-premise applications.

SAP software accounts for about three-quarters of Seidor's business and the cloud portion of that has been growing rapidly. But like Fraser, Fertig sees the new Profit Option as intended to bring more channel partners to the cloud, rather than assisting those that have already made the transition.

Seidor competes around the world and Fertig said that in some regions enforcing contracts and maintaining billing can be problematic. Allowing SAP to handle those tasks and assume the associated risk might be a benefit to Seidor, he said.

SAP plans to expand the cloud partner program in the near future to include other partner models including sales referrals, influencers and service-only partners, Scola said.