5 Ways To Drive AWS Partner Profits, 60 Percent Margins

‘One dollar of AWS can lead to $6.40 for the partner—that’s a lot of money if you think about how much money is moving into the cloud,’ AWS’ Julia Chen tells CRN.

Amazon Web Services channel leaders want to take partner profitability to new heights, explaining to CRN how partners can make $6.40 on every dollar of AWS sold.

“One dollar of AWS can lead to $6.40 for the partner—that’s a lot of money if you think about how much money is moving into the cloud,” said Julia Chen, vice president of AWS’ Partner Core, in an interview with CRN. “This is quite a substantive multiplier.”

The Seattle-based $82 billion cloud giant is striving to drive partner profitability by opening up the floodgates to incentive programs for channel partners of all shapes and sizes, while also matching partners together within the AWS ecosystem to drive the “nirvana” business outcomes customers are seeking, she said.

Solution provider powerhouse Presidio is reaping the benefits of some newly available incentive programs and trainings inside the AWS Partner Network, which has been revamped under the new leadership of AWS’ Worldwide Channel Chief Ruba Borno and AWS CEO Adam Selipsky.

“They’re rolling out programs that are extremely rich in margin and helpful for the partner,” said Chris Cagnazzi, senior vice president and general manager for Presidio’s Cloud Solutions Group. “They understand there’s a cost to onboarding clients and the cloud [transformation] work that’s needed. AWS is backing us up with lucrative programs that are meaningful and working on initiatives that are focused on partner profitability.”

AWS Profitability Report At re:Invent 2022

At AWS re:Invent 2022 in Las Vegas today, Amazon’s cloud computing unit unveiled a new survey in conjunction with Canalys that reviewed dozens of AWS partners to understand profit margins and return on investment (ROIs).

The study was aimed at helping AWS’ 100,000-strong partner ecosystem discover how to make more profits and margins working with AWS.

Sachin Vora, global leader of the AWS Partner Network (APN) Programs, told CRN the survey showed where some of the greatest profit opportunities are for channel partners.

“We don’t just have foundational workload-based opportunity for our partners, but partners can now start stacking up different layers of value-unlocking with the customer,” said Vora. “AWS is the best place for partners with our innovation. We are seeing that flywheel effect now kicking-in.”

In an interview with CRN, AWS’ global partner executives Vora and Chen explain how partners can reap the highest ROI, margins and profits with AWS.

Business Outcome Solutions Reap 60 Percent Margins; $6.40 Multiplier

Partners who sell business outcome solutions can reap 60 percent margins on their offerings.

“For example, predictive maintenance in a factory or real time in-store retail analytics—when you’re selling a business outcome solution, you can make upwards of 60 percent margin on what you’re selling,” said Chen.

AWS’ study with Canalys found that partners can reach a $6.40 multiplier per one dollar if they can offer services and support across the entire cloud lifecycle.

Breaking down the $6.40 multiplier figure, Chen said a partner who offers a wide breadth of services can make around one dollar on advising; $1.20 on designing; $1.60 on building; 30 cents on procuring; $1.10 on adoption; and $1.10 on managing the AWS service for the customer.

“I think nirvana is delivering that business outcome solution,” said Chen.

“Some partners are not geared to do it. They would have to hire a whole different skill set than they have,” she said. “One thing that I tell partners is if you don’t have that, then partner with another partner. This is where a system integrator (SI) can partner with an independent software vendor (ISV) and together, they can sell a business outcome solution.”

Partnering On The AWS Marketplace For Larger, Faster Deals

One-way partners can be matched with ISVs and other partners to drive profitability is through the AWS Marketplace.

AWS’ global partner program leader Vora said channel partners can sell ISV solutions on the AWS Marketplace can “become the seller of record for the customer” through the Solution Provider Private Offers (SPPO) and Consulting Partner Private Offers (CPPO) programs.

“These allow our consulting partners and services partners to partner with ISV solution providers and be able to take that back into market,” said Vora. “Marketplace is a great meeting point for that.”

The Marketplace creates “both the economics as well as an transactional ease” that a partner can do without having to engage in another companies partner program.

“For example, they don’t need to formally engage with Snowflake’s program, right? They don’t need to do that,” he said. “They can actually just be part of a solution provider program here, on the resell side, and be able to seamlessly sell and market a solution that Snowflake has on the Marketplace.”

Managed Services Partners Make 30 Percent To 40 Percent Gross Margins

Building an AWS managed services practice and investing in MSP cloud skills is critical to increasing profitability.

“If you’re just reselling AWS products or offerings, you’re making high single digits, maybe low double digits, in terms of margin. If you’re selling managed services, you can make 30 percent to 40 percent gross margin,” said Chen.

She said partners are realizing that the best way to really “unlock growth and profitability” is to diversify into being a managed service provider.

In order to become a highly profitably partner, solution providers must invest in building out managed services capabilities for AWS.

“If you invest in learning more of the AWS portfolio, and you invest in building capabilities like managed services—you will make more money,” Chen said.

AWS Opening Doors To Incentive Programs For The Channel

There are currently more than 100,000 partners inside the AWS Partner Network with the vast majority of them enrolled in the AWS Partner Paths program.

Launched this year, Partner Paths aims to provide a tailored experience for each partner’s business model to help partner differentiate themselves around five paths: software, hardware, services, training or distribution. The program includes benefits and AWS resources designed for each partner’s strengths and goals.

AWS has opened up Partner Paths to allow channel partners receive the same benefits that other ecosystems partners received such as ISVs.

“For example, Accenture says, ‘We are in the AWS services path, but we are also building an ISV practice. So we want to be in the software path too,’” said Vora.

Accenture is now enrolled in AWS Partner Path for software as well as the training path.

“Now they are able to participate in programs which were specific to ISVs,” Vora said. “For instance, the ISV Accelerate Program—Accenture is now a part of that program.”

Additionally, the AWS SaaS Factory Program is helping partners at any stage of their SaaS journey.

“Our SaaS factory program was meant to accelerate our ISVs ability to build SaaS offerings on AWS, but we are realizing through this partner feedback is that a lot of our partners who do not look and feel like an ISV—they are also building a SaaS offering on AWS,” said Vora.

For example, Deloitte is building offerings on to AWS’ SaaS Factory program which provides direct access to best SaaS practices, technical and business content, and SaaS experts.

“So they are now not just ISVs or SAAS players [in the program]—they are partners trying to make a SaaS play for themselves,” he said. “We are really broadening that programs’ impact. So it’s super exciting times for us in terms of program development and design.”

Don’t Get Discouraged; ‘Break Journey Down Into Very Small Pieces’

In order to make a $6.40 multiplier on every dollar spent on AWS solutions, partners typically need a substantial AWS business unit and provide a large breathe of AWS services offerings.

However, Chen said smaller solution providers shouldn’t feel like they have to completely transform their business overnight to become a more profitably partner.

“Sometimes partners get discouraged because they think that they have to change so many things and there’s no way that they can do it all at once,” said Chen.

“My advice is ‘You can actually break this journey down into very small pieces. You can learn a new AWS technology every quarter. You can invest in one more type of service. You can partner with another partner who has that capability that you don’t have just yet and go in there together,’ she said. “It becomes much more manageable when its incremental. They don’t have to do it all at once.”

Chen said the new AWS profitability study should give partners comfort knowing that their cloud investment does provide tangible new margin opportunities.

“So you invest a bit, you’re going to get a bit more back. And you invest another little bit—you’ll get more back too,” she said.

Additionally, the AWS Partner Network is investing in incentives and programs targeting new customer acquisition and greenfield opportunities specially for channel partners.

“We are building out how we can help them unlock growth and profitability within a partners’ business model. That is definitely a key cornerstone of our programs,” said Chen.