AWS Partner Profitability Framework: Deepen and Diversify Your Offerings
“AWS Transforms the Partner Experience” is a blog series on updates to AWS Marketplace, AWS Partner Central, and programs.
By Priya Bains, Principal Product Manager – AWS Partner Network
We’re excited to introduce the AWS Partner Profitability Framework, an intuitive and reliable way to maximize business value with the AWS Partner Network (APN).
In 2012, we launched the APN with a few hundred partners. Today, AWS customers can choose offerings from more than 100,000 partners in more than 150 countries. Partners continue to be an integral part of Amazon Web Services (AWS), empowering customers to grow their business by leveraging the scale, security, and flexibility of the cloud.
As we celebrate a decade of partner-driven innovation and customer success together (read Jeff Barr’s blog, APN 10 Years and Going Strong), we’ve witnessed how the pandemic has shifted the economic landscape, driving organizations to new ways of working and striving to do more with less.
Partners have shared that as they evolve to better support their customers, they want a more predictable return on investment (ROI) building solutions, specializations, and relationships with AWS and other AWS Partners. The Partner Profitability Framework is a response to this evolution.
To better understand the key factors that drive partner growth and business opportunity, we commissioned an independent study of AWS Partners with Canalys, a leading global technology analyst firm.
Research found that AWS Partners that achieve profitable growth are those that have deeper AWS engagement and offer a breadth of services and support. From reselling to offering services and technology solutions, data shows that different business models generate different levels of profitability.
In 2021, we introduced AWS Partner Paths to better support the range of partners’ offerings. This year, we’re enhancing the Paths by adding the business model dimension to introduce the new Partner Profitability Framework.
The AWS Partner Profitability Framework optimizes the partner journey to broaden the value and deepen expertise across these various business models—driving greater growth and profitability.
Partner Ecosystem Multiplier: The AWS Opportunity, a Canalys Study
According to the 2022 study conducted by Canalys, for every dollar of AWS revenue, partners across the globe generated a multiple based on their activities, cloud maturity, and business models.
Whether reselling, offering services, technology solutions or a combination of these, partners with a full stack of professional services and the most diversified offerings can achieve a $6.40 multiplier per $1 AWS sold. Services include advisory, design, procurement, building, adopting, and managing.
Figure 1 – Partners with a breadth of offerings can achieve a $6.40 multiplier.
The study also explored the key factors underpinning this multiplier, including:
- 61% of the multiplier is gained in the first year of the initial project. Partners that develop new opportunities with the same customer fuel greater growth with their AWS business.
- 60% revenue is generated at the front end of the customer lifecycle during advise, design, and build motions.
- 79% of partners interviewed indicated that customers increased cloud consumption after the first year of an initial project.
- 30-40% gross profit margins are generated by managed services recurring revenue opportunities.
- Breadth of partner services and AWS portfolio available to customers is key to AWS Partner growth. The most successful partners are those that have wide-ranging relationships across the broader partner network.
- The biggest barrier to achieving full multiplier is not having gained sufficient cloud maturity.
Figure 2 – Multiplier by service category.
Different Business Models Generate Different Profitability
Profitability varies based on business models, activities, and cloud maturity. Partners can deepen their expertise within their business model and grow their business by diversifying their offerings.
The framework guides partners to the right resources to grow profitability across all business models—from resell, services, managed services, and technology solutions to business outcome delivery. As they move up the Partner Profitability Framework (Figure 3), they can deliver different levels and types of value to customers, thus driving greater growth and profitability.
For example, straight resell of AWS’ native services may yield single digit margins. But by adding their own services to the AWS services, partners can differentiate themselves and add more value to the customer experience—yielding higher margins.
Managed services, in particular, yields even higher margins in the 30-40% range, setting the foundation to offer technology solutions. The largest returns come to partners who are delivering business outcomes to customers, as these solutions affect a customer’s top line and are usually tied to their main revenue stream.
Figure 3 – AWS Partner Profitability Framework.
Business Outcome Delivery Drives Maximum Growth
As a partner moves up the Profitability Framework to deliver business outcomes, AWS supports their evolution with programs, tools, benefits, enablement, and experts to build their capabilities and offerings, drive go-to-market (GTM) activity, and sell solutions.
For example, starting from the build stage, the AWS SaaS Factory Program is a strategic accelerator for partners in the early stages who want to build, migrate, or optimize software-as-a-service solutions on AWS.
As a partner looks into developing their GTM capabilities, they can achieve specializations (AWS Competency, Service Delivery, Service Ready, Managed Service Provider) to differentiate their expertise to customers, leverage Marketing Development Funds (MDFs) to co-fund joint marketing activities and also market their business outcomes.
AWS’ team of sales experts support partners with sell and co-sell activities. Programs like AWS ISV Accelerate incentivize AWS sellers to co-sell joint solutions with partners. Partners can leverage AWS Marketplace to sell their offerings to customers, expand reach, and accelerate deal closure. Additionally, the AWS Solution Provider Program (SPP) and AWS Distribution Program offer discounts and incentives to help partners grow and drive greater profitability.
Customer obsession is central to everything we do at AWS—and it starts with partner success. That’s why we give our AWS Partners the best-in-class programs, tools, and benefits to grow their business models and deliver greater customer value.
So, what’s in store for 2023? The Partner Profitability Framework is the organizing construct of our programs, tools, and enablement. The map by which partners can navigate the journey to their desired business model end state.
We are in the process of aligning AWS resources across the various business model stages of the Partner Profitability Framework to provide support throughout the entire journey—from starting point to desired destination.
AWS is constantly improving how we sell and co-sell with partners. We look forward to further streamlining our partner programs and helping you achieve greater profitability.