Achieving Greater Profitability: AWS Partner Alignment and Incentives

“AWS Partner Experience Transformation” is a blog series on updates to the AWS Partner Programs, AWS Marketplace, and AWS Partner Central.

By Hans Schabert, Global Partner Management Solutions Architect – AWS
By George Swain, Sr. Partner Management Solutions Architect – AWS

The Partner Ecosystem Multiplier study conducted by Canalys highlights that AWS Partners with a breadth of offerings can achieve a $6.40 multiplier per $1 AWS sold.

Achieving this multiplier requires optimization across various areas, including professional services, managed services, advisory, resell, and different business units within an AWS Partner’s organization.

In this post, we will explore common challenges AWS Partners face in achieving profitability and how to overcome them by leveraging sales and funding benefits, portfolio alignment, and support from Amazon Web Services (AWS).

The AWS Partner Network (APN) is a global community that leverages AWS technologies, programs, expertise, and tools to build solutions and provide services for customers.

The APN has more than 130,000 partners from over 200 countries, with 70% headquartered outside of the United States. Together, partners and AWS provide innovative solutions, solve technical challenges, win deals, and deliver greater customer value.

Learn more about the AWS Partner Profitability Framework, and see how AWS is transforming the Partner Experience in our blog series highlighting updates to AWS Marketplace, AWS Partner Central, and APN programs.

Figure 1 – AWS Partners with a breadth of offerings can achieve a $6.40 multiplier; via Canalys study.

Challenges in Achieving Profitability

AWS Partners have told us the challenges they face when looking to leverage the Partner Ecosystem Multiplier are multi-faceted, ranging from technical and business processes to financial. A few challenges include:

Disconnect between departments: Alignment between departments is crucial but often elusive. For example, conflicts between DevOps integration teams and managed services teams can arise when implementing projects for customers if they have differing deployment methods, architecture, and documentation. This can lead to inefficiencies and reduced profitability when customers transition between solutions. With IDC projecting that by 2026, 65% of total public cloud spending will be managed by managed service providers (MSPs), this makes it essential for AWS Partners to successfully navigate customers onto their managed services solutions without friction.
Sales and marketing involvement: Many partners have a diverse portfolio of offerings, but sales and marketing may not be aware of these if they are not directly involved during the design phase. This can result in failing to identify cross-sell opportunities, with customers receiving inappropriate solutions, costing both time and resources.
Inadequate sales incentive models: Traditional sales models within channel partners are often misaligned with the cloud sales cycle. This can result in conflicts between sales KPIs and remuneration, hindering sales staff from effectively positioning the right solutions for customers.

Gartner projected global IT spending to reach $5 trillion in 2024, with industry line of business (LOB) buyers representing the largest group of tech buyers (41%). Industry LOB buyers are looking to adopt dedicated industry-focused solutions with proven business value and outputs.

Ensuring that sales teams are able to propose the right solution for the correct customer challenge becomes critical. This broader alignment between teams is key for AWS Partners to drive greater value for their customers and profitable growth for their own business.

Focus on the Customer Journey

Efficiently bridging the gap between customer challenges and AWS solutions requires a thorough understanding of sales structures, funding benefits, and portfolio management. In this section, we’ll explore mechanisms to help AWS Partners achieve this and enhance their overall business success.

It can be easy to say that something is “the” way to be efficient, but the reality is that it’s a journey. AWS collaborates with partners to identify the right approach to help drive success.

Customer obsession is not only a leadership principal across Amazon but also for AWS Partners. Recognizing customers’ needs and tailoring your portfolio to those needs is an important element in increasing partner profitability.

Figure 2 – Multipliers based on categories of AWS Partners; from Canalys study.

According to Canalys, only 14% of partners classified in the “Focused” category have considered increasing their revenue by expanding and aligning their cloud portfolio offerings. Through the process of alignment, AWS Partners are able to better understand customer challenges, bringing them closer to the $6.40 multiplier per $1 AWS sold.

This may involve unique portfolios and customer journeys for different segments or industries. For new customers, entry-point elements like AWS Optimization and Licensing Assessment (OLA) or a data discovery workshop can help them get started working with your organization. Visibility into these portfolios is important for sales and project managers to guide customers in the right direction.

Customers Are Looking for Integrated Solutions

Today’s customers are looking for integrated solutions that deliver measurable results. These usually involve multiple components including software, hardware, consulting, implementation, or change management.

Harnessing multi-partner collaboration through partner matchmaking events can develop innovative business outcomes. These can be built with one or more partners’ technologies or services, and delivered by a single partner or in collaboration with other AWS Partners.

An example is collaborating with a partner that specializes in FinOps to help manage costs for your own customers. This collaboration can help to optimize your revenue and remove the undifferentiated heavy lifting of new workloads. Building a portfolio around customer issues that is specific to each partner is based on customer relationships, delivery capabilities, and customer segmentation.

Optimize Your Portfolio for Customer Challenges

A mechanism for adapting the portfolio alignment to customer needs works best with discussions between or a workshop that includes portfolio managers, sales, delivery, and marketing.

A Partner Profitability Workshop can be conducted in four steps:

Interview the seller for a specific segment, such as small and medium business (SMB) customers. During the interview, the salesperson is encouraged to list all of the challenges the customer has asked them to address. These challenges can be sorted by the maturity status of the customer from greenfield to cloud-native.
Session with the partner’s Solution Architect/Pre-Sales Architect. Based on the outcome of the first step, participants can write down their answers about the best offer for each customer challenge using different colors; for example, yellow for time and material offers and blue for packaged solution that are ready to sell.
Review the whiteboard and identify white spaces for challenges that are only addressed with time and material (yellow) responses or no offering. You can also identify relationships between offerings and challenges to identify paths through the partner portfolio based on each customer’s problem journey. Identify gaps as action items and how they can be reduced or eliminated, either with a new packaged offering or by adjusting the scope on existing offerings.
The final stage is to finalize the various calls to action. These could be training for sales teams about the value proposition, in addition to funding or incentives for customers to offset the cost. They can also be the foundation of the next go-to-market (GTM) campaign or promotion to existing or greenfield customers.

The results and action items of a Partner Profitability Workshop can have different outcomes. Let’s review two examples we have heard from partners:

Sales incentives are an important elements in managing sales interests within an organization and prioritizing certain offers. Partners have told us that the prioritization of sales incentives was particularly important for greenfield customers or entry elements in their portfolio. The Customer Engagement Incentive (CEI) for AWS Partners can be used to help sales teams reduce the cost of scoping the requirements of companies in the early stages of AWS cloud adoption, and encourage growth within end customers.
Moving to the partner’s managed services was another example outcome of the Partner Profitability Workshop. In this scenario, a marketing campaign was used to conduct a cost optimization workshop with existing customers. The aim was to evaluate whether the partner’s managed services were the better choice for the customer. Marketing Development Funds (MDF) helped drive offerings and sales pipeline for this initiative.

How to Get Started

Learn how the AWS Partner Profitability Framework can deepen your expertise and broaden the value across business models to drive greater profitability.

It starts with identifying the most profitable segment in your organization and aligning with stakeholders to start a Partner Profitability Workshop with sales, marketing, delivery, and executive sponsors.

Reach out to your AWS Partner team for support and to facilitate the Partner Profitability Workshop.