Cloud Partners Seen Gaining Recurring Revenue In New SAP Program

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."

But the program appears to be particularly geared toward solution providers that 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.