SAP: Cloud takes emphasis off direct/indirect mix

Kevin Gilroy, senior vice president and general manager of Global Small & Midmarket Segment at SAP

, senior vice president and general manager of Global Small & Midmarket Segment at

ORLANDO – Less than two years ago, SAP proudly touted a company wide goal, set by CEO , to do more than 40 per cent of its total revenues through partners by 2015. But today, that number has been somewhat forgotten. Kevin Gilroy, the company’s channel chief, said the old figures, which measured largely the percentage of its sales were through resellers, have largely become irrelevant as SAP and partners have turned their attention to the , and now sell in different modes, including subscription and other recurring revenue models.

“Resale is such an old KPI at this point,” Gilroy said at the company’s Now event here. “With the cloud coming in, the direct/indirect split becomes irrelevant.”

That’s largely because the company works with more types of partners in more ways than ever before, and even a single solution provider may take on different roles in different deals – serving as resellers in some cases, agents in others, and services partners in others still.

Gilroy reported that, as expected, SAP sees a bell curve in its channel, with about a third of its partners leading the charge towards the cloud, the second third still finding their footing, and the final third “aggressively resisting” transforming their business to involve cloud.

“They’re all moving in the right direction, but they have to see the upside,” he said.

SAP partners face the same challenges many solution providers face in moving to a cloud-based business model, particularly if they’ve cut their teeth in a business that involved big projects for big dollars. But it’s a change most partners realize they have to make, even if it’s not easy – and if they don’t realize it, Gilroy is only too happy to spell it out for them.

In meetings with large groups of partners, he likes to ask “Anybody in the room a DEC partner?” The point is seldom lost on solution providers.

“You have to pick your suppliers really carefully when you’re in a big transition like this,” Gilroy said. “You don’t want to pick the DEC or Data General of this generation. You want your partner to be one of the absolutely foundational players in the industry, one that will be left standing.”

While Gilroy, like many sellers of software, said the company fully expected cloud to at least somewhat cannibalize its on-premise business, that hasn’t necessarily been the case. The topic of cloud, he said, has been so hot, that merely using it as the conversation-starter gets partners into meetings they wouldn’t have otherwise if they were just pushing for a business software discussion.

“Some customers like the cloud, and they buy it. Other balk at it, but after they’ve heard from us, they realize that they can get a much more cost-effective SAP solution than they ever thought they could,” Gilroy said. “Or some of them like cloud, and want CRM, travel, and HR sent to the cloud, but want to keep the general ledger in-house. We’ve seen cloud go up, but it’s brought up our on-premise business as well.”

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