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SAP partners get new revenue-sharing model for cloud

SAP rolled out a revenue-sharing model that aims to support cloud economics. The software company also encouraged IP development among its partners.

In an update to its channel strategy, SAP has introduced a revenue-sharing model that will support partners' transition to cloud sales.

The new revenue-sharing model marks a shift from SAP's prior focus on partners that resell on-premises software and provide implementation services. When a partner closes cloud deals, the SAP PartnerEdge Cloud Choice flex model offers an upfront payment based on a percentage of the total contract value (TCV). Additionally, the partner will receive a percentage of the annual revenue it drives with the customer and get a slice of the TCV if the customer renews its contract. The flex model, detailed on Wednesday at the SAP Global Partner Summit Online, will launch at the beginning of third quarter.

Karl FahrbachKarl Fahrbach

"The cloud actually changes the economic model for partners," said SAP chief partner officer Karl Fahrbach at the virtual event. "The way partners were [making] money before -- by reselling our software or by doing implementation services, as well -- has changed. We needed to adapt our business models as well as economic models to the partners."

Fahrbach cited partner participation in previous cloud initiatives as evidence that the ecosystem will likely embrace the new flex model. Half of the cloud business SAP conducts with partners comes through the company's SAP PartnerEdge Cloud Choice profit option program, which launched in 2016, he noted. That program aims to get SAP partners established in the cloud.

"Partners are ready," he said. "I expect a big adoption of the model in the partner ecosystem."

SAP partners urged to build IP

The flex model dovetails with SAP's land, adopt, consume and expand (LACE) go-to-market strategy, which debuted in 2020 as part of SAP's cloud transformation strategy. Under the strategy, the partners' role is to land a contract and support customers through their adoption and consumption of SAP's cloud offerings, then encourage expansion and renewal.

The cloud actually changes the economic model for partners.
Karl FahrbachChief partner officer, SAP

Fahrbach added another partner element to LACE: Build. Reseller and implementation partners should build IP to "continuously add value on top of the SAP solutions," he said. Customers "want constant access to innovation" with the cloud, he noted.

SAP will invest in training content to help partners build on top of its Business Technology Platform (BTP), a portfolio that includes SAP HANA and SAP Analytics Cloud. In addition, the company has made BTP more "partner-ready" for ecosystem members to build on and invested in development advisors to help partners create applications, Fahrbach said.

The expanding partner role will change partners' business mix. A partner might derive 60% of its revenue from reselling SAP offerings and 40% on customization via services, Fahrbach said. The new model calls for an even distribution across the build, land, adopt, consume and expand elements, with each element representing 20% of a partner's business.

The traditional reselling and implementation services business model, however, is not vanishing. The company will continue to support the on-premises approach to partner business, Fahrbach said. Many SAP partners operate with hybrid business models, spanning on-premises and cloud deployments, he added.

Other SAP partner updates

Other SAP Global Partner Summit developments included the following: 

  • A new Partner Finder, which will roll out by the third quarter of 2021. The updated tool will let customers identify partners for a specific business or industry without requiring detailed knowledge of SAP technology or the partner ecosystem, SAP noted in a blog post.
  • Expanded SAP partner demo offerings, which now include more than 50 live scenarios. Partners have had free access to the demo environment since June 2020.
  • Extensions to the SAP for Me partner dashboard, which will include customer project information and data on cloud product adoption and renewals by the end of 2021.

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