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Citrix Expanding Its Partner Program for the Channel

Citrix — a large software company offering virtualization, mobility management, networking and SaaS solutions — is offering a channel partner program characterized by monthly pay-as- you-go (i.e. consumption-based) license pricing. Citrix is fine-tuning its channel-partner approach, the Citrix Service Provider program, finding opportunities by working with managed service providers (MSPs) as sources of business solutions for end-customers.

Perhaps the most interesting aspect of this is that Citrix is offering flat-rate monthly licensing options similar to telco long-distance bundles. These options include value-add services, including tech support for its partners to offer their end-user customers. In the age of the cloud, enterprise customers and SMB customers are looking for value-add services – making these services a good “match” for the new market realities.

Citrix has created three-tier education and enablement tracks (technology, business and community). All tracks start with introduction to becoming a Citrix partner and on-boarding. Neuralytix believes this is a necessary, and often overlooked, element for any channel program.

Citrix is clearly moving ahead faster than some of its competitors with consumption-based pricing that is based on the customer’s preference. But, more competitors can be expected to adopt this approach, as well. That’s why Neuralytix believes Citrix could expand this offering, to emphasize service differentiation. One example of this is Citrix’ business-ready data-as-a-service (DaaS) offering.

The New Pricing Models Challenge Traditional Revenue Models

We believe this new consumption-driven model for pricing will be as good for the partners as it for the customers.  This model, however, requires a significant change for many of the established partners.  Partners have built their businesses on a traditional resale structure with fees for products and services, either resold or delivered by partners bolstered by additional applicable rebates or marketing Development funds.

Moving to the cloud changes the traditional pricing assumptions by placing the emphasis on services, rather than on the infrastructure that supports those services. It is as much about the usage as it is about the way the partner is paid and the way the customer is billed. This is a disruptive business model, not a technology disruption. The good news for channel partners is that it allows – even forces them – to focus on higher margin services as their primary value-add. When sold as a solution it allows the focus on the usage for the customers’ business.

The overall rate of cloud adoption varies by vertical, application, customer need, or requirement, software availability and education on the value of cloud. Cloud computing, however, is growing in the IT market overall.  At some point cloud will eclipse the on premise sale but has not done so yet. It is important for partners and suppliers to offer both as the market adapts.

Citrix continues to add solutions to its cloud offering, which should resonate well with the partners. They like their customers to “walk” before they “run” approach to cloud. While the timing and alignment with customers may not always be in lockstep with the customer adoption but credit goes to Citrix for expanding and keeping the partners aware of the direction that Citrix is going.  This allows them for time to adjust and to move on the next segment of the solution.

Highlighting Partners’ Role as Trusted Advisors

As partners and customers move to cloud computing, partners are focusing on the customer’s business rather on the technology alone. This can be transformative to the channel partner-customer relationship – casting the partners into a trusted advisor role.  Paying on a consumption model is good for partners because it will incent them further to work with the customer to use the cloud more fully, rather than selling and leaving the customer site. Now the channel partner model is all about selling and expanding.

This approach will be good for customers because it allows for more flexibility and agility with the solution.  It provides them to right Information Technology at the right time.  Customers are moving to the cloud, more slowly than the market has forecast, because this is a sea-change for them – and many IT systems are still running on-prem, within the data center. This is part of a trend that began IaaS (infrastructure as a solution and is now extending into other infrastructure and application companies.

The Cloud is Changing Pricing Models

The introduction of cloud software and cloud infrastructure has already begun to change pricing models that affect IT spend. Instead of one-time perpetual licensing or purchases, cloud infrastructure providers such as Amazon and Google levy a monthly fee, which is basically a subscription for services rather than an outright purchase. The same is true for cloud application software, for which monthly or annual subscriptions are gaining traction with customers. These new pricing models benefit customers greatly by reducing upfront capital costs in favor of long-term operating costs. Month-to-month subscriptions mean that customers can purchase and pay for only the software they actually need each month.

Moving to a Consumption-Based Model for Services

Even more radical is the consumption model, by which customers only pay for what they actually use each month. Consumption pricing levies a fee based on how many resources or licenses a customer actually uses. From the customer’s perspective, this is an efficient and fair way to price products, especially when utilization is somewhat low.

Neuralytix believes that all customers and partners adopting these new pricing models should go in with eyes wide open. Here, total cost is what matters. There are many companies that are finding that their cloud infrastructure bill is more expensive than they had anticipated. Even so, the pay-as-you-go model makes sense because the customer can reduce their ongoing IT staff costs, while aligning IT spend to business outcomes.

Pricing Changes for Channel Partners

Traditionally, channel partners were charged a discounted price for each hardware system or software license they delivered to end-customers. This discounting model depended on volume purchases and was additive to the value-added services the channel partners provided. It was, quite clearly, hardware-based – where now most of the value is based on software and services accessed via the Web and the Cloud.

The consumption model is now finding its way into channel partner pricing. Consumption pricing is analogous to the old telco model, in which customers paid for each long distance call or mobile phone minute. Channel partners are compensated on the resources that their customers consume each month, whether it’s network resources, storage resources, or software licenses. In this model, channel partners will generate more revenue as customers derive more value for their subscription-based purchases. This aligns the channel-partner interests more closely with the customer priorities in cloud-based computing.

Conclusion

Cloud computing models are influencing the IT purchases are made. What was once acquired in a piece-meal fashion, and assembled by IT organizations, is now trending toward a mix of on-prem and off-prem systems. It’s clear that hybrid clouds are growing, linking applications in enterprise data centers with applications hosted by cloud service providers.

Citrix is expanding its approach to increasing channel partner value, by offering them new programs that will change the way its software is acquired, deployed and maintained over time. Channel partners will play a key role in building this “to-the-cloud” momentum by bundling-in their hosted services and value-add offerings to expand business opportunities from commodity hosted services. Neuralytix believes the new Citrix approach will allow channel partners to find new business opportunities, building on their traditional volume-based sales, as engage with customers, and build new revenue streams.

 

Tom Petrocelli and a guest analyst contributed to this Insight.