At NetApp, partner profitability is at the heart of everything we do and everything we deliver to our partners. We understand that profitability is crucial to the success of both partners and NetApp alike, and we build our strategy with that in mind. I outline how we identify opportunity areas and the findings from our most recent partner profitability study in my recent video. We consider our partners to be an extension of NetApp; they are an integral part of the data authority on hybrid multi-cloud, and they’re key to helping customers maximize the value of their data.
Companies use resources as inputs to produce output—that is, finished goods and services. Economists typically divide the factors of production (resources) into four categories: land, labor, capital, and entrepreneurship. But has the digital economy created a fifth resource? And is data that fifth resource, with the outputs being business outcomes?
Data-driven digital transformation remains a top priority for companies, with an estimated $2.1T annual spend by 2021. Clearly, data has the potential to be one of the most sought-after and valuable resources of the 21st century.
Data is being created at a wholly unprecedented rate. For example, 90% of the data that exists in the world today was generated in the last 2 years. Every single day sees the creation of more than 2.5 quintillion bytes of data, and it’s estimated that by 2020, 1.7MB of data will be created every second for every person on earth. And this trend will only increase over the coming years. IHS Markit predicts that by 2030 more than 125 billion devices will be connected to the Internet of Things. With 8.5 billion people expected to be living on earth at that time, that’s almost 15 devices per person.
Some describe data as the “new gold” in a digitally transformed world, because every change and process relies on accessing, harnessing, and converting that data into actionable insights. A September 2018 Information Week article was titled “Yes, Data Is the New Oil in the Digital Economy.” The author, Mark Minevich, stated that, in his opinion, artificial intelligence (AI) is an unstoppable vehicle, and data is its gasoline. AI is at the forefront of innovation, and massive amounts of data fuel it, tell it everything it must do, and feed it the knowledge it needs to continue to evolve. This need to collect, analyze, and use data to generate positive business outcomes creates a massive market for a whole realm of services and a wealth of opportunity for partners.
The generation of all this data creates a challenge for customers and a business opportunity for partners. Professional services are increasingly important in the digital economy, with implementation and integration services contributing to more than 50% of the revenue stack. Although partners can sell distribution-branded or NetApp® services, unlike our competitors, we strongly encourage and enable our partners to create and deliver their own services of all kinds, including delivery, consulting, and support services.
From the results of our most recent Partner Profitability Survey, we know that significant partner profitability is derived from partner-branded services and delivery models. The data in the recent study show us that NetApp’s most profitable partners are realizing up to $7.41 in attach of hardware, software, and services for every $1 of NetApp they sell. These partners are extending the high attach rate through multiple workloads, driving more capabilities through artificial intelligence, automation, analytics, machine learning, and more. All of this activity drives more capability, flexibility, and agility into a data “always-on” business solution.
This study also showed that for NetApp’s most profitable partners, 73% of their NetApp practice revenue comes from services, with more than half being partner-branded services. Those partners with their own multi-cloud managed services practices are seeing additional profitability, because the majority of cloud opportunities are created and delivered by partners. It’s clear that the most profitable partners truly are data authorities, investing in their organizations and delivering a wide range of data-focused services to help customers maximize the full potential of their data.
Partner profitability is the key. I came to NetApp because of its rich, uninterrupted history of a partner-first approach and its record of empowering partners to deliver successful business outcomes to customers. It’s exciting to be able to accelerate this approach and expand the focus, offering differentiated ways to grow a profitable and sustainable multi-cloud business that exceeds our mutual customers’ needs.