Google's New Partner Program Increases Margins, But Partners Irked About Premier Status Changes

Google is ringing in 2015 with some significant changes to its partner program, which will transition this year to one that is not only more lucrative, but also more exclusive, according to documents obtained by CRN.

Large resellers and managed services providers, as Premier partners, will see their margins jump to 30 percent for products such as Google Apps For Work and Search For Work. But potentially far fewer partners, overall, will actually qualify for the Premier tier than before, meaning some current Premier partners will be left out of the party.

CRN has obtained documents and compensation schedules sent to the Mountain View, Calif.-based tech giant's global network of partners, detailing the nature of the revamped programs. Because Google has not released the information to the public, no partners who spoke to CRN were willing to be identified by name in this report. A Google spokesperson also declined comment.

[Related: Google Gets Serious About Channel, Launches Partner Program For Enterprise Tech]

Some partners are thrilled with the changes, which will, as one partner told CRN, "separate the men from the boys."

Another U.S. partner told CRN: "I think that the increase in margin to their larger partners underscores Google's new understanding of channel partners. It costs money to run a good channel program and since the pricing is advertised publicly, partners who sell more should be compensated better for their effectiveness."

Others have been less understanding.

A U.K. partner posted on a message board: "Don't be evil is supposed to be your motto. Sticking one to all the small and medium partner evangelists who have battled for you against Microsoft, hows that not evil?"

The new partner program went into effect Jan. 1, merging seven product-specific partner programs under a Google For Work and Education Partner Program umbrella.

The most significant change is the margins increase for Premier partners from 20 percent to 30 percent. At the same time, to qualify as a Premier partner, a sales threshold was escalated to $500,000, with additional requirements that all that revenue be sourced directly by the partner, and that they post yearly growth in bookings of more than 25 percent.

The exact amount that raises the bar is hard to quantify because Google previously had multiple programs and a more complicated structure involving markets served and seats sold, resulting in partners not uniformly held to the same thresholds. But for many, the new half-million-dollar mark represents a substantial increase, in large part because the direct-sourcing requirement amplifies the shortfall they have to make up.

Google also is implementing a $4,000 revenue requirement to qualify for the standard partner tier, which before just required deploying a certain number of seats.

Another change introduced this year is that transfer rates, which resellers earn from taking on customers already doing business with Google, have decreased for some products -- for Apps down to 15 percent from 20 percent.

In the documents sent to partners, Google said the changes are meant to reward those who invest significantly in skills and technical certifications. The new Premier tier is "for Partners who demonstrate significantly higher levels of competency and success." Google notes most partners will find themselves in the lower tier, with the same margins all partners have seen in the past.

The simplified two-tier program breaks down into three tracks: sales, service and technology.

The sales track covers high-volume resellers that generate revenue primarily by selling licenses; the service track applies to solution providers offering end-to-end services going beyond simply selling the product, such as systems integrators, MSPs and cloud brokers; and the technology track is for application developers complementing Google's technology.

By abandoning separate product programs, Google also is making it easier for partners to sell multiple enterprise products across the portfolio, like Maps For Work, Search For Work, Apps For Work and Chrome, one U.S. partner told CRN.

NEXT: Some Partners Irked, Especially In Smaller Markets

While partners in danger of losing Premier status don't need to worry about seeing their margins decrease, many are irked to be relegated to the lower tier.

The U.K. partner complained on the message board that while selling Microsoft Office 365 seemed a more financially lucrative decision, his company chose Google and has been evangelizing its technology to an often skeptical business clientele. No fathomable level of success in his market would see sales exceed the half-million-dollar mark, he said.

"We would imagine that an awful lot of Premier partners ( we were working towards that ) being relegated to standard partners is a very bitter pill to swallow. What a kick in the teeth!" that partner wrote.

Another based in Ireland wrote on the same message board that his entire country doesn't have enough business to make the threshold realistic for any partners.

"We won't be a Premier partner at the end of 2015, it is simply not possible, even if we got all the business," he wrote, speculating the same could be said for all small European countries.

"This strategy means there will be no indigenous Premier partners in any of those territories," the partner wrote, adding he believes the reason for the changes was diminishing sales of Google Apps and the decision to drive more business to a smaller set of partners to make sure they stay afloat.

Google's strategy certainly does seem to favor quality (measured in volume) over quantity.

Google's notice tells legacy Premier partners who wouldn't qualify under the new threshold that they can continue in the Premier tier through the transitional year of 2015. They then will be evaluated on the previous four quarters of performance, and if they don't meet the new standards, they will be dropped down to standard.

In a Frequently Asked Questions document sent to partners also obtained by CRN, Google informed the community it developed the new program after considering feedback from its Partner Advisory Boards and annual Partner Satisfaction survey.

"We believe the changes will drive further profitability for your business, simplify the program and processes," the document states.

Google's channel program is relatively young. When the program first launched, much partner business came from customers who first purchased direct from Google, but then realized they would benefit from a relationship with a solution provider.

Maturation of the market is probably the reason Google is lowering that transfer rate enjoyed by partners who took over such accounts, one partner suggested to CRN.

NEXT: Google Executive Responds

While Google would not comment to CRN on this story because it is based on leaked documents, it did respond to upset partners on the same message board hosting the complaints cited above.

Louise Byrne, a London-based director of partner operations for Google, noted in the forum that news of some of the upcoming changes -- consolidation of partner programs and higher margins -- broke unexpectedly, the result of a leak to The Wall Street Journal. Google was caught off-guard and had not yet planned all communications around the issue, she wrote.

But she said Google listened extensively to partner feedback and took into account the evolution of the market and its own products before structuring the new program. "Continued evolution of our products will ensure both more profitable license opportunities for our partners and more service opportunities," she wrote.

"Partners globally wanted the word 'partner' to truly mean something in the market and felt that the existing entry requirements did not reflect the strength of the partners in our ecosystem and the value that they can bring to our customers (we also got this feedback from our customers). When we examined our ecosystem we felt that the focus should be on helping our existing committed partners grow and be successful rather than having thousands more partners to join up (which is what would have happened if we had not changed requirements)," Byrne wrote on the board.

The Google executive also said that the changes encourage partners to focus on obtaining new customers, rather than maintaining revenues from legacy ones.

PUBLISHED JAN. 9, 2015