Google should shell out, not pay resellers peanuts

Reselling Google Apps has always been a tough gig. A flimsy entry exam meant that anyone with a passing interest in cloud software could start reselling the main competitor to Microsoft Office 365. "Because there is no professional channel, anyone who opens a box of Wheaties can be a Google Apps reseller," said one partner.

Then there’s the systemic problem facing the cloud software channel: there’s no margin. With few exceptions, it hovers around 25 to 30 percent – on a $50 per user Google Apps fee, that’s $12.50 a year. That’s right, just over $1 a month per user.

Enterprise customers understand the need to pay for change management, consulting, training and support. SMEs tend to ask how the software can cost several grand for a whole year and two months of change management costs more. The ‘add-on services’ pitch is tough.

So most cloud software resellers are building businesses out of peanuts. That’s true the world over, but Australian resellers have it tougher than most for one ridiculous reason: they sell Google Apps to their customers in Australian dollars but have to buy it in US dollars.

Two years ago, when the Aussie dollar was over US$1, this wasn’t such a problem. But when the currency dropped 10 percent, resellers suddenly had $7.50 in the hand instead of $12.50. One Google Apps reseller told me, "On some clients, we’re actually losing money." Of course, the reseller could whack on a currency adjustment charge, but who wants to pay a floating amount for software based on an exchange rate? At worse case, the customer could ditch the reseller and buy Google Apps direct in Australian dollars. Ultimately the reseller had to take the hit and pray for an Aussie dollar rebound.

What has really upset the Google Apps channel is that Australia is an exception. In Japan, the US and other countries, Google Apps is sold to resellers in local currency. The feedback from Google Australia is that changing the situation in Australia "is not a major priority", a reseller said. "It’s not fair. Google is forcing its resellers to pay more than you can buy direct. You’re just cutting the margin [when the AUD falls]. Google Australia agrees but it’s all controlled from the US."

Google has always been half-hearted in supporting an SME channel. It most likely recognises the margins are too low to support a channel business, so it promotes a DIY approach backed by direct marketing campaigns. However, it’s clear that a channel is needed.  

In mid-August, Google Australia sent resellers a Google Form survey that shows it is finally addressing the currency issue. The form asks resellers in which currencies they pay Google and charge customers and whether they would prefer to pay Google in AUD. The research is part of an overhaul of the channel that will address other key deficiencies.

The entrance exam will be much tougher with formal certifications or qualifications required to receive a licence. But there are fears that the grading for Premier partner will be raised well beyond reach of most resellers. "I think you have to generate millions of dollars to remain a Premier partner," one Premier reseller said, although Google Australia wouldn’t confirm this.

Whatever the outcome, at least Google is finally paying attention to hard-working partners who to date have laboured long and hard with little recognition or support.

Google did not respond to request for comment.

Sholto Macpherson is a journalist and commentator who covers emerging technology in cloud