Craig Stilwell started his career at Citrix in 2000, when a huge portion of the company’s business was pallets of shrink-wrapped software CDs, and a big part of his job was just managing inventory sitting in distribution. The big push toward 21st century digital transformation had just begun. Seventeen years later, he’s worked his way through the company to become its vice president of worldwide partner strategy and sales.

“Our early channel was more integrators. Everyone called them VARs or resellers back then, but you had to have some integration skills because Citrix wasn’t doing a lot of that.” He pauses. “We still don’t do a lot of that.” Stilwell says that less than five percent of Citrix’s business is direct. Partners are responsible for the vast majority of the company’s implementations.

In recent years, the channel has been consumed with a ‘new’ shift away from one-time sales to ongoing services. But the concept isn’t all that unfamiliar to Stilwell, or, he says, to Citrix’s channel. “This services transformation, our core partners are doing the lion’s share of our business, and that isn’t new. The nature of our product, where it fits and the work you have to do to make it work well, has teed [our partners] up nicely for this transition to cloud, to a more services model.”

At the end of 2000, he points out, the big craze in the channel was application service providers. In concept, it had a lot of similarities to the cloud service model we see today. But the infrastructure just wasn’t there to support it, and Stilwell says partners of today can learn a lesson from the last generation.

“Some of our bigger reseller partners had gone through not only just acquiring partners to get bigger, but also investing in infrastructure to build this ‘cloud’ thing that—back in 2000—the market wasn’t ready to consume. They were investing out in front of revenue so far that some of them went under, even some of even the bigger guys from back then.”

Yes, partners that haven’t made the shift to a services model should start. Yesterday. But Stilwell cautions partners to take care not to invest out in front of their ability to execute. He sees big opportunities for value-added distributors and partners that are creative with their strategies, such as forming partnerships with other channel firms or specializing in a specific vertical or line of business market. These shops can bridge the gap until the rest of the channel slowly, incrementally and organically make those investments themselves.

“In the old days, you sold something to one customer, found an engineer to put in there, and scrambled to find another job for the engineer to do before the first job finishes.” It was a tried and true model in which system integrators and VARs made a lot of money configuring the infrastructure to support Citrix applications. But Stilwell says the cloud is pushing that model toward extinction.

“So much of the service dollars for the channel is wrapped up in professional services ‘project’ kind of work like implementation. But in the cloud, the big providers are taking care of the infrastructure. They’re doing the provisioning and giving you the hardware and the compute and storage and network.”

In order to make money in this new paradigm, partners need to move up the stack to the configuration layer, where the big cloud providers aren’t set up to work with applications. That, says Stilwell, is where Citrix has always lived and died—and where partners should make sure to take care to make the proper investment before making the move to managed services.

“If you’re used to doing project-based, implementation work, maybe break-fix because you happened to be there on site, it’s very different from a managed service practice because you have to have an investment in some of the managed service utilities and invest in people who are just sitting there waiting to take care of these environments.”

Those making that switch can testify to the dry period before the new cash flow gets going. “As you scale up your managed services in the beginning, it’s not very profitable. It’s not until you get to some kind of critical mass that you can run a very profitable, scalable managed services business.”

Complexity and Cloud

As for Citrix, Stilwell admits the transition to cloud has added complexity to an already complicated channel program. At its core, Citrix only deals in five or six products. But it has many thousands of SKUs that have built up over time. That phenomenon is mirrored in its channel program.

“Each one of the individual components in our programs makes a lot of sense. But when you stack them all together, it builds a lot of complexity.” Partners that have doubled down on Citrix’s business and invested resources in managing its program reap rewards, he says, but the further you move down the activity chart, the more turned off partners and distributors are by that complexity, making it hard for Stilwell to develop a satisfactory breadth of partners.

Considering one of the publicly stated goals of at least the last three Citrix channel chiefs has been to push into the midmarket, that tendency toward unnecessary complications is a problem. New market, after all, means new SKUs, and Stilwell says Citrix may be missing out on connecting with partners that have valuable relationships in that midmarket white space but shy away from its complex channel.

Simplifying its program is a big goal for 2018, as is getting to the “tipping point” where cloud services become a dominant part of Citrix’s revenue. “We’re in the early stages of moving everyone and adding new users in the cloud, but I feel the momentum building and it’s exciting to me. We’re not quite to that point where the floodgates are going to open and it’s just going to be all cloud, but I can see it happening. Is it the end of this year? The beginning of next? I’m not sure, but I can see it.”

Stilwell is enthusiastic about leading Citrix’s channel through what he calls one of the pivotal changes in tech history, and about looking back once he’s on the other side of it to see how both the company and its partners weathered the game change.

“We have this install base that we can move to the cloud which is going to create a tremendous amount of opportunity in the channel. It’s going to be this tremendous change for our partners and the industry.”

But he’s not there yet, and one of his biggest focuses is on helping partners figure out how they make money in the Citrix cloud as opposed to the company’s on-premise business. He’s happy with the momentum the cloud business had in the first quarter of this year and says this is the year the company is starting to move a little faster, building new pipelines and really making that push.

“But it’s still not the main way we all make money yet. It’s going to take partners awhile to digest how this model works.” While Citrix “bits and bytes” manage the whole environment, virtualized Citrix workloads don’t live in the cloud, at least for desktops and desktop virtualization. Stilwell says that’s where the managed services play will be for partners, but they’re still trying to understand where the lines between their work and Citrix’s lie.

“Most of their role is still there: All of the services, all of the implementation, all of the care and feeding the Citrix environment. It’s up to the partner to manage and control, help make that environment better.” Stilwell sees the managed services opportunity as even bigger in the cloud than in on-premise workloads. He’s satisfied that as Citrix ramps up its cloud program, partners are beginning to understand the difference between how it works on-prem and how it works in the cloud.

“The punch line is it’s not that different.”