Weekly Update: SNOW vs Redshift, ODFL, Spirax Sarco, Guidewire, & Cytek

In Practise Weekly Update


AWS Partner Program Incentives

In an interview we published last week with a Former Go-to-Market Strategy Director at AWS, the executive noted that the 'third wave' of cloud adoption will be driven by the ability of hyperscalers to effectively partner with SaaS companies to build customised, vertical cloud solutions for enterprise customers. Microsoft's history of enterprise sales has given its Partner Network a slight edge over AWS today.

from my observations. Azure, a different organizational philosophy, but equally tenacious and equally structured. They don’t have exactly the same lexicon for their innovation engine, but they’re very focused on it and they’re very focused on partners. A lot of those examples of innovation really happen with partners. Yes, AWS does that, but look between the lines when you see the announcements for Microsoft Envision and other conferences they have, versus re:Invent and I think you’ll see more of these credible industry solutions that we’re talking about that are endemic of this third wave of growth and market maturation. You’ll see more of this from Azure. - Former GTM Director at AWS

Over the last few years, AMZN has revamped its Partner Program to drive more co-selling between AWS and companies like Snowflake.

This has led to a new incentive structure for sales reps:

If you think about Snowflake again, if Snowflake and Discover sell a million-dollar deal – say it's a $3 million, three-year deal for easy math – into an enterprise client, that rep gets 30% of that or a $300,000 against their quota amortized over the three years. So that would be $100,000 a year; call it $8,000 a month amortized over the lifetime of that deal against their quota. At first, it wasn't a huge incentive, but if you start thinking about selling more and more of these partner deals, it turns into the gift that keeps on giving against your quota. - ISV Partner Sales Lead, AWS
It's become so much more material to the point where I can get on calls with reps, and they will ask a partner, are you part of our SaaS Revenue Recognition Program. You can see in 18 months that this program has gained a lot of traction with our ISVs and sales teams. I think most sales folks at AWS will tell you that the SaaS Revenue Recognition Program and the 30% commission towards quota is a bigger incentive to work with ISVs than the SPIF, which is a change. So two programs are cash incentives towards quota for those partners. - ISV Partner Sales Lead, AWS
The third piece is this year, AWS reps and inside sales reps, and anybody tied to an account, has an MBO objective about so many partner-attached wins. It's probably in the neighborhood of 15 to 20, and it's just one of their, call it, 12 goals that their performance is evaluated against. They need to have X number of partner-attached goals. That's another incentive to work with partners. Many of my good reps will say, let's knock off these 20 goals before six months because I want to turn that one green, so I don't have to worry about it. - ISV Partner Sales Lead, AWS

Each time an AWS sales rep co-sells a service like SNOW, it drives incremental revenue to AWS compute and storage services that host Snowflake. This enables AWS to fill more capacity and drive greater scale efficiencies. Maybe AWS doesn't care too much about potentially losing share at the PaaS layer to companies like SNOW? As long as it drives more compute and storage revenue, it drives scale for AWS. The long runway of workloads moving to the cloud offset any potential margin decline.

ODFL: LTL Pricing

In Q2 22, tight capacity and higher pricing led Old Dominion to report an operating ratio below 70% for the first time in the company’s history.

Source: ODFL FilingsSource: ODFL Filings

For LTL carriers, controlling costs is vital to price freight accurately. Pricing structures are different across LTL providers but are mainly based on weight and size.

Pricing models are all over the place. Some base it on tonnage while others base it on piece and weight. Different models have created challenges with price variations. 3PLs have made the pricing models more consistent, which is good and bad. Shippers were frustrated with LTL carriers making this way too complicated and having no clarity, so 3PLs clarified that for them by negotiating on their behalf. - Former VP at Southeastern Freight Lines

The 3PL providers sit in-between LTL’s and shippers and could pose a threat to LTL’s positioning in the value chain:

3PLs are a threat. Old Dominion held a harder line in negotiating with 3PLs than others. They had their pricing strategy and when a 3PL came in to negotiate, they would simply say no. 3PLs are definitely changing the landscape fast because smaller ones are getting bought up and larger ones are growing and gaining more control over the business. - Former VP at Southeastern Freight Line

The executive argues that ODFL should begin to offer services that 3PL’s provide. But didn’t Brad Jacobs, one of the best entrepreneurs out there, just spin-out XPO’s 3PL assets and stay with the LTL business? Maybe he has realised this is the most attractive part of the industry?

Spirax Sarco: Steam Properties

Spirax Sarco is a London-listed engineering company that provides steam engineering products to industrial customers such as food and beverage, pharma, and energy companies. The company earns >20% EBIT margins and revenue is far less cyclical compared to other industrials given >75% of the revenue is recurring.

The physical properties of steam make it one of the most effective methods to transfer heat to power an industrial process. Because it’s a relatively old technology, most customers don’t have in-house steam expertise to update, fix, or maintain steam processes in the production plant. This enables SPX to earn superior margins by providing steam products and acting as an outsourced steam consultant for customers.

Sign up to read the full analysis and hundreds of interviews.


The forum a trusted place for investors to debate and share ideas on quality companies.


Company Channels
Did you like this article ?