Why working with ISVs that have a consumption revenue model is different

A Q&A with Hakkōda, an Elite Snowflake Partner

In every new era of technology, consultancies and services firms have had to adapt to the way their software partners go to market. The shift towards consumption-based pricing models in the cloud’s Third Wave is no exception.

In the late 1990s and early 2000s, software vendors relied on perpetual licenses for on-premise solutions, with their service partners focused primarily on one-time implementations and periodic renewals. This model gradually gave way to Software as a Service (SaaS) subscription pricing, necessitating a greater emphasis on adoption to ensure customer satisfaction and retention.

Today, we’re seeing many of the software vendors across the Tercera 30 lean into consumption-based pricing models, positioning their software as a utility where customers pay based on actual usage. This includes hyperscalers like AWS and Microsoft, as well as data platforms like Snowflake – an ecosystem that we profile in detail on our Tercera 30 report.

While this approach brings many intrinsic benefits to customers, it’s a different muscle for services firms that grew up in the era of traditional software (or even SaaS) models. It requires partners to take a more thoughtful approach with customers – finding value-added ways to drive more consumption of the platform while making sure that consumption is efficient and cost effective over time.

We sat down with Hakkoda’s CEO (Erik Duffield) and CRO (Ryan Tucker) to talk through this new mindset and how Hakkoda has developed a partnership model that prioritizes long-term value creation over the “lift and shift” mentality of legacy service providers. Hakkoda is one of Snowflake’s top services partners, specializing in healthcare, financial services, supply chain and the public sector. The firm was named Snowflake’s Americas Innovation Partner of the Year, and has grown in the triple digits for the last two years. Full disclosure: Tercera is an investor

Why do you believe the consumption-based business model of Snowflake and others is positive for customers?

Erik: A consumption model is like a utility, the software provider only recognizes revenue when it’s used, which is a huge benefit to the customer. Not only do customers only pay for what they use; it puts a clear focus on the software provider to drive value. It also lowers the cost of entry to modernize technology, leveling the playing field so that both small companies and large companies can have access to the same technology. Large companies can benefit from their scale by contracting for a lower consumption credit cost, but they are both able to leverage the same platform.

As a Snowflake partner, what does this mean for how you engage with Snowflake and their customers?

Erik: As a leader who’s built services companies supporting all different models, I love how the consumption model reduces the quarter-end sales heroics at ISVs. Snowflake and other consumption-based providers think longer term. It’s good for partners like us who think similarly. We are able to bring industry use cases, build on the data customers have, and integrate the various ecosystem technologies around the platform. This leads to more consumption so our strategic partner is happy, and leads to tangible and transformative outcomes for our clients.

Ryan: Traditional SaaS license models put more pressure on ISV sellers to increase the size of deals at the end of each quarter and year, which can reduce the active dialogue with buyers until just before the renewal date. Consumption models like Snowflake connect the buyer to the ISV, and perhaps more importantly partners like Hakkoda, throughout the full contract period as they view consumption as a barometer for actualizing business value.

Does a consumption-based model ever act as a disincentive to increase usage?

Erik: No, there’s always a focus on ‘healthy consumption.’ In every program, we actively try to reduce the usage from inefficiencies which often come from legacy design patterns. Then we redirect that consumption to driving outcomes. This always, 100% of the time, leads to more consumption.

Ryan: Buyers have an ongoing understanding of the value they are getting. Snowflake has built AI-driven tools like SnowPatrol to monitor use and the propensity for use of other cloud applications, which can help drive healthy consumption.

Does this model change the type of clients you seek?

Erik: No. For Hakkoda we are focused on our core verticals: healthcare, financial services, supply chain/logistics, and the public sector. The consumption model benefits our customers but hasn’t changed who we work with.

Ryan: If anything, the model brings our key verticals and buyer personas more into focus, not less.

You have to really understand a client’s business to drive consumption. How do you approach this?

Erik: We bring deep industry expertise to our clients. We know their business objectives, underlying technologies and the state of their talent pools. Our focus is on specific outcomes we outline with each client. The more value we drive, the more they consume, but it’s always more efficient and cost effective than legacy license or appliance models.

Ryan: For example, our healthcare team combines deep data and analytics domain knowledge with expertise in-industry from places like Kaiser Permanente, Scripps Health, Corewell Healthcare, St. Jude Children’s, etc. This brings a unique perspective to a problem like migrating or unifying data from EMR platforms like Epic, not just a migration to Snowflake.

Why are you (and your clients) so gung ho on Snowflake?

Erik: Being very focused as a data consultancy, we aren’t all things to all people. We want to work with the best data tools and platforms on the market, and we believe Snowflake is that platform. It is constantly introducing new capabilities which expands our market as well. For example, we have a big focus on building data apps on the Snowflake platform.

The magic of Snowflake is in making complex things simple. For C-level executives in large organizations, they know adoption and change management are essential to success. Whether it’s streaming data ingestion, data governance, massive performance, or machine learning and GenAI, Snowflake’s lens of the world is to enable these capabilities in organizations as simply and scalably as possible. That’s why they are such a great partner for Hakkoda. This isn’t a science experiment or a PhD thesis. Our shared customers don’t like to admire complexity – they want to solve real problems, real fast.

Ryan: Customers are using Snowflake to do truly transformative things. As an example, we are helping a global logistics company evolve beyond logistics to a productized analytics company so they can meet customer demands and open new revenue streams. Their customers want to use robotics and predictive analytics to optimize their supply chain, but they don’t want their data sent to them – they want it shared directly with them in real time. These are the kinds of things we’re doing for Fortune 500 companies and beyond.

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