There is an on-going discussion in articles, at events and in offices each day about the part that channels will play in go-to-market for the cloud form factor. Does it have a place? What is that place? What do cloud providers want and need? And is there any money in it anyway?
Resellers can all reflect on the “good old days” of strong margins on hardware, software and support; days when customers could not go online to easily compare pricing and source alternatives or visit the local PC World or Best Buy, and find business-fit IT products with in-store support and break/fix at a level that can work for them in areas of their business.
When you consider that Gartner predicts that 46% of all businesses will have more than half of their infrastructure in the cloud by 2015, versus only 3% in 2011, and IDC is expecting that 85% of new software firms created in 2013 will be cloud businesses, you realize this is something that you ignore at your peril.
We all have to remember that these will be the “good old days,” only to be remembered by those who took a proactive and logical step to embrace — not be killed by — a new delivery paradigm.
Cloud is not the predicator or the death knell of the channel as many have muted, but it certainly is a contributing factor. Much of the traditional IT supply will change to being supplied online via cloud or simply sold via online eTailer channels, marginalizing the opportunity for the traditional brick-and-mortar reseller and their ability to make the same level of historical margins.
In my 20-plus years in the channel, I have experienced much change in the IT supply channel, but change has traditionally come progressively. And what we are seeing now is accelerated change, rapid disruption and a fear of the unknown. A wide range of resellers have muted many concerns with me about cloud solutions, all valid, but overcomeable if you face up to them and start working with customers, suppliers and vendors. Concerns have included, but are not exclusively limited to:
When you dig deeper though and consider the needs of the customer and the cloud vendors, you can see exactly why an opportunity for the middleman channel supply chain remains.
The Cloud Opportunity
End customers remain in need of independent advice, and a trusted advisor who can deliver more than just a switch it on cloud service. A recent Dell Survey reported that 69% of small- to medium-sized businesses bought cloud applications from a single trusted vendor. Meaning, they will be looking to procure and have a single point of contact for their solutions, not a multitude of Internet-based new relationships to broker. This presents an opportunity to grow a customer base and create stickiness with customers, as well as ensure a strong renewing annuity base.
In surveys and at events I have presented for, I have found the average customer is lacking a true understanding of cloud, the nuances, how to get past the technical terminologies, compare cloud vendors, weigh up on network versus cloud in different business need scenarios and ensure that they remain secure and chose the right solution for their businesses, and not simply the same old brand names they have heard of before. Cloud flattens the landscape of choice and affordability; smaller businesses can afford much of the big name brands now with ease, and no big architecture deployments are needed to go live. All customers have a wealth of new innovative solutions from non big brand names to choose from that may offer better outcomes for their business, at more affordable costs.
We at Workbooks provide a good example of this. We are working with resellers who can resell our Software-as-a-Service licenses, as well as their own consultancy and configuration skills, to deliver customers’ favorable outcome at more affordable rates than big brand name CRM solutions. Having the opportunity to go to a customer with a solution often 50% to 70% cheaper, and yet make good overall margins on the initial sale as well as strong renewal rates for years to come, is an attractive proposition for a reseller in a market where CRM holds the highest amount of cloud application use, with an estimated 45% to 50% penetration in the market.
Channels also have the opportunity to assist with cloud sprawl — customers who are adopting multiple cloud solutions and need help with compatibility and connection issues that arise from this process. Moving forward, business will demand more integration between both multiple cloud platforms and on network solutions. We are already seeing this requirement growing, providing an ideal opportunity for the third party solution provider to assist the customer in knitting together their required solutions.
Resellers have the opportunity to add value, consult, be a trusted advisor, wrap around services and certainly deliver integration and security to the customer’s mix of on network and cloud-based solutions.
There are challenges, however. I have been building cloud channels for vendors for the past eight years, and today we see an increasing number of vendors with cloud solutions that are seeking ways to resell these through the channel. Having spent a great deal of money building, engineering and acquiring cloud solutions, many vendors have been struck with the realization that their traditional supply to market — through an IT reseller channel — have not adopted and taken their offering to customers at the speed they expected.
We are even seeing pure play channel vendors considering selling direct as they struggle with how to reach the end customer and grow their share of cloud sales to the levels they need, forecasted and expect. There are a mix of reasons for this. For many resellers they have shunned selling cloud for a combination of reasons, resisting the change and only resorting to a transaction where the customer has forced their hand. I speak to many in the cloud vendor and distribition community and a common trend is that they are all looking for resellers to sell cloud and when they find someone willing, able and perhaps already doing it, they value them highly and are keen to engage and work with them. Why? Because there are not enough channel players representing and understanding cloud today to go around. Providers are trying to find the route to market, and the help they need to reach the wide customer spread and get their share of the lucrative growth happening today.
We are seeing cloud solutions sold through Xsp’s, be they Internet (ISP) or Managed Service Providers (MSP), through telco resellers, traditional resellers of solutions such as Avaya or Cisco communications solutions that are expanding their reach and portfolio of services offereded to clients. We are seeing new cloud only brokers and resellers who understand the cloud model, the sales approach, the commission plans and the true value of annuity to their own businesses value and resellers launching new cloud divisions and brands to represent boldly to clients and suppliers their commitment to the cloud form factor.
The traditional reseller has many asking them to come and play. The vendors need market reach, need local trusted advisors representing them to clients, need people who understand cloud and are willing to sell it to clients. Many are knocking on doors to be told “were not coming out to play.” That is, not until the customers ask us for it, and maybe not until its too late.
We have seen in other markets where traditional legacy delvery methods and brands ignored the change to their peril. Take Blockbuster Video compared to Netflix and Lovefilm, as well as Tower Records, HMV and others to the online music world. In addition, take Kodak and the online photographic change that swept their industry, bookstores a plenty to online book companies, and the stories continue.
The IT sector is not immune to these business changes. In fact, the industry is at the core of this change. You can ignore what is happening and the huge numbers relating to it. Resisting it and focusing on the old, telling yourself that you can protect your legacy sales and that it wont cannablize your incumbunt renewals will be an interesting and dangerous tactic to play.
Vendors are looking for resale channels that will embrace the cloud, work with them, educate and take valid cloud prospotions to clients. End users are looking for agnostic providers who will advise them in their best interests of where and when to use cloud to their businesses advantage for top- and bottom-line commercial benefit. In the middle is the supply channel, needing to earn the right to demonstrate their value to both supplier and customer. Yes, it does need effort and a conscious decision that I am going to come out and play. No, it isn’t always going to be easy, and there will be some conflict and losses along the way. But to not play means it happens without you, and you may be the one left staying indoors wishing you were taking part.
Customers hearing more and more about cloud systems will find vendors or other suppliers who will help advise and supply them. Vendors will find new partners and channels who will take them to market. The world will continue to turn, and you may find that much of your existing business is lost and your future business is smaller and not as you intended. As once a great man told “History will be kind to me … because I intend to write it” (Sir Winston Churchill). Your willingness to play in the cloud world and the effort you put into it is up to you. No one can or will do it for you, but you not taking part will not stop it happening at the break-neck speed we are seeing already.
Ian Moyse, Sales Director at Workbooks.com, a cloud CRM vendor, has more than 25 years of experience in the IT sector. He sits on the board of Eurocloud UK and the Governance Board of the Cloud Industry Forum (CIF), was listed in top 25 of the worldwide SMB Nation 150 Channel Influencers list in both 2012 and 2013 and named by TalkinCloud as one of the global top 200 cloud channel experts in 2011.