For some resellers the cloud is here and for others it is coming but holding back some channel players has been the difficulty in moving to a different way of delivering and charging for applications. Have vendor's been much help in supporting their partners through the transition? They think so but it has involved a fair amount of work, as Amro Gebreel finds out.
The word cloud is rarely off the lips of vendors and it is usually followed fairly quickly by mentions of assistance, training and support for partners. But in practical terms this has not just required some investment in the portals, programmes and marketing materials but also in trying to help explain to resellers and customers there has been a shift in the way technology is sold.
"The cloud is fundamentally changing the way in which organisations are planning to manage cloud, and in response the IT channel will need to review and adapt how they sell their offerings. From previously managing infrastructure, it is now all about managing services," says Mark Lewis, EMEA marketing director at Riverbed Technology.
"The cloud in itself is an ever evolving market and it is vital vendors keep their channel partners up to speed with the changing trends. With the very nature of a services led market, it is becoming more and more important for partners to cross-sell and up-sell other technologies. Therefore, it is critical that vendors offer partners technology that integrates smoothly and easily with other vendor product offerings," he adds.
As well as providing smoother technology the other requirement that vendors identified fairly quickly was around the financial implications of the cloud. Monthly rather than large annual payments are one challenge but so it helping calm fears that the hosted option will undermine existing margins.
"Much has been made about the threat that the cloud poses to the channel, with the rise of on-demand software seen by many as the beginning of the end for the traditional reseller model. However, the move towards the cloud doesn't have to be bad news commercially," says Nessa Lynchehaun, UK & Ireland channel director at Mimecast.
"The best resellers still have a crucial role to play in providing advice and education to the end user. However, there is no doubt that vendors need to provide the necessary support to partners as thety move towards the cloud," she adds.
From a Mimecast perspective that necessary support includes measures to protect resellers' recurring revenues and to discourage poaching between partners.
The threat to the channel is one that others also agree has been overstated and the reality is that the need for local experts is not going to diminish. If the reseller plays their hand well the relationship with the customer should widen and deepen rather than become one that is reduced as monthly payments and management interfaces become the norm.
"Cloud Computing will have a huge impact on the way solution partners and distributors are running their business. What we do not see, however, is the often predicted negative impact of this shift. Being a manufacturer of fairly complex encryption solutions that require a hefty dose of consulting services around them, we have always believed in the capability of our solution partners to position and execute on the required service levels," says Peter Schill, EMEA channel director at SafeNet.
"As we see it, this is also going be the key to success for any solution partner dealing with cloud computing issues and with cloud security in particular. This represents a huge potential for all resellers who are ready to step in and become that trusted advisor for their customers. We can hardly imagine companies hiring a dedicated cloud project manager to lead such an initiative and the existing IT staff in most of the cases will not be able to carry the additional workload. Solution partners will need to pursue the shift to solution and service selling and think about seizing the opportunity to evolve beyond and start/continue to offer managed services for their customers. Especially in the SMB segment we see an increasing demand for specialized local providers with a highly developed, granular service offering, tailored to the need of today's on-premise customers," he adds.
The problem is of course that vendors take an individual approach to solving the cloud transition challenge and not all have made moves with just the reseller community's needs at the top of their agenda.
"Some vendors are doing a great deal to help resellers transition to the cloud, where others remain focussed on retaining whatever revenue they can from their legacy client-server service contracts," says Merrill Kindred, channel director, EMEA at NetSuite.
"There are also those who are trying to propagate their existing business model of selling on-premise software products by encouraging their resellers to become Managed Service Providers (MSPs) and to host their client/server application for their clients. These 'fake' cloud solutions do not deliver the true benefit of cloud computing but instead serve as a near-term fix for vendors' lack of true cloud solutions. This serves as a disservice to resellers since they are now taking on the burden of maintaining a datacenter environment and will eventually come up against the same economic realities their clients are facing today," she adds.
The advice seems to be for resellers to not only note that the economics and support requirements are different but so are the agendas from vendors with some much more advanced than others.
"It is evident that the business landscape is changing rapidly and VARs can't ignore that more critical business processes are being transferred to the cloud. While many traditional software vendors have been slow in developing applications that take advantage of cloud economics, others have taken the lead in working with channel partners to add cloud computing to their portfolio," adds Kindred.
More dangerous than just mixed marketing messages is the way some vendors have cobbled together cloud programmes based on existing schemes with a lack of real regard for what is required in a hosted environment. Resellers are warned to avoid these particular hazards because they have the potential to be frustrating for both partner and customer.
"If done well, cloud services represent a significant opportunity for resellers to expand their business. However, most cloud offerings were not architected to be delivered by the partner. To truly enable resellers to be successful with a cloud model, the offering needs to be built from the ground up with the partner in mind," says Jim Harold, vice president of worldwide channel sales at Blue Coat Systems.
"Most partner programmes tend to be slight variations on traditional appliance programmes, yet selling a cloud-based offering is fundamentally different from the appliance-based business that most resellers have established. Putting in place training programmes, a discount structure and incentives based on how cloud services are bought and sold is key," he adds.
Harold is not alone in sounding warnings about the position some vendors have taken over their approach to the cloud. Ian Masters, sales director at Vision Solutions, says that many vendors have jumped on the cloud bandwagon by re-labelling their solutions to include the latest buzz-words or by creating service provider licensing agreements (SPLAs) that allow their VARs to offer customers pay-as-you-go pricing with no upfront costs.
"However, few vendors seem to have adapted their channel programmes to assist their partners in the transition towards cloud. It is not just the pricing to think about when it comes to selling cloud; a vendor must think about the current strategy of the VAR and whether or not they are able to easily integrate cloud into their offerings. It is a very different sales process to traditional hardware or software licenses. Rather than a big upfront sale with smaller orders down the line, cloud represents a much lower upfront commission with the aim to keep that at the same level over a longer period, although there is no guarantee that the customer will go the distance," he says.
Given all of the confusion not just about the state of readiness by the vendors but also the users it is not surprising that some resellers have been slow to move to the cloud adopting a 'wait and see' attitude clinging on to figures from the likes of Gartner that show it only takes 10% of the market at the moment.
Analysts might disagree about the size of market taken by cloud sales in the immediate future but most are agreed in the direction the market is heading with the conclusion being that to sit on the hands is a wasted opportunity.
"In order to keep the on-going revenue stream that cloud offers VARs will need to focus more than ever on the long-term service relationship with their customers. If they get this right cloud could be very lucrative for them, as revenues keep on coming in every month rather than in one-off deals. Vendors can help resellers in this shift towards cloud by creating specific channel programmes that look at the various streams of business derived from the cloud and then working with the VARs to develop new business areas," says Masters at Vision Solutions.
"What vendors may find is that not all of their existing partners will want to sell cloud, so this will also be an opportunity to hunt out new partners and widen the network," he adds.
Distribution has a rather large role to play in helping resellers through the cloud transition with some arguing that they are better placed to handle that role than vendors.
Vendors have an important part of the cloud eco-system developing, testing and delivering technology to drive the cloud adoption, however, when it comes to helping resellers through the transition to the cloud it is distribution that holds the key, argues Wayne Gratton, director of technology at Avnet Technology Solutions UK.
In support of its resellers Avnet has developed CloudReady. The objective of this new programme is to educate and train business partners so they gain the knowledge and skills required to deliver practical, safe and secure cloud solutions.
"Distributors working with their vendor partners also have a responsibility to help resellers provide additional services which accelerate the acceptance of cloud solutions, even those solutions not sold via the channel. There is an opportunity for the channel to offer additional value-add services to their clients which address some of the key concerns of security, authentication, integration and management. Programmes like Avnet's CloudReady help resellers identify those areas where they can add real value to a customer's Cloud deployment," says Gratton.
A similar argument about the role of distribution can be heard elsewhere in the channel with Dave Ellis, director of new technology and services at ComputerLinks, says that when it established its Alvea cloud platform it was determined from the very start to ensure they it was not just easy for resellers to use but had also to be risk free. As a result it has not only provided plenty of training but also hands the resellers SLAs and marketing material they can show to clients without having to put them together themselves.
The other note that is sounded around the idea of a reseller transition to the cloud is a warning that speed is important. Those vendors that fail to encourage resellers are letting not just themselves but their channel down.
"You could argue that the opportunity to drive outsourced managed IT services - preceding what we all now refer to as 'cloud' - dates back long enough for resellers, by now, to have no excuses for failing to wean themselves off tin. It's not as if resellers can say they never saw this coming," says Barrie Desmond, business development director at VADition.
He acknowledges that vendors have a key role to play but this should be a situation where both ends of the channel are making cloud noises regardless of the help that is or isn't on offer: " Yes, vendors play a key role, and yes some have been more proactive and imaginative than others in promoting ways of selling and packaging more flexible IT delivery models."
But the determination to change the business has to come from within and Desmond finds it strange that some channel players might have left themselves in a position where they are yet to adapt their approach in light of the cloud.
" Vendors and channel partners alike; if your business is not embracing or adding value in a cloud-based IT sale then you only have yourself to blame. As a reseller; if you don't have the infrastructure to support your own cloud-based services then there are plenty of opportunities to derive them on a white-label basis. End customers who dictate a cloud-based approach from their technology of choice are increasingly unlikely to be cowed by anyone that can't provide it. Therefore, vendors who aren't supporting this [resellers' transition to the cloud] must consider their commercial future, and the resellers who orbit them."
The reseller's story: Maxima and IBM
Corinne Steer, chief marketing officer at Maxima, told us that at it works closely with IBM in the Cloud Services area, and believes that it has benefited considerably from the support that Big Blue offers in managing the transition to Cloud.
"We were delighted recently when IBM chose Maxima as its first Tier One accredited cloud services partner, however the agreement was actually the result of months of work at Maxima in getting close to IBM, convincing them of our Cloud Services skills and go-to-market capabilities, and demonstrating how we could support their own ambitions in the Cloud Services arena.
For Maxima, engaging with major global partners such as IBM brings us real strength and credibility. IBM gives us lots of support, but they also recognise that we're serious about Cloud too - not just from a Sales & Marketing perspective, but also through our ongoing capital investment in the renewal and expansion of our fully virtualised server and storage Infrastructure-as-a-Service platform. We've now implemented our IBM-based platform across two Maxima data centres, and are already supporting over 30 Cloud-based customers. So, yes - vendors are being supportive of the reseller community, but they're also looking for real commitment from their channel partners in return."
This was first published in August 2011