Opinion

The two-tier channel can still have a role in the cloud

Historically the notion of a middle man in deal-making did not always reassure the customer that they were getting the best deal. The suggestion is that extra layers in the process mean additional mouths to feed, which for the client means the price paid is uplifted accordingly. Looking at the development and delivery of cloud services however, it is the emergence of a specialist branch of middle men that may offer resellers the ultimate chance of success at the same time as delivering more value to the customer.

It’s also commonly misconceived that opportunities arising from cloud technology are simple for all to bag; that cloud is a leveller of the playing field and an easy global solution for taking once untouchable enterprise technology to the channel’s SME clients. The fact that cloud involves the transferral of technology selection and management from the buyer to the seller however means that the seller must have access to more IT management expertise than was once the case. For the reseller this is a different skill set to that of the IT implementation knowledge they needed in the past.

While it may be relatively easy for resellers to sell simple off the shelf space or basic services like email in the cloud, developing a portfolio of more specialised and differential IT services like backup and disaster recovery will require increased collaboration with ‘middle men’ who have specific expertise in these fields. I believe that the trend of outsourcing non-critical services to the cloud and the need for specialist expertise in the these fields will see a rise in two-tier channel models, where expert managed services providers sit between vendor technology and the reseller community.

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The common end customer scenario with technologies like backup and DR is that they know exactly what they need to do but are time and resource constrained and the mission critical IT systems that ‘run’ the business take priority. These customers want to know that they are able to outsource entire processes into hands that will do as good a job, if not a better one, than they would internally. Many non-specialist cloud resellers are not up to this job.

For the VAR it’s a ‘buy versus build’ decision. One could choose to build a specialist managed service from scratch. It could build its own vendor partnerships. It could increase its staff by recruiting the deep domain expertise it needs to manage a specialist service on behalf of its clients. Finally it could also put in the mammoth effort required to scope and build a highly robust service, as well as investing in the infrastructure required to deliver it. But in this situation, cloud’s often coined ‘level playing field’ - the opportunity for anyone to sell any kind of service - is somewhat a misnomer considering the cost and time prohibitive nature of building a competitive and compelling offering from ground zero.

Looking at the IT channel market today things are shaping up for growth with mid-tier managed services specialists that have the close vendor relationships needed to distinguish their service, the carefully constructed service infrastructure and the purist focus on the skills needed to do the job. As moving to cloud becomes the viable option for the customer, services built around vendors’ increasingly cloud-focused proposition, that the reseller can white-label as part of its service portfolio, are increasingly attractive.

The cloud back-up and disaster recovery markets are a case in point. The management of background IT essentials like these is often overlooked internally as time is pressed into core technology strategy to support the business each day. Cloud is an increasingly attractive option as the Cloud Industry Forum’s latest UK cloud adoption figures show; over 50% of organisations have now adopted cloud services for back-up and disaster recovery. But the bulk of the challenge in these areas is outsourcing management, not outsourcing IT. A cloud offering only really adds value to the customer if it comes with the skills to remedy the headaches of the IT manager as well as his or her operational expenditure. Development of the indirect market in this space is also evidenced by leading vendors’ strategies - such as EVault’s - which has a clear channel growth programme.

My predicted growth of middle men in the channel - or should I say specialist service providers - is not simply another cost layer that encroaches on resellers’ margins and unnecessarily increases the price the customer pays. It is the required conduit, providing vendor alliance, infrastructure and specialist knowledge, through which both resellers and the clients can truly capitalise on the cloud.


Alan Back is a director at DCG Group

Image credit: Digital Vision

This was first published in June 2013

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