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Is Cloud a Threat or an Opportunity for the Channel?
It is time for the channel to embrace the Cloud and start exploiting the opportunity
By: Janakiram MSV
Jul. 7, 2012 02:00 AM
One of the key tenets of the Cloud is self-service. Anyone from an individual entrepreneur to an enterprise CIO with a valid credit card can subscribe to the Cloud. This has been the biggest driver of Cloud adoption especially among the startups and SMEs. While this is definitely an advantage for the Cloud providers and Cloud consumers, there is one entity in the ecosystem that is intimidated by this paradigm. And, that is the reseller community which is also known as the channel or the Value Added Reseller (VAR). Before we analyze whether Cloud is a threat or an opportunity for them, let’s see their role in the current context.
Having worked for the world’s largest software product company, I witnessed the significance of a software reseller first hand. Any software company dealing with shrink-wrapped products classifies their customers into large enterprises, medium enterprises and small businesses. Large enterprises typically include the public sector and the big conglomerates who invest multi-million dollars into IT year on year. Hardware manufacturers like HP, Dell and software product companies like Microsoft and Oracle have dedicated account teams to manage the relationship with the CIO of these companies. For the smaller enterprises, there may not be dedicated account teams but multiple customers are managed by a sales rep who owns the relationship. When it comes to the smaller businesses, the vendors never manage them directly. Instead, they rely on the reseller community to drive the business across these thousands of accounts. It’s the partner account manager or the channel head that will manage the relationship with the reseller and each reseller owns multiple customers. These small businesses are very unique, as they neither have a CIO nor a skilled IT team. For them, IT is a tool for keeping their businesses running. Due to the lack of a decision maker in these accounts, most of the IT choices are left to the reseller. Since the reseller is the face of IT for these companies, he becomes the trusted advisor over a period of time. Most of the small businesses just go by what the reseller recommends. Many resellers also provide services like installation, configuration, migration and maintenance. For the small businesses, the channel is both a reseller and also an IT solutions provider. Everything from a server to the operating system to an anti-virus, it is the reseller who influences the decisions. In short, the reseller community becomes the IT department of many small businesses. Software and Hardware vendors lure the resellers by offering them high margins, discounts and other incentives. The channel drives most of the volume business that impacts both the topline and the bottom line of the vendors. With such a strong role to play in the IT ecosystem, the resellers and the VARs are now under the risk of being short-circuited in the Cloud purchase cycle. Selling Cloud is all about high volume and low margins! Whether it is the traditional software or the Cloud, Small businesses drive the high volume sales. With no complex licensing schemes to understand and with easy accessibility, Cloud just bypasses anyone in the middle and becomes available to the consumers representing companies of all sizes. So, is Cloud all set to destroy the reseller model? Not at all!
I firmly believe Cloud presents a great opportunity to everyone in the ecosystem including the channel. While it is true that anyone can subscribe to a Cloud service, it does not end there. With many players entering the Public Cloud market and competing for the sameslice of the pie, it is important to understand which Cloud is right for the business. Many times, the smaller businesses may have to choose a combination of Cloud offerings to realize better return on investment. After choosing the right Public Cloud(s), the next step is to integrate existing assets and migrate a few. There are many exciting opportunities for the VARs that will emerge in this space.
It is very clear that the channel has to evolve with the Cloud. Apart from selling the Cloud services, the following are the scenarios that the reseller will get involved –
Cloud Migration – Any SME looking at investing in the Cloud requires a plan to move the existing on-premise assets to the Cloud. One of the common scenarios is moving the on-premise email servers based on Exchange or Lotus Notes to Office 365 or Google Apps. Though it may not be a complex migration, it does require quite a bit of planning and execution. Same is the case when moving the CRM system to Salesforce.com or Dynamics CRM. External facing Line-of-Business applications like trading partner integration and supply chain management may be moved to a PaaS offering like Windows Azure or Force.com. This requires more effort than moving to SaaS. Finally, replacing the physical servers with VMs on Cloud is the most common use case and involves a lot of planning. Defining a solid migration strategy and executing on it is a huge opportunity for resellers who are already skilled enough in deploying an Active Directory or Messaging server. By identifying the key migration scenarios across shrink wrapped products to Line of business applications to moving the physical servers, the reseller can realize a huge upside in the business. In short, the channel becomes the new conduit to the Cloud.
Cloud Integration – Hybrid Cloud is the biggest enabler of the enterprise Cloud adoption. Most of the enterprises are looking at protecting the existing investments while moving to the Cloud. Moreover, there are workloads that continue to run on-premise with secure connectivity to the Cloud. Defining the hybrid strategy and bridging the gap between on-premise and Cloud is a big ticket revenue opportunity for the resellers. Apart from fork-lifting the workloads and running them on the Cloud, the reseller can now provide strategic Hybrid Cloud offering to securely extends the datacenter of the enterprises. This is a niche skillset but a worthy investment.
Cloud Aggregation – As the choice of Public Clouds increase, Cloud aggregation is bound to happen. For example, an organization might want to move different workloads to different Cloud providers and the reseller just becomes the single point of contact to deal with multiple providers. In a sense, the distributor and the reseller assume play the same role as they always played in the traditional software procurement lifecycle. They just become the face of multiple Clouds and make it seamless for the customer to negotiate and deal with the Cloud providers. Of course, the reseller technical team must be skilled enough to tackle multiple Cloud platforms.
Cloud Operations – This is an interesting opportunity in the era of Cloud. Assuming that the reseller plays the role of the internal IT for SMEs, they are responsible for keeping the lights on. Moving to the Cloud is just a part of the story but managing and maintaining the Cloud deployments is very complex. Given that Cloud is prone to failures and outages, it is extremely important to handle the disruptions gracefully. The VMs, applications and the customer deployments need to be constantly monitored for unusual patterns that need attention. Companies like NetEnrich play a crucial role in enabling and empowering the VARs to leverage this opportunity. NetEnrich offers a platform for VARs to effectively manage the customer infrastructure running anywhere between the closet and the Cloud.
It is time for the channel to embrace the Cloud and start exploiting the opportunity. They should identify the principal vendors / service providers to partner with and start investing in a Cloud readiness plan for the technical teams.
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