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Editor's note: IT distribution is undergoing a massive change as companies maneuver to develop business models for the world of cloud computing. The following article takes a look at the emerging category of cloud distributor companies.
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Chris McAree, senior network consultant, founded LeafTech Consulting LLC in January 2004. The firm carved out a growing niche delivering consulting services and other offerings -- phone systems, voice products, workstations and security software -- to small technology companies. As the business grew, LeafTech left significant money on the table because it lacked cloud expertise. Then, serendipity struck: The phone rang, and LeafTech eventually partnered with Pax8, one of a growing number of corporations focused on helping channel partners supplement box pushing with delivery of public cloud services. As result, cloud sales now make up about 20% of LeafTech's revenue.
Traditionally, channel partners created business models, business processes and support procedures for clients running their own computer systems. Increasingly, enterprises are ditching that model: Gartner expects that businesses will spend $204 billion on public cloud services in 2016, a 16.5% increase from the $175 billion spent in 2015.
Because they are subscription based services, public clouds require that resellers operate differently. Many channel partners find themselves in a position like LeafTech: They are busy running the business, want to move to the cloud, but lack the expertise to make the switch. So, where do they go for help?
Cloud distributor firms: Filling the void
A variety of third parties are emerging to help with the transition. "Our business came from our experience as a cloud email filtering supplier," said
Ryan Walsh, senior vice president, partner solutions at Pax8, which has 50 employees and 1,000 partners. Walsh was often frustrated when working with channel partners because their traditional pick, pack and ship processes did not translate well to cloud services.
In effect, businesses, like Pax8, are creating a new cloud-centric channel. Underscoring this channel's fledgling, fluid nature, these companies go by various names. In fact, what to label itself has been an ongoing debate at Pax8, which has used valued-added cloud distributor, cloud community marketplace, born-in-the- cloud distributor, and cloud wingman to define itself, according to Walsh.
Fittingly, these firms offer a hodgepodge of services. The first area of support is access to cloud services. During the past few years, cloud brokers emerged: They act as consultants, examining a business' or managed service provider's needs, making recommendations about which cloud offering fits best, helping customers acquire and deploy the system, and then providing a variety of support services.
What's in a name?
For instance, Pax8, which now bills itself as a "Born-in-the-Cloud Distributor for VARs, MSPs, and IT Service Providers," has reseller agreements with two dozen cloud vendors and is adding about one more a month. Pax8 developed an online marketplace so resellers can find cloud offerings that mesh with their business models. Such marketplaces mimic mobile application stores: They vet services, and provide catalogue and portal functions that help partners sift through their options and get the service up and running. AppDirect and SaaSMax are a few other third parties that offer such services.
Channel partners need help as they supplement traditional box pushing with selling cloud services. Cloud Harmonics, which labels itself as a "next-generation distributor of cybersecurity and cloud solutions" has 50 employees and 400 partners. The firm provides resellers with three services: education, engagement and enablement, according to Pradeep Aswani, CEO at Cloud Harmonics. The process often starts with training courses for products from vendors, such as Arista, Aruba, Blue Coat, Check Point, Cisco Systems, Citrix, Hewlett Packard Enterprise, Microsoft and VMware.
Support is another area where the emerging cloud partners offer assistance. In some cases, they take on first level customer support and offload help desk functions from channel partners.
Vendors need help too
Not only do traditional channel partners need help moving to the cloud, but IT equipment vendors also require assistance. KEMP Technologies has been selling Layer 2 - 7 application delivery controllers to businesses since 2004. The vendor wanted to expand marketing of its equipment to Asian cloud providers and MSPs, according to George Zervos, vice president of sales Americas and APAC at KEMP Technologies.
Enter rhipe Ltd., a Melbourne, Australia firm that sees itself as a "cloud channel company" and KEMP's first strategic partnership with a "cloud-first" distributor. MSPs using KEMP products now purchase licenses and services, and access billing, provisioning, management and support through a dashboard via the rhipe portal.
Cloud is changing the way that corporations purchase, deploy and manage computer services. This transformation requires that the channel develop new service avenues. In response, startups are emerging to help channel partners migrate to this Brave New World.
Read about Rackspace's move to become a Microsoft cloud distributor
Find out how a security startup tapped a cloud distributor to expand its presence
Learn about the expanding role of services among distributors