New research shows that many channel partners expect cloud computing to greatly affect the services they offer and their vendor relationships.Now analysts say the next step for these VARs will be defining their cloud channel partner roles and refocusing their skills.
A recent study from the Computing Technology Industry Association (CompTIA), “Amidst Changes, IT Channel Programs Still Earn High Marks with Partners,” reveals that a good majority of IT solution providers are satisfied with the vendor partner programs despite enduring changes in benefits and incentives due to the economic recession. Now providers expect cloud services to further change these partner programs.
Of the 400 U.S. IT channel partners interviewed for the study, four in 10 respondents said cloud technology would drastically affect partner programs within the coming year. Specifically, 56% of respondents said cloud technology would alter classroom-based technical training, as well as telesales support, general vendor-partner communications and the cost of technical and business training.
Meanwhile, it is likely that partners will begin adding these very services to their own portfolios —once they figure out just where they fit in, explained Leslie Rosenberg, IDC research manager in Network Life-Cycle Services.
“Many local resellers or VARS may not offer their own built-managed services, so they’ll have to take a step back and think about where they are going to play in the cloud space. If they come from the server storage arena, being private cloud builders may be their area of expertise. Another aspect could be cloud resellers,” said Rosenberg. “I think VARs will have to do a lot of hard and fast thinking about how and where they want to play, how they want to invest in resources to allow them to play.”
Vendor programs adapt to meet the needs of new cloud channel partners
Tim Herbert, vice president of research for CompTIA, says these findings show the complexity of how the cloud will affect both vendor programs and channel partner business models.
“We found that there is a segment of the channel that is experiencing a lot of anxiety regarding the transition to cloud computing,” Herbert said. “These are primarily the companies that are relying on the traditional reseller model; they are very transaction based. They’re selling a box. There is still a lot of confusion among end users, and one of the greatest challenges is the integration with legacy systems to the cloud.
“Some companies are trying to figure out revenue models, customer relationship models, etc. There are going to be a lot of opportunities for channel partners that are able to step into that role of integration, custom app development, ongoing maintenance and assistance in ensuring that the cloud model is working for the end user.”
As VARs look to make the transition to cloud channel partners, vendors will also have to alter both what they offer in terms of technology and how they train partners.
“Different vendors are approaching this in different ways. Some are providing additional benefits and support to their partners who are most ready to embrace the cloud model. Others are looking at reducing certain partners who are not able to make that transition,” said Herbert.
Training will also differ depending on the type of services and technology that cloud partners plan to offer. For example, cloud partners who are reselling cloud hosting will not necessarily need to learn how to integrate private clouds with existing networks.
Vendors will also need to refocus their training to support new business models that are not necessarily based on component sales. There will be a difference in pre- and post-sales work.
“There is concern around margin. Some core issues channel partners and vendors have to deal with when selling an on-premise solution is that traditionally it is a much higher upfront fee. When you’re moving to a model that is an ongoing stream of payment instead of one large upfront payment, how does compensation work for sales people?” said Herbert.
Jason Bystrak, director of sales for distributor Ingram Micro Inc., says his company has a Cloud Solutions Development team that bundles cloud services for VARs so that they can sell a complete package. “For example, we bundle Intermedia (email as a service) with McAfee (email security)—a natural complement. This makes it easy for the VAR to deliver a complete solution that has been fully vetted,” Bystrak explained.
“When you look at the different layers within the cloud, you need to have a security, infrastructure, helpdesk solution, storage, etc. Each reseller is going to have a feel for which they want to use, and Ingram is going to help put that solution together.”
It's important to be able to explain to users the benefits and incentives of this type of bundled cloud service, said Jared Mills, director of sales and service for systems integrator InterTech, which provides hosted services from its own cloud. “The benefits are the same that they were for managed services. We pitch it as, you’ve got to go back and focus on your business, let us focus on IT for you. What better way to do that than to get out of the hardware business and remove the lifecycle component to the repetitive cycle of having to refresh and buy hardware as an organizational expense. By moving to private cloud, that lifecycle management is fully our problem.”
This also changes InterTech's business model and revenue stream. “With cloud, we’re not selling product to the client anymore, now we’re selling a service. We’re selling it as a recurring revenue model, so we have guaranteed income, which means better planning for the service provider, in that I know I can go and hire resources,” said Mills.
Cloud channel partners practice what they preach
When InterTech set out to build its own cloud and offer hosted services, the company took a unique approach.
“We converted ourselves first,” said Mills. “We took every piece of infrastructure, server, component, etc. of our business from the database to the mail server, and we moved it into the private cloud offering on the exact same hardware and data center that we were going to move our clients to, and let it run for six months. Once we knew that it was working without issues, we started to move clients into it. That was a good approach for us because it gave us the ability to see and feel what the client was going to see and feel.”
Even with precise preparation, any technology is subject to potential snags or even failure. If the cloud doesn’t perform as networking channel partners expect, there are alternatives. Mills added: “If you get halfway through cloud migration and there is some application or database that won’t play nice, the backup plan cannot be, ‘well, we’re going to put all this stuff back in the closet.’ Then that organization is scarred forever and will never let go.”
For InterTech, the answer to troubled applications or databases is to collocate a piece of hardware that runs that application or database.
“You can hybrid that cloud model that way on a case by case basis,” he said.
Still InterTech's method is only one of many strategies channel partners will consider.
“The channel is known for being transformative and resourceful, and every time there has been a new business model, technology or disruptor, the channel has adapted and figured out ways to make money. Will there be significant paradigm shifts in the way resellers change the way they do business? Absolutely,” said IDC’s Rosenberg. “Your contacts within the organization, the value proposition, sales talent, billing systems, everything needs to change. Some partners may not want to go there. Their customers may not want to go there. However, I think if you’re a smart partner, you need to be astute enough to have that conversation.”