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Channel Matters Blog > September 2012 > The channel and the cloud

The channel and the cloud

by Lynn Shively
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For the past several decades, channels have been thought of in the basic categories of distributors, systems integrators (SIs), or value-added resellers (VARs), that are engaged by vendors to link them to end user customer and to sell and service their products.  When cloud computing started getting traction, there was concern about what would happen to this tried and true model.  So far, what we are seeing is that these channel partners that have been around for a long time are not going anywhere.  They are continuing to play an important role in the cloud, but their functions are starting to vary.  In addition to those traditional categories, a new form of cloud-enabled channel is also beginning to take shape.

Traditionally channels have existed to help the vendors reach customers, penetrate new geographic or vertical markets, or add expertise and capabilities to provide complete solutions. Channel partners typically consisted of highly skilled people who could specifically integrate a generic product, or put together multiple products to meet the specific needs of a particular customer or industry. Most of that is still true today, but with some new responsibilities.

A new generation of channels is forming consisting of distributors, SIs and VARs acting as "cloud brokers" that can pull together various cloud offerings into a unified portfolio of on-demand solutions. From there, they can select specific cloud features, applications, and offerings and put them into a unique portfolio of solutions and support for a specific client.

The cloud ecosystem is becoming more complex than the traditional model, because there are also new elements in the cloud channel business model. From a high level, the functions of cloud channels model are build, buy, enablement, and sell.

In the build portion, ISVs now have to consider the platform they will be using, and how and where they will host their applications and services. Some will be a pure-play, multi-tenant SaaS products, and some will be more of an ASP model, where applications are hosted by channel partners. The building of applications, integration, and security will all have new considerations in the cloud channel.

Vendors still want to make it as easy as possible for customers to buy, install, enable, get support for, and upgrade their products. For most solutions, there will be some degree of channel engagement where they enable solutions, implementation services and provide on-going support. This is especially true for complex applications and solutions, where clients buy services for integration, customization, and training along with the subscription.

When it comes to selling, someone still needs to do the marketing and the selling. There will be solution application marketplaces where like-minded solutions will be collected, but just because information has been put on a website, does not mean that anyone will find it and buy it. Vendors can pay partners to sell for them, or they can take on some of the selling role themselves.

There is also a new element in cloud solutions, and that is transaction automation. It impacts all three layers of the business model. Selling, provisioning and managing a cloud solution is a bit more complex than selling an on-premise license and receiving a lump payment from the customer. There are channel partners that provide fully developed solutions which automate all aspects of the ongoing transactions. Hosters and application marketplaces also often provide this as part of their service.

The new cloud channel ecosystem for cloud applications is starting to look something like this:

  • There will be the traditional big vendors; Microsoft, HP, Apple, Google, IBM etc.
  • The distributors, VARs, and systems integrators are not going away, but they will probably  morph and change as they adapt to the market and technology changes
  • Application marketplaces are going to play an important role for many types of products
  • Channels will exist that are managed service providers, often with their own data center
  • There will be some pure play application VARs who focus on selling high volumes of subscription licenses without investing in professional services or support infrastructure

So the channels are responding and changing to these new business directions. The reality is that their business models are still evolving. Roles and responsibilities are not yet well defined, and much of the industry is still trying to figure it out as they go. It may be years before things which are as seemingly simple as commission structures and payments for services, settle out and get standardized. Not every new channel strategy is going to work; some companies will be too slow to respond and won't be successful.

But with all of those changes, there are still channel fundamentals that will need to be in place for your channel program and channel account managers to be effective.

  • Vendors will have to segment and target their markets appropriately
  • There will have to be partner identification, recruitment, and training
  • Vendors will have to supply a complete product to the channel in terms of form, function, and support that will enable channels to be successful
  • Channel enablement and supplying systems and processes that help channels be more effective will still be critical
  • Partner programs that motivate, reward, and help channels compete will still be important
  • Helping channels sell, and alignment of plans to drive sales will still be needed
  • Company alignment of goals, strategies, measurements and compensation to integrate channel strategy with overall business objectives is going to remain a key component of a channel program

 

 

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