Distributors are being forced to question their role in the cloud computing model as channel partners increasingly scramble to re-evaluate business models.
It is one of the biggest challenges facing the channel, Gartner channel research director, Neil McMurchy, told ARN. Recent Gartner statistics show 75 per cent of Asia-Pacific organizations will increase SaaS investment in 2010.
“Where does a distributor fit into the cloud?” McMurchy asked. “Why would the channel look to a traditional distributor when they can look to a cloud provider? Will the distributor’s role be about aggregating cloud services to provide to resellers?”
Express Data, vendor general manager, David Peach, said the cloud transition will be gradual: over the next three to five years customers will still demand on-premise as well as cloud-based applications – and will need the distributor to educate resellers about the complexity of the hybrid cloud arrangements.
“I get asked almost weekly what the whole cloud thing will mean for business. If you look back a decade ago, when we were seeing the move from box to software licenses, it didn’t minimize the role of the distributor. It presented opportunities because it was a more complex model," Peach said. "Every software publisher had their own rules. That complexity meant a role for us to move into software licensing and take away the complexity for resellers. The same thing will happen with cloud.”
Pressed for specifics, Peach said the types of services a distributor can offer include billing.
“The magic word here is aggregation. We can aggregate billing as a service back to the channel. Setting up individual billing is expensive. But if we have it all set up, life is now much easier for a reseller.”
Peach said the company is also offering guidance on two types of cloud delivery models: partner-hosted and vendor-hosted.
“It’s not about what needs to be done, but what we’re already doing in the cloud. We’ve been distributing four cloud based solutions (including Microsoft, Citrix IBM Lotus, and m86 Security) for more than a year,” Peach said.
Like Peach, Ingram Micro, ETG business manager, David Power, said the role of the distributor in the cloud is to act as the “conduit” for resellers.
“We can pull it all together. We have an opportunity to help define the market, and have the ability to educate partners,” Power said. “We can create solutions to market to fit certain requirements whether it be a hybrid model or a complete cloud offering.”
Newlease, CEO, Doug Tutus said the trend towards the software subscription model and the advent of ‘digital natives' in the workplace means traditional distributors need to shift business priorities – and fast.
“The shift is happening faster than I expected. Distributors today need to get some insight into what the customer is looking for, so they can help the reseller sell it,” Tutus said. A distributor has a lot of ability to manage what the reseller does, and a lot of the cloud providers are starting to notice that.” Asked the benefits for partners, Distribution Central CEO, Scott Frew, said the premise is simple: the distributor is the connector.
“The distributor is the connector between cloud providers who have no channel, and the channel who are not going to build their own cloud offering but need to offer their end customer a service," he said. "There is also value to be gained by offering the other pieces of the puzzle required to actually deliver cloud to an end customer [including communications gear, WAN optimization and security products].”
Frew said cloud services can be introduced as an add-on to an existing channel offering similar to security services.
He said the company’s StormFront technology was built to take the pain out of both sides of the “cloud-to-channel” supply chain and is simply an add-on to its existing vendors.
He admitted cloud represents a world of uncertainty. “It’s going to be messy for a while whilst the market polarises and the traditional price-based distributors will probably have difficulty dealing with the cloud," Frew said.
“I think the larger problem, one of which was highlighted recently by EMC unceremoniously shutting down their cloud storage offering, is there are still many unresolved issues for the end customer such as data security, data portability (cloud to cloud) and the impact to data and business continuity on termination.”
Express Data’s Peach said there’s still time to sort out the wheat from the chaff. “People aren’t going to switch the lights off on Friday, and transition to a cloud model on the Monday. It will ramble on for awhile. But definitely a shift is happening with the way software is sold and consumed. Distributors who don’t transition will see a rapidly diminishing business model.”