Cloud computing is changing the
distribution landscape - are you maximising the opportunity?
decades the IT industry has
operated effectively on a well-understood two tier system comprising
distributors and resellers, with each having clearly-defined roles and
responsibilities. However, cloud-based technology is fundamentally changing the
distribution landscape, not just for the distributors and resellers, but for
vendors and end-users too.
is here to stay
to the Cloud Industry Forum, by the end of 2013, more than 75
percent of UK businesses will be using at least one type of cloud service. The
Forum has also forecast that, of existing cloud users, 80 percent will increase
their spending on cloud computing during the same period. Moreover, research
firm Gartner predicts that by the end of 2013 the size of the cloud computing marketworldwide
will be $150bn. So it’s fair to say that it’s more than a passing fad. It’s
here to stay and it’s having a fundamental impact on the way organisations
select, architect and deploy their IT.
As a distributor of next-generation cloud-based technologies, I must confess to
having a vested interest in the positive evolution of an industry model that
has remained largely unchanged for years. From the vendor’s perspective, the
increasingly widespread acceptance of technology solutions developed for the
cloud has opened up the market. Historically the domain of the big IT brands
with massive marketing muscle and deep pockets have dominated the market, but
this new world of distribution is not concerned with, or constrained by,
infrastructure and physical bits of tin. Next-generation, agile, start-up
vendors now have a real shot at success. For these cloud-based technologies,
the barriers to entry are well and truly shattered. From the reseller’s point of view,
cloud-based technology solutions are delivering shorter, less complex sales
cycles with solutions that are easy to install and immediately available. The
days of on-premise solutions with lengthy and costly implementation periods are
From the distributor’s point of view,
more than ever in the current economy, there is a need to be truly ‘value-add’.
Resellers need a distributor that can add value to them by assisting in
creating new revenue opportunities from both products and services.
Distributors need to find these new, innovative and disruptive technologies
that their reseller community can take to market quickly and efficiently whilst
retaining high margins and differentiating themselves from their competition.
silver lining has a cloud
The potential fly in the ointment is that the very issue that makes cloud
computing so appealing is also what makes it so disruptive to the traditional
delivery of hardware and software technologies, because it changes both the
supply and consumption side of the distributor model. After all, if you look at
it from the vendor’s point of view, cloud-basedIT solutions tend
to be less complex, relatively easier to sell than on-premise solutions, and
don’t require massive up-front investment. So why not sell directly to the
customer and cut out the distributor and reseller all together?
As the old adage goes, if you do what
you always do, you’ll get what you always get. Distributors and resellers are
waking up to the fact that they need to radically change their approach to
avoid their roles becoming redundant.
The cloud aggregation model promoted
by some distributors is a good example of how things are changing. Effectively
they are offering platforms that allow their resellers to aggregate cloud services
from multiple vendors on a single billing platform. The ‘solution stack’
approach is another great example. Here the distributor ‘groups’ complementary
technologies together which can be sold stand-alone, bundled or sold as a
partner branded managed service, enabling resellers to create their own,
bespoke solution that meets the needs of their end-users.
revenue is the new maintenance
However, to my mind there’s an even bigger opportunity in the shape of today’s
next-generation technologies that offer a combination of cloud-based solutions
virtualised offerings or simply a pure cloud hosted option. This ‘hybrid middle
ground’ is where the next big opportunity lies for distributors and the
landscape is changing from box shifter, to one of offering managed services and
By tapping into this ‘hybrid middle
ground’ distributors can offer solutions that have a very low operating cost
versus traditional on-premise solutions with a high capital expenditure cost.
And by adopting a business model that’s built around managed and cloud-based
services, distributors can create an ‘annuities’ model, where subscription
effectively becomes the new maintenance. Selling batches of products or
one-time services is so ‘yesterday’. This new model means distributors can sell
monthly services either fixed-fee or utility-based. Now that’s real value-add.
I’d offer a note of caution here
though, because although the annuities model represents a solid business
opportunity for some distributors, it won’t work for all. These exciting hybrid
offerings need a ‘new breed’ of distributor – one that’s nimble and agile, and
can adapt to an ever changing market landscape. Having the ability to help
these next-generation vendors carve out a market position (and cut through the noise
of competitive offerings) is vital. As is the business know-how to
commercialise them with wrap-around services delivered via the
subscription-based model. And the final piece of the puzzle is the marketing
muscle needed to stimulate demand and help build a solid, qualified pipeline.
These three factors will determine which distributors will succeed in the
hybrid middle ground, and those that will fall by the way side.
Whichever business model is chosen,
the underlying offering has to be about real value-add on both sides of the
distribution model, whether that’s helping a next-generation vendor to break
into the UK market, or it’s helping a reseller create and deliver a branded
managed service to their customers. Take a look at your business model. Are you
doing all you can to maximise the cloud opportunity?