The industry has long tried to eliminate the middle man. The channel so far has not caved in, and remains to hold its fort during its latest challenge.. the cloud. The cloud predicts doom scenarios for cloud service sales. Product margins are squeezed, vendors have no obstacles going direct, product knowledge becomes redundant, while everything is available via the cloud. Right?
Wrong! While we acknowledge there are some channel challenges, we also see enough cloud opportunity for the channel. We see the channel succeed for the following reasons:
- Partners are needed to integrate front-office to back-end, and offer migration services.
- There are no net new clients – but new users within the existing client base.
- The channel remains to be needed to train and implement solutions – software vendors do not wish to do this stand-alone.
- Even pure play SaaS vendors (Salesforce.com) use channels to go to market
So, can the channel adopt these changes? We think so. If there is one entity accustomed to change in the IT industry it is the channel. Smart channel partners started changing a decade ago, to demonstrate their value in markets under pressure. The partner community already knew it needed to be able to demonstrate value through either verticalization, broader solution portfolios or expanding on its customer intimacy. Cloud success for the channel will depend on how they can anticipate in the changes necessary to sell (in) the cloud.
So, where are the biggest changes are in the cloud? For that we need to segment partner activity. If a partner knows what it actually offers or sells on premise, they can sell that offer in the cloud as well – depending of course on what piece of cloud they are aiming for, for instance the public cloud. The question is, who do they sell that to?
We distinguish partner activity in Business advice, IT advice, Integration capability, Service, Maintenance & Support, and Resale and Distribution. Business advice will show the least change, cloud computing will actually increase demand for business advice. IT advice will become less important to the end-user. That does not mean IT advice isn’t necessary, but it needs to be sold to another entity within the cloud value chain. Service and support is another area of change. Where ISV’s have specific partner requirements and certification levels (think gold membership levels), the value of certification for partner decreases. Customers are not interested in the number of certified Oracle engineers. They want to know if you can solve their problem. In resale and distribution, subscription based selling will require different sales techniques, and margins will be different. At the same time, end-users will still need a platform or vendor from whom they can actually rent the solutions. These are just a few examples that demonstrate that activities perfomed by partners remain necessary, regardless how and to whom they are sold.
So, what’s the channel deal in the cloud?
- Sell solutions versus products – Business and solution oriented advice for the business manager will be crucial. IT buy decisions become solution rent decisions.
- Offer a platform (aggregator) or be part of a platform – Platforms offering solutions will evolve. These platforms will be horizontal as well as vertical. Many will emerge, a few will survive. Ambitious channel partners will want to offer their own platform.
- Demonstrate your value in the chain (end-user contact, business advice, SLA, maintenance etc.). The cloud may seem simple for the end-user, the logistic chain needed to complete the cloud offering is still complex. PaaS and IaaS providers have found their positions, it is now time for the SaaS providers to add their value to the chain.
- Stay close to your competency – use the product knowledge you have to offer solutions, use the vertical expertise within cloud platforms and communities, use the end-user contact to expand or cross-sell within your existing client base.
Long live the channel!