Anyone who has spent a significant amount of time working in the IT channel has learned how to adapt their business during transition periods. If you look backwards from the cloud we float on today, the early days in the channel had plenty of shakeups – much like what we’re facing here in the cloud era. The channel had to make adjustments caused by mail order, consolidation, the shrinking influence of independent VARs, retail VARs and e-commerce VARs just to name a few. Within these examples, we saw the savvy VARs adjust to the new trends and emerge to take market share once the transition period ended, while others who didn’t adapt fast enough went away, got acquired or ended up selling off their customer base.
Of course the staying power and impact of each transition is shaped by the direction of end-user IT purchasing and deployment decisions. Which is why one has to wonder – is the current cloud transition carrying more momentum and sending larger shockwaves than anything we’ve seen prior? This was certainly the case in 2016, and as we move forward into the New Year, we should only expect this trend to continue and pick up even more steam.
Today, it’s already widespread knowledge that users are rapidly moving applications to the cloud. While the speed of the cloud transformation is still in debate with a few folks, I’ve come across a common scenario over the last few months that the channel should be acknowledging as they prepare for the upcoming year.
We’re continuing to see customers of all sizes test the feasibility of moving applications or resources to the public cloud. Not all are ready to move critical information, so when that’s the case, the common theme has been for them to choose something small like a SharePoint Online project that they can afford offload to the cloud. And because they’re starting with a small project without hardware or license revenue attached, they aren’t engaging with their usual IT provider. They aren’t engaging because their typical IT providers work on large deals, making a margin and commission on much larger spends on hardware and software – so the customer simply doesn’t bother to ask for assistance from the provider.
Small public cloud projects like this usually run pretty smoothly—even when companies don’t consult a VAR—because it’s easy enough for them to go at it alone on platforms like Microsoft Azure, Amazon Web Services or Google Cloud. However, soon after the initial cloud project is spun up, they recognize that the cost-per-compute model is hard to ignore compared to traditional IT. Because it was easy the first time around, the customer won’t jump to engage their solution provider on the next one. Small cloud projects wouldn’t typically equal a lost opportunity for the solution provider in terms of profit; however, what’s too often getting overlooked is that these smaller cloud projects are opening the door for a more “defining cloud project” for the customer. The problem by this point for the VAR is that when a company has been slowly moving small projects to the cloud, they may have already bypassed the cloud expertise from their traditional provider.
The good news is that there are still some crucial pieces of expertise needed once a company decides to move on with their “defining cloud project.” Securing the cloud, routing access to projects and providing the same availability and control for these applications becomes the goal. This is also the point where things can go awry for VARs that work with predominantly on-premises solutions and consulting motions. Companies are looking for consulting or deployment experience other than that provided from Microsoft or Amazon – they want someone who can engage with them for many years. They want someone with Azure or AWS experience in addition to knowledge of certain applications, perhaps of apps that can be used to secure those environments. So they look for a VAR that fits this description and often come across what is currently being called a “Born in the Cloud Partner.” This could be a cloud partner who is armed with Azure and AWS certifications as well as some core expertise in security and deployment. These solution providers can offer companies the same control, security, access and functionality in cloud that they previously had with their on-premises applications. Instead of cobbling together some on-premises products just to say that they are cloud ready, a “Born in the Cloud Partner” provides solutions already designed for the cloud and shows expertise around them that helps customers feel confident.
I’ve seen this happen again and again with Fortune 100 and mid-sized enterprises, and guess what happens to the traditional incumbent VAR? As companies rapidly move data and applications to the cloud, the traditional VAR may not even be aware that a migration is going on until after the “defining cloud project” is complete. In some cases, there’s a possibility of losing their preferred spot as the digital partner of record and getting cut out of the purchasing decision. Regardless, large chunks of revenue that normally went into the traditional VARs pocket now flow elsewhere.
I am a fan of the traditional VAR channel, and I know it will adapt – some VARs faster than others. I also understand how difficult it can be to decide when the right time to invest will be, and why investing too early or too much is a risky endeavor. With that in mind – the message for the channel is short as we head into 2017. End users are moving to the cloud, and now is the time to have the cloud talk with customers, not after they’ve already migrated. Ask them what expertise they need, and how you can align with them before the “defining cloud project” happens.