Cisco Advises Partners on Differentiation in Cloud Market

With increasing frequency, several prominent vendors have gone to greater than usual lengths recently to detail for channel partners their view of how value-add, differentiation and profitability looks and plays in the cloud marketplace.

For example, Mark Hennessy, IBM’s (NYSE: IBM) new channel chief, has been talking up the vendor’s strategy to help partners “move to higher-value spaces to drive more value to their clients.” His context? The cloud and business analytics, naturally.

Along similar lines, Surinder Brar, Cisco Systems’ (NASDAQ: CSCO) Worldwide Partner Organization chief strategist, last month quietly outlined four points of differentiation and value-add for channel partners, framed around the notion that reselling cloud services differs greatly from selling on-premise equipment and thus requires a completely different value proposition.

“The more unique this differentiation, the higher is the partner margin on the transaction; and, the more relevant their proposed solution is for the customer, the higher is their probability of winning the order,” Brar wrote in a blog post.

• Understanding the customer’s business tops Brar’s list for how partners can differentiate themselves in the new cloud era. “This has always been important but it is even more critical as a foundation for identifying and proposing cloud solutions,” he wrote. “Customers are expecting improved business agility when they move to the cloud, which requires a much deeper understanding of their functional processes by the partner.”

• Picking the right cloud solution to sell also is important, Brar noted. “This is obviously based on the needs of the customer but is more difficult than selecting hardware for customer premise equipment based on speeds and feeds,” because the customer “wants to pay for the cloud solution over time through operating expense instead of capital expense.” An ongoing service level agreement (SLA) that reflects the performance of the service and the volume of usage is vital, he said. “Crafting the SLA and the payment terms can become a differentiation as the partner must match the proposal to the exact needs of the customer – not more and not less.”

• Selecting the right cloud services supplier to represent is a significant partner differentiation point because it reflects the reseller’s “due diligence on the cloud offer itself, the provider of the offer and the supplier of the infrastructure,” said Brar.

• Cloud-related professional services, Brar noted, is “perhaps the single largest area of differentiation and profitability for partners. “Moving to the cloud changes the economics and success metrics for IT investments, including how to evaluate the role of the IT function itself by the customer. Since the role of IT shifts from control of assets to coordinating their usage in the cloud environment, partners can now become a direct extension of the internal IT department at the customer site,” he wrote.

The net-net of Brar’s, and, by association, Cisco’s perspective on partner differentiation and adding value in the cloud era? First, understand your customer’s business; next, be smart about selecting the right cloud solution to meet their needs; third, be careful about finding the correct cloud supplier; and fourth, be services-oriented.

It seems so simple. Maybe that’s why Brar referred to his blueprint as a “return to basics.”

Reselling cloud services “provides an opportunity for partners to both reinvent their business model and create new differentiation for competitive advantage,” he said, noting that “few market transitions have had the potential to change the channel landscape as dramatically as is happening in the transition to cloud.”

We do, indeed, live in interesting times.