Does the Cloud Need the Channel to Thrive?
Many solution providers fear that the rise of cloud will make resellers and VARs obsolete. That’s far from the truth – cloud companies need the channel just as much as traditional IT vendors do, a fact that will become even more apparent this year.
That’s not to say that embracing the cloud will come without hurdles for VARs and resellers. Companies that operate in the channel have built their businesses around perpetual software licenses and on-premises hardware sales, which require a drastically different sales and support cycle than selling cloud services. In order to succeed, companies hoping to thrive in a channel dominated by cloud services will need to understand how to best work with cloud providers and, just as important, why these companies need the channel more than ever. First, let’s dive into the “why” part of this massive paradigm shift for the channel.
Customers Want a Trusted Advisor
As the saying goes, the customer is always right. In this case, cloud providers understand that buyers don’t simply want to pay for services, they also want support. The major cloud behemoths have massive customer bases, and as a result, putting in a support ticket can feel a lot like hurling a bottled message into the ocean.
The reason that this is such a sticking point for buyers is that, while the cloud has made great strides in operating as a self-service industry, the journey is far from complete. So, while it may be easier to do certain things in the cloud, it’s not as if people no longer need handholding and advice, especially when the cloud isn’t working as expected. When companies inevitably need help, most organizations are going to want someone local with whom they can have a face-to-face relationship, and not a brief exchange with some nameless remote support staffer over email or chat.
Furthermore, organizations know that their vendors will likely tell them exactly what they want to hear, bending the facts to their advantage. This isn’t the case with solution providers, who typically offer an array of systems to solve a wide variety of challenges and can better tailor a solution to meet a customer’s specific needs. And with the cloud, one size does not fit all, making channel partners critical for navigating the complexities of the various offerings on the market. With their extensive knowledge of the nuances of public, private and hybrid cloud technology, solution providers help both their customers and cloud service providers by assuring the end user’s organizational needs are met by the vendor’s services.
In order to keep customers happy, cloud organizations have two options: bolster support staff to keep up with tickets, or partner with a VAR or reseller. In terms of feasibility, the second option is far more attractive, as it lets organizations keep their engineers focused on product development and refinement while their channel partners handle the nitty gritty details that are involved in maintaining existing deployments.
Cloud Companies Need Sales Magnification
The second benefit the channel offers cloud companies is sales magnification. Large cloud players such as Amazon and IBM operate their own direct sales force, but they certainly benefit from partnering with channel companies who know their local market far better than they ever could. More importantly, however, the cloud industry is still relatively immature, and is filled with small startups who are operating on increasingly smaller funding rounds. Entrepreneurs are left to decide whether their start-up will prioritize sales or product development and refinement. This situation is detrimental to buyers and sellers alike, as companies with incomplete solutions fail, leaving their customers out in the cold.
Cloud startups that work with VARs and resellers avoid this predicament by leaning on their channel partners’ sales team as they work to perfect their technology. This allows emerging companies with a compelling solution to arm themselves with an experienced sales staff almost instantly, benefiting not just from the magnification of their selling scope, but also from the relationships their partners have developed.
New Business Models for Channel Organizations
Now that we’ve covered why cloud companies need the channel, how do VARs and resellers make their organization a natural fit for the cloud?
The first consideration is sales model. Channel companies have become accustomed to a sales model that depends on perpetual license and hardware sales, where payments for large deals come through as soon as a company purchases the product. That’s not how the cloud works. VARs and resellers must prepare themselves for the shift to a recurring revenue model, where payments occur over an extended period of time. Executives will need to pay a lot of attention to sales personnel, in particular, to ensure their incentives align with the new business model.
Secondly, channel organizations embracing the cloud must master the skills necessary to help their customers manage and integrate a wide array of cloud-based solutions. This is arguably the most critical factor to success, since the main benefit the channel offers the cloud is its ability to sell and support the industry’s solutions. Before switching models, organizations should conduct rigorous training programs and make outside hires to acquire the necessary expertise.
While some channel companies might be slow to admit it, the cloud is here to stay, and solution providers who ignore this fact will perish. So while embracing the cloud may not be free of hurdles, it’s an undertaking that solution providers must commit to if they hope to remain relevant.
Leonard Iventosch currently leads the Nimble Storage worldwide technology alliances and associated go-to-market sales initiatives as the vice president of worldwide channels. With over 30 years of experience in data storage and cultivating new business opportunities, Leonard has developed strategies and programs to fuel channel growth at businesses such as ExtraHop Networks, EMC, Isilon Systems, NetApp and Data General. Leonard earned a B.A. in economics from UC Davis and an M.B.A. from UC Berkeley with an emphasis on marketing.