By Khali Henderson

No doubt you’ve heard about “born in the cloud” partners. You can’t help it; everyone especially the supplier community is talking about them. And that talk is quickly elevating them in the partner value hierarchy. It’s as if they actually were spawned in the clouds and thrive in rarified air not suitable to traditional VARs, agents and dealers. As the legend of these cloud masters grows, one wonders if they are real at all. And, so began my quest to find actual “born in the cloud” partners, figure out what they have in common and determine why they are in high demand.

My first stop was Google. I searched for research on “born in the cloud” partners and quickly found that one of my go-to sources on channel, Tiffani Bova, vice president and distinguished analyst covering channel innovation for Gartner Inc., is emerging as a leading authority on this topic. When I contacted her, I learned she was just about to publish a client brief that, in part, addressed some of my questions validating my suspicion that others in the channel were as confused as I. “This category is by far the most misunderstood by traditional technology providers, and it is the most disruptive to the current resale-oriented channel,” she wrote in the May 24 brief, “Tech Go-To-Market: Providers Must Adjust Their Channel Programs as Partners Take to the Cloud.”

We’ll share more about what suppliers must do to attract “born in the cloud” partners later in this article; for now, let’s work on defining the partner category itself. To do that, it helps to know what the other partner categories are. Using an oversimplified version of Bova’s partner transformation model, imagine a “pool” that contains all partners, and within that the following three “swim lanes”: 1. traditional partners with no cloud offerings 2. hybrid partners with traditional and cloud offerings 3. “born in the cloud” partners with only cloud offerings.

So, does that mean being “born in the cloud” is just a matter of not having a traditional offering like premises hardware and software for VARs or telecom circuits for agents?

Bova writes: “Born-in-the-cloud companies aren’t driven by making money the ‘traditional’ way (by reselling someone else’s products at a profit and offering value-added services on top for additional revenue). Instead they offer ‘outcome-based’ business solutions built on the backs of [cloud service providers], focused on software and application development and business process consulting, and offer unique solutions to the market.”

So let’s break this down “born in the cloud” partners are:

So to answer the question, “born in the cloud” partners are characterized by more than their lack of a legacy non-cloud offering. If they are simply reselling cloud services, that would not be enough for membership into this exclusive club. On the other hand, if they are aggregating or integrating or customizing services offered by cloud providers, that gets them in. Those that follow Gartner will recognize these functions as part of the “cloud services brokerage,” or CSB, model. CSB is a legitimate path for a “born in the cloud” partner, but it’s not the only one; partners also can stand up their own cloud services as well.

“Born in the cloud” partners, then, are sourcing from an ecosystem of providers or creating cloud services on their own. More importantly, said Bova in an interview with Channel Partners, they are developing their own intellectual property, enabling innovation and accelerated growth. Their quick impact, of course, is what’s turning heads.

“The reason ‘born in the cloud’ partners are becoming highly disruptive is because they have found a way to add value in a business model that is very difficult for the traditional guys to do,” Bova explained.

That also explains why many “born in the cloud” partners either have been spun out of traditional channel businesses or been started by executives that had worked for them. “Rather than trying to evolve a legacy resale model into a cloud-based business, they chose to build a company more in tune with where they believe the market is going as opposed to where it is now,” Bova wrote in her May 24 brief.

This was the case with Cloud Sherpas, which has emerged as the poster child for the “born in the cloud” set. Michael Cohn, senior vice president of marketing for Cloud Sherpas, said he and two colleagues Eran Gil and David Hoff left a traditional VAR in 2008 to start their cloud company. “It became evident to us in the 2007-08 timeframe with ubiquity of Internet and things moving online that the legacy VAR model was very likely to be threatened by cloud,” Cohn told Channel Partners. “The existing VARs were never going be able to fully embrace cloud without cannibalizing their existing business. In order to be a next-gen channel in the cloud, you have to be born in the cloud. Maybe today it’s possible, but back then we didn’t think it would be feasible to sell cloud in addition to selling on-prem.”

It was apparent to Cohn and friends that business fundamentals  sales compensation, cash flows and customer relationships of traditional and cloud models were incompatible. So, the trio decided to start something new. That’s how Cloud Sherpas was born in the cloud.

Cloud Sherpas’ dogged pursuit of Google enabled the startup to become one of the first Google Apps Resellers in January 2009 and within 18 months became the search giant’s go-to implementation partner. The company is still the No. 1 Google Apps Reseller. Today, it has three core practice areas around Google Apps, Service Now and Salesforce.com, but its full roster of services includes 20 providers from which it can build a solution.

As its name implies, Cloud Sherpas provides guidance to customers moving to the cloud. It has developed proprietary processes and even applications around implementation, migration, integration, customization and change management for customers of these cloud apps. At one point, it developed a migration tool for Google Apps, which it later divested and is sold today by a spinoff called Better Cloud (not owned by, but still used by Cloud Sherpas). It continues to create and abstract applications for use across its customer base as needed.

Cohn said being a “born in the cloud” partner starts and ends with a long-term view of the customer relationship. “It’s the crux of it all,” he said. “Everything falls from that the economics and the business model. We have to have a strong focus on customer education and support. It’s not at all about the one-time sale you used to see in the channel ecosystem.”

Burstorm, another “born in the cloud” partner, was formed about five years ago to rethink the emerging cloud infrastructure distribution model, which was turning out to be a slow and laborious endeavor of matching customer demand to an ever-growing and ever-changing supply. “That’s a very complex problem to solve,” said Burstorm CEO and co-founder Brandon Abbey, explaining that all providers describe and price their products differently. “Normalizing that and comparing that is a very arduous task.”

Abbey and Burstorm co-founder Ed Wustenhoff, CTO, understood that a “big data” problem was emerging in being able to track the available inventory and then align it with the specific requirements of large enterprise clients. So, they built a cloud-based application that would not only house all the data, but crunch it and make recommendations to the customer, cutting the sales process down from 12-18 months to 1-3 months. “Burstorm is the first to use computers to address this problem [rather than] human labor,” Abbey said. “We lower cost of sales for the supplier and help the customer by delivering many possible solutions.”

That said, the software is only a tool for Burstorm’s educated cloud specialists who understand cloud services and leverage the deep technical data mined by the software to more efficiently solve the customers’ problem.

The company boasts that its databases often have more current and actionable information to share with customers than do the providers themselves. To make sure its data is constantly up-to-date, Burstorm’s executives have been evangelizing its solution to cloud infrastructure and connectivity providers to automate access to their inventories via APIs.

“Born in the cloud” partner Twilio also has leveraged the cloud to solve another, but a long-standing problem how to easily embed communications functions into applications. Founder and serial entrepreneur Jeff Lawson experienced this firsthand with some of his earlier ventures, said Lynda Smith, Twilio’s chief marketing officer. As an example, she cited StubHub, the online secondary ticket marketplace now owned by eBay. Lawson wanted to automate functions like enabling sellers to call and book couriers and send text confirmations to buyers from within the application. Because none of this functionality was readily available from carriers via APIs, Lawson and his team had to build a traditional call center to make it happen. For his next venture, Twilio, he decided to solve the problem for all developers once and for all.

Twilio is a cloud-based communications platform that exposes APIs, enabling developers to easily add voice and text functionality to their web and mobile applications. What’s more is Twilio offers this on a pay-as-you-go basis. Twilio’s cloud API is hosted on Amazon Web Services cloud infrastructure and taps into functionality from a range of telecom service providers with which Twilio has wholesale relationships. It has also developed its own intuitive markup language called TwiML, to make it simple for developers to use. For example, if you want to use text-to-speech, you just use the word “say.”

“In addition to revolutionizing or disrupting the way telecommunications solutions can be built, we changed the business model,” Smith said, explaining telephony is generally bought and sold based on ports or seats on an upfront contract. In contrast, Twilio offers Web-based account signup and is billed via credit card on a transaction basis, so you pay per text message or phone call or phone number, etc. “There are no contracts, no upfront fees or commitments,” she said.

Based on this one-of-a-kind approach, Twilio started to gain traction with little marketing save developer evangelists who made the rounds at hackathons and develop meet-ups. “This is really a case of ‘build it and they will come,'” said Smith, claiming hundreds of thousands of users and more than 100 percent growth year over year for the past three years. The company’s clients include some household names like Home Depot and some noteworthy upstarts like Uber. Its success has earned the support of the investment community; the company has raised $110 million, including $70 million in a fourth round as of mid-June. Dow Jones reported the company has a valuation of more than $500 million.

A Common Mindset

While each of these “born in the cloud” partners looks nothing alike, they have something in common a developer-like mindset or philosophy about solving customer’s business problems using an agile, collaborative approach that leverages open APIs and cloud infrastructure.

“They are fast and they’re innovative and moving agilely because they can, because that’s the way cloud is enabled,” said Brooks McCorcle, president of Emerging Business Markets at AT&T Inc.  “They are not having long cycle time infrastructure discussions because to them it’s a moot point; they are just going to buy a cloud service. They have the mindset that whatever they are going to pull together is going to be a fast, complete solution that is totally born and enabled in the cloud.”

Their abilities to assist customers with achieving their goals in a quick, flexible and scalable way is winning customers, which in turn has caught the attentions of suppliers like AT&T and Cisco.

Scott Boyd, director of operations cloud and next-generation solutions for the cloud and managed services partner organization at Cisco, explained: “Cloud represents a very large revenue opportunity for vendors and channel partners, but moving into cloud also has many challenges with it. I think these types of companies are viewed as having the right business structure to capture this revenue opportunity.”

But, as Gartner’s Bova mentions, not all suppliers are ready to support “born in the cloud” partners, as their programs are tailored toward traditional partners. Rather than MDF and deal registration, for example, “born in the cloud” partners want things like open APIs, distribution of their solutions in a supplier marketplace and professional services development help, she said.

But some suppliers are coming around. Case in point is AT&T, which recently launched its Emerging Markets Business to tackle new opportunities like cloud. This group acts like a startup within the carrier not only strategically, but operationally; it’s housed at the AT&T Foundry, which takes advantage of the open-office format popularized in Silicon Valley. Its first initiative was to enable its channel with the creation of the AT&T Partner Exchange. It has shaken off the traditional closed carrier approach and opened its APIs so partners can create their own solutions to optimize cloud environments, add DR capabilities or create entirely new services as a few examples.

“The conversations with these solutions providers is just very different,” McCorcle said. “The conversations have a lot do with how they can use what we are enabling to provide a more complete solution to their customers. They are not waiting for us, but saying, ‘If you are serious about building a business model around me, here is what I need.’ Immediately a great white-boarding session ensues. It really, truly is how they think about the business they are looking at the next wave of solutions, the next value they can bring, the next mouse trap, so to speak, that can be built.”

MORE INFORMATION

Hear more from Gartner, Cloud Sherpas, Twilio and Burstorm in the session, “In Search of ‘Born in the Cloud’ Partners,” at Cloud Partners, a Channel Partners’ event, Sept. 11-13, in Chicago.