When VMware announced plans to buy VeloCloud earlier this month, the tech wags went into overdrive to muse about the technological ramifications.

Would the deal pave the way for the combined companies to offer service provider-like capabilities? Does it foreshadow the availability of a single management console that can control virtualized data centers and remote office connections to a WAN? Could it finally be the nail in the coffin for MPLS networks, as many have predicted?

Among those with insights on the matter is Ian Kieninger, co-founder and CEO at Avant Communications, a Chicago-based distributor of cloud services. More than an interesting tech mashup, Kieninger believes the VMware/VeloCloud deal is another in a string of developments that is upending the economics of the channel. Here’s why.

Avant jumped into SD-WAN three years ago. Since then, it has been hard at work building out its portfolio of software-defined products and services. In the past two years, the company’s SD-WAN business has been the fastest growing part of Avant’s operations. Growth rates have been in the triple digits.

With VeloCloud, Kieninger believes VWware could create a virtual orchestration tool that can manage a variety of different infrastructures and networks, and be used by almost any IT administrator. Compare this to Cisco, which requires far more sophistication and investment.

“The strategy of VMware is smart. It simplifies things for customers and gets them into one of the hottest markets in all of technology,” says Kieninger. What is more, it makes VMware a more important vendor to customers who care about applications availability, security and compliance. And that’s the key.

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To Kieninger, the VMware/VeloCloud deal is another indication that it’s time to move “up the stack.” When it comes to channel practitioners, there is less need and reward for those who focus on infrastructure building blocks. “Stacking storage architecture with infrastructure is going to be less compelling and valuable [to customers],” Kieninger says. In contrast, “Having a broad understanding of the applications [they use] is everything.”

So how should a channel partner put such advice to use? Consider what Avant specialists tell their channel partners during the “Special Forces” training they offer: “Quote at Level One but sell at Level Seven.”

The reference, of course, is to the common seven-layer technology model, which features a data link and network near the bottom, and applications at the top. Many experts believe that legacy salespeople within the channel who continue to lead with bargains and discounts on commoditized products and services will struggle in the years ahead. But those who provide a higher-level of value may be able to win business at both the upper and lower levels of the stack so long as they lead with applications expertise.

“If you’re really understanding the needs of the business, then you can bring [the conversation] back to the right product set and strategy,” Kieninger says. “Understanding layer seven is how you sell, and how you provide maximum value. As the trusted advisor community gets better and moves up the stack, it’s just going to be stronger.”

Many of those who are doing just this are channel newcomers and converts that have made adjustments, Kieninger says. This includes ATC, a telecom agency that was formed in 1999 but today offers everything from managed cloud to colocation to hosted applications.

Another reason channel companies should be wary of selling at the bottom of the stack? Reduced barriers to entry, which can lead to increased competition in commoditized market segments. Unlike a decade ago, channel companies don’t need as much capital, engineering talent or infrastructure as before. Today, they can simply leverage the expertise of those who work in cloud organizations such as Rackspace or Peak 10, or those who work for the likes of Avant.

The new market realities are significantly changing the economics of the entire channel. 

In response to all these changes, Avant has created a new cloud-based security practice, among other things. Looking ahead, it is looking to build out its portfolio with SaaS-based upstarts that have enormous potential.

As Kieninger and Avant like to say, “Come to us for the cloud and application level solutions, stay for the network.”