Distributors and the Cloud: The Pink Elephant in the Room
Distributors and their role in cloud services: it’s the pink elephant in the room that nobody seems to want to talk about. I mean really talk about. Sure, the big boys of distribution have created tons of activity, websites, toolkits and forums around their packaged cloud services, but the question many solution providers are privately asking is: Is there real value to the channel in what the distributors are doing, or are they just trying to remain relevant in a services world where pick, pack and ship is now a given, not a bragging right?
As VARs have had to migrate their go-to-market strategies and reinvent themselves around a services and reoccurring revenue model, distributors have been trying to adapt as well — except their customers are the solution providers and supply chain efficiency is their core value. In an age where many organizations are buying their PCs, printers and many peripherals from discount superstore chains now, as well as direct from the manufacturer, distributors have had to evolve the services they offer to the channel and the permeation of cloud computing has given them the springboard to do it. Or has it?
Big distributors such as Ingram Micro (NASDAQ: IM), Synnex (NYSE: SNX), and Tech Data (NASDAQ: TECD), to name a few, have been spending a ton of dough and throwing considerable resources behind marketing themselves as cloud partners to the channel. Ingram has its dedicated website providing information about services, features and benefits of bundled cloud solutions for data centers, device management and security. Synnex last year launched a cloud services automation platform called CloudSolv, providing solution providers with scalable, comprehensive lifecycle management tools. And Tech Data has its TDCloud Academy and its provisioning portal trying to make it easy for VARs to manage the whole cloud business from one console. And so on. And so on.
It makes for great news fodder and live discussion forums, but how much of these services are the solution providers really using? Even further, once a VAR begins offering such basic cloud bundling services will it need to rely on the distributor after that? Lots of questions. Lots of pink elephants.
Fact: Distributors are the cornerstone of the channel in many ways and always will be. As solution providers continue to get out of the inventory business they have come to rely more on their distribution partners to carry everything under the sun so that they can meet all their customers’ needs. And believe it or not, the majority of VARs still get most of their vendor and industry information from their distribution partners. In addition to supply chain management, distributors are critical in providing education, awareness, and financial services.
But how does that transfer over to value in regards to a cloud play? Here is what a few solution provider executives had to say.
“It looks like [the major distributors] are all betting their futures on [cloud services] and from where I sit, the outlook is bleak. They’re all struggling for relevance in a market that doesn’t require aggregation. They claim they provide an excellent vetting service, but a good integrator is always going to evaluate any service they put their name behind themselves,” said one executive.
Others were not as brash but weren’t completely convinced, either. “Some distributors are providing cloud services where a VAR or cloud reseller can resell the distributor’s offering,” said another solution provider. However, he added that these general-purpose distributors still have not done a good job articulating their value proposition around cloud services and why solutions providers should consider them. “They are taking a number of packages and bundling them as a service and then reselling it to VARs who turns around, supports it and resells it to their clients,” he said, adding that these VARs will eventually build their own solutions.
So what is the conclusion? What role will distributors ultimately play in the cloud computing environment? Based on many conversations I’ve had with solution providers on this very subject it has become clear as mud.
In other words, the jury is still out.
Knock em alive!