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Will the Channel Disrupt the Cloud?

How the channel will impact cloud computing in the enterprise

James Urquhart wrote an interesting article today in his Wisdom in the Clouds blog on CNET about how cloud changes the customer, vendor relationship.

In the article he states:

"In cloud, your traditional technology suppliers are now interfacing directly with the customer, and the channel's "value add" of customer relationship management, technology delivery, and solutions development is being seriously threatened."

Having worked for enterprise customers and vendors for the last 20 years, I have to say many companies have a direct relationship with their technology providers.  I think Dell & Gateway are probably most responsible for that disruption with support from a bursting .COM bubble. Before that, resellers were the primary route to market for product.  Vendors had some large "captured" partners and then a number of tier 2 providers. The commoditization of the PC really drove the balance of product distribution into smaller enterprise. Made easier by more made-to-order, direct order and delivery relationship.  Then, as those companies hunted for high margins fighting against the bigger vendors, direct sales forces and different channel programs came about.

The "channel" has always existed to add value to that technology when the customer did not have the capability to implement themselves. It has always support complex products, of which cloud is just another.

In a previous post I discussed some changes at Amazon to try to attract enterprise customers to the public cloud. This is a clear sign of recognition that things need to change to continue to drive broad adoption.  I think the cloud has disrupted many things, but the SI, MSP and VAR channel is probably not one of them. In fact, I think looking forward it is the need to leverage that channel that will disrupt the current flavour of the cloud.

Partner programs in major public cloud providers have been forming for a while and will continue to gain strength while complex workloads are being refactored for the cloud. Public cloud providers are hungry for customers who can spend larger sums of money on larger workloads. The public cloud provider model does not lend itself to a high touch salesforce or a significant solutions support organization, all this will come from the channel.

The "swipe your credit card and start an instance" is a version of the stealth adoption model most commonly used by Open Source Software (OSS) to bypass the management process of Enterprise IT. For OSS it was free downloads, for AWS is $0.0x cents per hour computing to a company that probably already has your credit card details. To say AWS or most cloud providers have a "relationship" with their customers is bit of an exaggeration. Certainly, for bigger users this is true of public cloud, you would have a very important customer relationship. The average public cloud however, has a very skewed distribution of users, with the majority just tinkering. As public cloud moves from the edges of the organization to workloads of more significance, it will come into the sights of IT Management, and then the channel that serves it.

To James's point, there is no physical fulfillment in the public cloud model. The distribution of cost model in a VAR moves from a focus on logistics to and focus on solutions design and delivery, plus application development etc.. Most VAR's however, have made this move anyway. It's part of a natural desire to increase margins once logistics automation is complete.

Cloud is not disrupting the channel, at most it's just giving it some X-Training, maybe a dose of P90X. The more relevant question is:

"What changes do cloud providers need to make to get the channel to help penetrate the market"?

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Brad Vaughan is a twenty year veteran consultant working with companies around the globe to transform technology infrastructure to deliver enhanced business services.

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