Is There Really a Channel for the Cloud?

Many pundits have argued that the cloud essentially eliminates the need for a channel.  To some extent, this is an accurate observation, because distribution in the traditional terms “pick, pack, ship, install” is no longer needed.  On the other hand however, all of us know that the value-added services the channel has traditionally provided for on-prem solutions are still important, albeit many services for the cloud are unique and distinct from on-prem services. At Digital Bridge Partners we’ve blogged a lot about this.

The truth emerging between the two positions, for and against a channel role, is that the channel is shifting from a focus on physical distribution and integration toward a role centered around software value add. This make sense, after all, because the cloud is essentially software.

A few examples help illustrate this point:

SADA Systems has developed its own cloud-based software application (file server migration to Google Drive) to provide a solution for enterprises as they move productivity applications from on prem to the cloud whether they be on Google or Microsoft. SADA is a channel for both Microsoft and Google, but the value add is not on distribution, it’s on software. In essence, SADA is in fact a cloud services provider and a channel for other cloud service providers. That’s how the channel for the cloud is working and will continue to evolve over the ensuing years.

Another example to consider, is the evolution of the cloud in different vertical markets. Take the medical industry, as an example. Or the next few years the medical industry will leverage the cloud and mobile technologies to fundamentally transform the way that patients receive medical care. Cloud service providers will build solutions that allow a DR in an Indian call center to check blood pressure, heart rates, even conduct an EKG using medical sensors connected to an iPad. Will these companies be a channel, a cloud services provider, a full solution provider? All of the above is the right answer.

The common theme here is that the channel will be both a cloud service provider and a distribution point for other cloud service providers and that the value will be all around software and processes.

The radical deviation from the traditional channel management model that has predominated since the introduction of the personal computer here is that we have to rethink the way we view the channel and think more in terms of a vast, interconnected ecosystem of cloud service providers who work together and interchangeably to create last-mile solutions & who are more or less on equal terms with one another.

It’s no longer about how much margin a vendor can provide to channel partner, or how much demand generation that vendor can offer, it’s more of a business development type of mindset in which the channel (as a cloud services provider) assembles its solutions using the building blocks of another cloud services provider (a vendor) to create yet another level of granular cloud services.

Traditional channel management experts might say, “what’s different here, versus what has always been the case with solution providers. Solution providers in an ‘on-prem’ environment deliver last-mile solutions so what’s new here? The big what’s new, is that the last mile will actually be a software/cloud service, and will likely be the cloud service that drives most of the value commoditizing and integrating upstream cloud services.

It’s also the case, that many of the channel partners (in this new cloud channel model) will actually have better margins and superior economics to the vendor who is trying to get them to buy into their cloud offering. This changes the DNA of channel management and forces us to re-think the way we treat, relate, and manage our channel partners in the cloud, to say nothing of dramatically altering the go to market strategies required to be effective in the cloud.

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