Word Association Quiz: When you hear “Amazon” what do you think of? Perhaps some might think of Wonder Woman, but the overwhelming majority probably think about an online retail giant from which you can obtain just about anything. Since you’re reading this publication, you probably know about Amazon Web Services as a force majeure in the cloud services business.
Data from Synergy Research Group shows that Amazon enjoys worldwide market share in excess of 31 percent, almost triple that of its nearest competitor, Microsoft, with 11 percent. IBM followed with 7 percent, and Google 5 percent. The next 20 cloud competitors, including Alibaba, AT&T, BT, CenturyLink, Fujitsu, Joyent, HPE, NTT, Oracle, Orange, Rackspace, Salesforce and others, total less than AWS at about 27 percent.
As the cloud continues to obliterate the server integration market, what do channel partners need to think about when determining which cloud service or services they will partner with?
The Cloud Becomes the Platform of the Future
In the earliest days of the channel, when hardware and software margins spiraled downward in free fall, many channel partners decided to provide and charge for services to make up the lost dollars. This reversed the concept of VARs who justified charging more for products because they provided so much additional value to them. When that didn’t work, insightful partners sold the value-added services and stopped depending upon the products to generate much, if any, profit.
With many high-end server and storage manufacturers bemoaning their dropping sales, it’s time for channel partners to exhibit the same insight. Their customers are buying fewer and fewer servers and storage devices and using cloud-based infrastructure-as-a-service (IaaS) instead. They’re going to the cloud.
At the beginning of the cloud phenomenon, many channel partners refused to change their business model, holding fast to product sales and attached services. They heard repeated warnings that they would lose their customers to competitors because cloud computing is so much less expensive and gave such better service. Those warnings came true.
Over the next several years, we’ll enjoy vastly expanded functionality from the cloud as we move beyond just shifting applications and workloads from on-prem to cloud and start taking fuller advantage of the unique additional capabilities cloud makes possible. Keep an eye on Docker and other container-based solutions. Follow microservices, software-defined-networking, software-defined-storage and anything involving virtualization.
Selecting Cloud Partners
Here’s where you need to do some heavy soul-searching and thinking about how you want to integrate cloud technologies into your business, not from a technology standpoint as much as a profit-generation standpoint.
Partners complain that cloud compensation programs are shrinking, while cloud providers claim they’re increasing. No matter which way they’re going, many partners find that cloud subscription revenue is insufficient to fuel their business growth. While many claim that monthly recurring revenue is the Holy Grail, experienced cloud sellers know that it’s a very long road until you have enough contracts in place to drive meaningful income.
The first question you need to answer to your own satisfaction is: What services can I provide that wrap around this cloud subscription? This is very similar to the early product days, where smart partners asked what services they could wrap around products.
Ask yourself, or the cloud provider rep who’s talking with you about partnering, the following questions.
- What are the initial consulting services you can provide to drive more profit into each sale?
- How is provisioning accomplished? Can you do it and sell that service?
- How involved is migration to each cloud service? What tools are available? Can you be the one performing that migration?
- Where does training and ongoing support come from? Are these revenue opportunities for you or just for the provider?
- Who manages the services? Are management services baked in, or can you offer a third-party solution that allows you to make more money?
- What are other service opportunities you can deliver or resell for additional profit?
Underneath all this lies the most important question: Can your customers rely upon this cloud service to consistently perform, delivering the services they need to drive the business outcomes they desire?
When selling cloud services, you are simply engaging your customer to use the data center services of a company that employs experts and runs their data center specifically for that purpose. This partner must open doors for you to add your own services to augment your income stream; otherwise, seek services elsewhere.
Howard M. Cohen has spent 30-plus years as an executive and community leader inside the IT channel. He now writes and presents about it in Channel Insider, Redmond Channel Partner, Insight Technically, Channel Partner and more.