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Cloud Computing’s Carrot
In this still-evolving market, some cloud vendors want to take control right away and are dangling the exclusivity carrot in front of solution providers, promising added incentives for those that sign on the exclusive dotted line. So far, few solution providers are taking the bait.
“The cloud space is still so small that the vendors feel they have control of the market,” said Eric Berridge, co-founder of New York-based cloud solution provider Bluewolf. “It’s the customers that control the market. Period. But that could change.”
To assert that control, some cloud vendors -- which solution providers wouldn’t specifically name -- push for exclusivity with their stable of solution providers. Berridge said, however, that in many cases vendors might not have to push too hard. Some relationships are relatively exclusive by nature and vendors and solution providers enter into an almost unwritten agreement. Bluewolf is in a unique position in that it’s a major Salesforce.com provider but is still free to work with other vendors, he said. For example, the company works with Oracle on the database side but would think twice before signing on with a competing pure CRM vendor other than Salesforce.com.
“If all of a sudden I told [Salesforce.com] I was going to build an Oracle on demand practice … they would see it as a break of trust,” Berridge said, adding that while Salesforce.com isn’t forcing Bluewolf into exclusivity, it is fairly inherent. The continual addition of features and modules on the part of Salesforce.com would make it difficult for Bluewolf to align itself with a different vendor. “We want to keep our focus,” he added.
Some cloud VARs have benefited from playing the exclusivity game. Bellevue, Wash.-based Explore Consulting was an exclusive NetSuite solution provider for years and received incentives for that agreement.
“We were exclusive, but we all just kind of outgrew the exclusivity thing,” said Jeremy DeSpain, Explore Consulting’s co-founder. “The industry grew and the space grew out of that small-niche mentality.” Now, Explore Consulting offers solutions across other platforms, has signed on with Amazon.com and is working to integrate solutions from both Amazon.com and NetSuite, DeSpain said.
“It gives us the ability to cross-sell, in this case, Amazon customers to the NetSuite platform,” he said. “We can provide better overall solutions to customers. I view it as complementary to extend out and beyond what core NetSuite functionality offers to clients.” Looking back, DeSpain said the NetSuite exclusivity was a win-win for both companies as it helped establish a strong customer loyalty, helped Explore Consulting gain experience and pushed it to becoming one of the biggest NetSuite providers.
“Being the best at one thing is better than being average at a lot of other things. It was a huge benefit early on,” DeSpain said. In the end, some solution providers vehemently believe exclusivity goes against the true meaning of cloud computing.
“We haven’t had any one company asking for exclusivity, and if they did we wouldn’t work with them. But we haven’t seen that,” said Patrick Ciccarelli, president and CEO of Varsity Technologies, a San Francisco-based cloud solution provider. “As soon as you’re exclusive, you’re breaking down the idea of this amorphous thing [the cloud] you can use on an as-needed basis.” —Andrew R. Hickey
NEXT: The Security Squeeze
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