September’s issue of CRN investigated the rise of the cloud provider. In that issue, I took the opportunity to depart from the standard mission of this column, which is to address critical issues from your point of view. I shared the beginning of a contemporary vendor topic instead. Namely, which partner types, as defined by business model, will survive in the long run in the midst of this disrupted ecosystem?
A quick review: The IPED point of view is one of transformation. Those who transform in this disrupted ecosystem will survive. Though many believe distributors will be less or not at all relevant, private cloud sales, if on-premise, typically look like a standard VAR transaction. Distributors’ willingness to aggregate public cloud solutions and administrative infrastructures to ease VAR/MSP cloud transformation ensures they’ll be relevant. ISVs have been leading the transformation to Software-as-a-Service for five or more years and will thrive because of their willingness to embrace the new public or hybrid cloud IT delivery model.
That brings us to white-box resellers, where specialization or verticalization is key -- whether it’s gaming, health care or shop-floor-specific, everything isn’t going to the cloud and specialty system demand will survive. SHI International, a leading corporate or volume reseller, is an example of transformation in this very transaction-oriented category. I was surprised to learn a major volume reseller supplemented its product fulfillment and software compliance mission to jump headfirst into the cloud. SHI did this when it reportedly invested $20 million in an Infrastructure-as-a-Service capability and data center. This transformation of its business model positions the company to capture the customer IT budget spend both on-premise in the customer data center as well as in the cloud.
The transformative VAR or solution provider of the future is one who can sell private, public and hybrid cloud-based solutions in addition to its standard offerings. The transformative label refers to the new systems integration or private/hybrid cloud development capability or cloud-managed services that have successfully been transitioned into the company’s cash flow, service offerings and customer reference list.
This brings us to the local, regional or national VAR or solution provider that did in fact transition to becoming an MSP in the past year or two by reselling or white-labeling a public cloud service, e.g. Terremark. This business model will not only survive, but is likely the model of the future as telecom and cable companies penetrate our ecosystem as service providers and IT services are increasingly delivered via the cloud. Those at risk are the MSPs that have been investing for five to 10 years, have built one, two or three data centers, and compete with larger service providers. This segment will have difficulty achieving economies over the long run. An example of this might be the inability to continue a service it priced at $20 per user, per month as it may now be available from a global hoster/service provider for $10 per user, per month.
The pivotal point for today’s VAR or solution provider is the collision of the telecom/cable company agent model where the telecom/cable vendor controls billing and pays commission rather than the traditional IT resale, margin, local billing model. This collision will be one of the most interesting to watch over the next two years.
BACKTALK: Contact SVP, IPED MarketBridge Alliance Rauline Ochs via e-mail at firstname.lastname@example.org.