Will Cloud Computing Kill Distribution?


Distributors storm into the cloud arena with new business models, tools and resources. But will solution providers follow?


Solution providers aren’t the only ones seeking to capitalize on cloud computing. Distributors are making their mark in the cloud as well, investing heavily in their own cloud programs and tools with one goal in mind: staying relevant to solution providers as the technology landscape shifts underneath them yet again.

Check out more of CRN's cover package on distributors and the cloud

As more businesses adopt cloud technology, some channel observers feel distributors run the risk of disintermediation as sales of on-premise hardware and software lose share to off-premise solutions. Solution providers are forging relationships directly with cloud vendors, and the need for the so-called middleman will become obsolete. Or so the theory goes.

It’s a battle distributors have faced before. In the past few decades, distributors have seen obstacles posed by the Internet, the direct model, ever-shrinking product margins, and the commoditization of technology itself. Each time, distributors met the challenge. They automated processes, slashed their own costs and built or bought resources when necessary. And they’ve remained relevant. Case in point: The world’s largest distributor, Ingram Micro, expects to close fiscal 2011 with more than $35 billion in revenue, its biggest year ever.

But cloud computing feels different. In the past, distributors evolved with a slight tweak of their business model, in some cases as simple as charging for services they basically had been giving away before (think logistics, tech support, integration services).

Providing cloud solutions is an entirely different business model than distributors -- and many solution providers, for that matter -- are used to. One doesn’t just flip a switch and start offering hosted applications or backup from across the country for a monthly recurring revenue stream all while constantly monitoring a customer’s network for irregularities. It takes the right resources, business processes and execution to successfully sell cloud solutions and add enough value to make solution providers -- and end users -- care.

The ability to add value -- and convince solution providers that they are, indeed, adding value -- has become an imperative for distributors, particularly as a whole flock of new cloud-only solution providers has emerged.

NEXT: A Tale Of Two Solution Providers