Will Cloud Computing Kill Distribution?


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


Today, Ingram Micro’s cloud portfolio amounts to about 50 services from 25 vendors. Those numbers have doubled since the third quarter of 2010 but, of course, still pale in comparison to the 1,400 vendors Ingram Micro represents in its traditional pick, pack and ship business. The stark contrast in just sheer numbers between the cloud portfolio and Ingram Micro’s traditional business underscores the cultural challenges distributors face in an era where the center of influence for many customers is quickly moving to off-premise Platform-as-a-Service, Infrastructure-as-a-Service and Software-as-a-Service.

CRN surveyed eight distributors about their cloud strategies. Ingram Micro said that from a launch in early 2011, it expects its cloud revenue to reach $200 million by 2015. None of the other distributors were willing to detail their cloud-related revenue or growth projections.

Distributors Take Different Paths

If -- and how -- distributors get to the cloud is the subject of a fierce battle being waged on multiple fronts right now. The eight distributors surveyed by CRN revealed eight different plans of action Cloud Eight: Distributors' Game Plans. Broadline distributors Ingram Micro, Synnex and Tech Data plan their own marketplaces and tools to offer third-party cloud services to resellers. Others, including enterprise suppliers Arrow Electronics and Avnet, appear happy to supply the products that solution providers need to build their own or their customers’ private cloud infrastructures and then teach them how to do it.

A distributor’s ability to ramp up, accelerate and complement a solution provider’s cloud capabilities is a key attraction for vendors trying to bring their own cloud solutions through the channel, said Julie Hens, vice president of Americas Distribution at Cisco Systems. Cisco is counting on distributors to educate and enable its solution providers to sell cloud, while also providing access to credit capacity and cloud expertise, she said.

“Our distributors are actively pursuing the capability of providing Cisco-enabled cloud collaboration services for resellers to offer their customers,” Hens said.

Bob Dutkowsky, CEO of Tech Data, said distributors will continue to enhance their cloud services strategies and solution providers will increasingly rely on them, just as they rely on them to provide products.

“People thought the Internet would put all distributors out of business. That didn’t happen. In fact, it made us more important. The same opportunity exists now with the cloud. It represents a different way to compute,” Dutkowsky said. “I’ve seen the mainframe change to the minicomputer, change to the desktop, change to client/server, change to the Internet, change to mobility. In every case, companies like Tech Data got stronger, not weaker. The key component is that each of those sea changes made computing more valuable to more people.”

Distributors are primed to become cloud leaders because they long ago made the transition from a transactional services model to an enablement model, regardless of what technology or service is being enabled, said Tim Curran, CEO of the Global Technology Distribution Council.

“Distribution is moving in lockstep with vendors and VARs as they broaden and transition to a solution sales approach. Distributors have continually and constantly improved their services. It’s an ongoing transition from a legacy tactical role to a strategic one,” Curran said.

NEXT: Distribution Lends A Hand