Cloud computing changes the game for VARs and solution providers, and to gain an edge in the increasingly competitive cloud channel, solution providers are adopting some of the traits inherent to ISVs, heralding a tectonic shift in how solution providers do business.
Whether it's custom application development or building software, cloud VARs aren't just selling the cloud, but are creating the tools and solutions that ride on top of it. That infusion of added value and intellectual property is creating new opportunities for cloud VARs and creating a new channel business model that one solution provider dubbed "Channel 2.0."
"I look at the cloud channel -- Channel 2.0 if you will -- as a hybrid of what we saw in the past … the line is being blurred," said Michael Cohn, vice president of marketing at Cloud Sherpas, an Atlanta-based cloud solution provider. "We have to be a reseller and an integrator and we have to be the ISV. This is actually part of the thesis around the business model we have here. It's going to be difficult for a traditional VAR to become a cloud VAR."
Cloud Sherpas, for example, resells cloud solutions from Google, but couples that with a suite of cloud computing services and offers its own application play, SherpaTools, which adds management functions on top of Google Apps not available elsewhere. The combination is a powerful proposition and gives Cloud Sherpas a major differentiator -- not to mention a new inroads that delivers recurring revenue -- into customer accounts.
"For us, one of the elements that's a big part of our business is the recurring revenue we get from the vendor, in this case Google," he said. It will be difficult for traditional VARs to transition to the cloud leveraging their typical sales model where there are up front transactions, which are not there with cloud computing offerings, Cohn noted.
Cohn said when Cloud Sherpas launched, the company found the VAR model attractive but discovered that operating sort of like a SaaS business brought big rewards. And through that SaaS-type business, Cloud Sherpas is adding value by providing its own intellectual property.
San Mateo, Calif.-based cloud solution provider Appirio came to a similar realization early on: "Traditional partners aren't going to cut it," said Ryan Nichols, Appirio's head of product management and marketing. "The founding of Appirio was based on this."
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