Will Cloud Computing Kill Distribution?

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

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A Tale Of Two Solution Providers

Cumulus Global, a $1.2 million Westborough, Mass., solution provider, is the kind of fast-growing cloud provider distributors want to get close to, as last year it doubled its sales vs. 2010. But when a cloud vendor asked Cumulus Global CEO Allen Falcon to contact Ingram Micro for a new purchasing process, Falcon brushed off the request.

“Most of our relationships are with [cloud] vendors directly. One or two of our vendors have gone to distributors for the purchasing process, but at this point it’s made it more cumbersome to order those products and services,” Falcon said. “To me, distributors still appear as nothing other than purchasing mechanisms. They’re still looking for their role in the overall process.”

For distributors to add value, they will have to come up with better pricing, better purchasing and deal registration processes and marketing development, Falcon said. And that’s something he said he has not seen.

“I’m also not seeing the cloud computing vendors rushing to the distributor market,” Falcon said. “How can distributors enter and provide services without impacting the pricing and taking a piece out of resellers’ margins? Where would you put distribution in without upsetting the competitiveness of the pricing? I don’t have an answer to that yet.”

Whether that perception is true or not, it’s evidence of the uphill battle distributors face. Still, some progress is being made.

For a long time, Peter Zarras, president of Cedar Knolls, N.J.-based CloudStrategies, felt the same way as Falcon. Zarras remembers the first pitch he received from a distributor about cloud computing two years ago: The distributor said it could help boost CloudStrategies’ relationship with Microsoft. Zarras could only laugh. Not only is he a former Microsoft employee, he already was one of Microsoft’s biggest cloud partners, with more than 200 clients using Microsoft’s cloud solutions.

“We have [employees with] years of ex-Microsoft experience in our organization and multiple channels to ridiculously high levels of Microsoft. A distributor doesn’t offer value to me in Microsoft,” said Zarras. “If you asked me two years ago after we started will distributors be valuable [in the cloud], I’d have said, ‘What do you mean? Distributors are going to go out of business.’ The first couple of times distributors approached me I said, ‘I’m way past you.’ We resisted distribution for a while,” Zarras said.

But over the summer, Synnex got Zarras’ attention with conversations about sales and marketing support and demand-generation services that Zarras also needs to sell Microsoft cloud solutions to customers. If Synnex couldn’t help with Microsoft, it could help with everything else around Microsoft. Zarras listened.

“No one ever has enough leads and no one ever has enough marketing. That’s interesting to me,” Zarras said.

Today, CloudStrategies relies on Synnex for leads, business advice and integration help, Zarras said.

“It’s a little early to say what they’ve generated for us, but we’re very pleased so far and expect the relationship to continue to develop and expand,” Zarras said.

NEXT: By The Numbers

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