Channel Chiefs: Cloud Ushering In Gilded Age for the Channel

The proliferation of cloud computing has created a bevy of new service and consulting opportunities for vendors and channel partners alike, according to a vendor roundtable of some of the industry's top channel chiefs.

"The channel, as a whole, is as healthy as I have ever seen it," said Frank Vitagliano, vice president of North American channels at Dell.

Vitagliano joined channel chiefs from NetSuite, Sophos, Toshiba and VMware for a roundtable discussion hosted by CRN during XChange Solution Provider 2015 in Dallas.

/**/ /**/

/**/ brightcove.createExperiences(); /**/

Sponsored post

[Channel Chiefs: Cloud Is Lucrative, But Don't Forget On-Premise Business]

"[For] the solution providers that have figured out how to go in and develop sustaining, significant, long term relationships with their customers, the business just keeps coming. It just keeps coming," Vitagliano said. "And they're riding that, and they are becoming more indispensable, frankly, than they had in the past. And it's going beyond a brand, an OEM discussion. It's [about] the solution provider value."

Much of that new demand stems from the added complexity cloud computing brings to today's IT environments, Vitagliano said.

"They're trying to figure it out. 'Hybrid cloud, private cloud, which pieces go to the cloud? While I'm doing all of that, how do I keep the lights on, and do the things that I've got to get done because all the users out there are torturing us over it.' It's a really good environment [for solution providers]," Vitagliano said.

"The success also stems from the desire of solution providers to build businesses by developing revenue streams in new technology areas, according to Frank Rauch, vice president of the Americas Partner Organization at VMware. He has, for instance, seen data center partners attempt to get involved with everything from mobility to security to device management.

"People are like, 'Hey, I've got a great core … Now I want to expand beyond that,'" Rauch said. "And they're the guys that are doing really well."

Toshiba has also seen tremendous growth from solution providers that used to be in different industries. Vaughn cited Toshiba partner Troxell Communications, which has transformed from being a pure audio visual dealer to investing heavily in the education vertical.

Growth has been pervasive for traditional direct market resellers (DMRs) involved with everything from small-and-midsize businesses (SMB) to medium-large businesses to the health care vertical, according to Richard Vaughn, director of channel sales for Toshiba America Information Systems.

"I've been here 18 years, and I've never seen the expansion that's going on right now," Vaughn said. "The RFP pipeline has never been bigger."

A lot of the new business is being done by new types of partners, according to Craig West, vice president of channel sales at NetSuite. Between 20 percent and 25 percent of the solution providers added by NetSuite are solution providers trying to reinvent themselves for the cloud era.

"We see a lot in the entrepreneurial start-up community. Folks that have sold a Microsoft practice, or sold an SAP practice have to find their second act are coming to us and saying, 'If I'm going to do this again, I'm not going to be encumbered by legacy or on-premise revenue streams. I'm going to do this with a proper recurring revenue model.'"

The more traditional VARs have often been slower to adapt, Rauch said. Many of these folks have grown so accustomed over the past 15 years to selling to the client's chief information officer that they maintain a laser-like focus on data center sales rather than broadening out their portfolio to include cloud.

Sales of off-premise solutions often go through individual business units, and many solution providers still haven't developed relationships at that level, Rauch said.

Sophos is enjoying tremendous growth securing Amazon Web Services cloud environments, according to Mike Valentine, senior vice president of worldwide sales.

"The fastest growing cloud for us is AWS. We're making a ton of money, and it's ramping faster," Valentine said. "We're having to hire and build teams in Seattle, in New York, in Tokyo ... It's almost out-of-control fast."

AWS makes it easy to wrap security services in, Valentine said.

"It's just a check box. You want to spin up 300 servers for 20 minutes -- do you want those secure? Everyone says yes. And they pay another six, eight, 10 dollars to secure it, and it's been fantastic business," Valentine said.

Toshiba has seen demand for both pure notebooks as well as cloud-type devices, Vaughn said. The success of Chrome in the education vertical has prompted other segments of the market such as health care, human resources and SMB to migrate to pure cloud solutions.

Dell's channel growth has been more broad-based, Vitagliano said, coming from the data center, storage, servers and networking, as well as PC sales during the 2014 end-of-life for Windows XP.

The cloud has also enabled accounting firms to get back into the service provider game, West said. Accounting firms used to provide enterprise resource planning (ERP) for clients during the 1980s and 1990s but eventually got displaced by technologists, he said.

The cloud, though, has created a big opening for those accounting firms, West said, since the best ERP consultants nowadays need just business savvy rather than technical expertise.

Cloud is also the fastest growing technology area for NWN Corporation, and the solution provider has had many conversations with its customers about migrated certain application or data center functions to the cloud, according to CEO Mont Phelps.

The Waltham, Mass.-based company, No. 81 on the CRN Solution Provider 500, has seen the most interest around its hosted email, voice and video solutions, Phelps said.

NWN's managed service practice has enjoyed a year-over-year growth rate of 35 percent for the past half-decade as end users look to outsource routine or mundane IT functions such as the help desk or remote server management, Phelps said.

From a vertical standpoint, NWN has witnessed strong interest in cloud infrastructure from the medical community as well as broad market strength for K-12 education, Phelps said. After going through a period of underinvestment in IT, Phelps said educators are doubling down on infrastructure and endpoint spending to facilitate one-to-one computing initiatives backed by the Common Core.

"Almost everybody is enjoying good, strong growth and success," Phelps said. "It won't last forever, but it's pretty good right now."

This article originally appeared as an exclusive on the CRN Tech News App for iOS and Windows 8.