Tech Data Pushes Partners To The Cloud; Looks For Wider Adoption

During its TechSelect Partner Conference in New Orleans this week, Tech Data illustrated how much cloud adoption it has seen from its partners.

The Florida-based distributor notes that about half of TechSelect members are selling cloud services, and don’t believe the rest of its members are that far away from adoption.

"There are very real and material benefits to doing this," said Stacy Nethercoat, VP of Tech Data's cloud division. "I believe, barring a VAR who is purely transactional and providing zero services, the leap is not as big as some partners think it is. At least in the TechSelect community, most of these partners are already doing some services. My message to partners is let's sit down and talk about it and figure out a starting point."

[Related: Dell Ups Enterprise Offensive With Rebate For TechSelect Partners]

Tech Data's cloud business has grown by 114 percent over the last fiscal year. The company launched its Microsoft Office 365 Cloud Solution Provider (CSP) offering last fall and Over 2,000 partners are selling Microsoft cloud solutions today.

Nethercoat says Tech Data is continuing to invest in select channel-friendly cloud vendors and is making an effort to train and educate its partners. Some TechSelect members who have made the transition have seen the benefits of recurring revenue.

"We had a lot of success," said Spencer Ferguson, CEO Wasatch IT, a Murray, UT-based Tech Data and Microsoft Cloud partner. "We decided several years ago to dive into Microsoft's cloud and embrace it… We saw that it was going to happen. We can embrace it or get left behind, so 7 years ago we started to make that transition…The growth has been insane. I would say that cloud revenue is becoming more and more a piece of our business going from 0 percent four or five years ago to about 15 percent of our overall revenue today."

Nethercoat of Tech Data acknowledged that she does still see resistance from some partners to making a transition to cloud, and cites two main reasons for why that is and both are centered on money. She explains that the time consuming planning and execution of this transition results in opportunity cost. Additionally, for any subscription model it takes a larger investment early on before seeing it pay off down the road.

"[Partners] are running a business and they already work 12 hours a day," Nethercoat said. "Stopping and spending time on planning and analysis and strategic planning is time consuming. There is an opportunity cost to doing it. That's the biggest challenge. The second biggest challenge is the concept of the cash flow trough. When you start to transition what used to be project based or transactional based business into recurring revenue, there is a hit to revenue and a hit to gross profit dollars, no question about it."

She adds that it can be a tough conversation with banks and investors when explaining that a company's revenue will go down in the short-term for a long-term benefit, but believes the conversation is easier today than it was even two years ago.

Ferguson of Wasatch IT says there is a real possibility of partners who don't transition to cloud sooner rather than later being beaten on deals for lacking the solutions in their portfolio.

"If they don't move to the cloud now, they're going to be left in the dust," he said. "It's time to make that transition to talk the distributors, the vendors, their piers out there in the community who have embraced cloud and find a way to adopt a cloud strategy now."