Cloud VARs Must Add ISV Flavor To Taste 'Channel 2.0'

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And taking on the role of cloud solution provider and peppering in custom cloud development has created a host of opportunities Appirio, Nichols said. Since it launched in 2006, Appirio has helped more than 180 enterprises implement, build and manage mission critical cloud solutions using, Google, Workday, and Amazon. Additionally, more than 5,000 companies use Appirio's products to connect and extend cloud platforms.

"We see a much bigger opportunity in being a cloud solution provider than a VAR or SI," he said, noting that a services and technologies mix has been a boon. And Appirio's custom app development and its software plays, like its Appirio CloudWorks and its Appirio SalesWorks offerings which tie together cloud offerings from various vendors like, Google and Workday, among others, create a level of stickiness that straight resale or integration doesn't offer.

According to Nichols, when Appirio builds a customer a custom application, it creates a unique business opportunity in which Appirio can support those applications and improve them over time. It creates a new revenue stream and gives cloud solution providers stickiness.

"It's the ongoing capability to make these improvements," Nichols said. "Once we build that app it ensures the customer relationship doesn't go stale. It's sticky because we're there and we're adding value every day."

Cloud Sherpas is seeing a similar dynamic. While SherpaTools indirectly drives revenue, it keeps customers from churning.

"We're building our intellectual property on Google's cloud, so we don't have a lot of expense to build that product," he said.

It's the value add on top of the cloud that is the key difference between Cloud Sherpas and other cloud solution providers, Cohn said. Cohn said Cloud Sherpas is seeing an increased demand for building custom solutions and more customers are looking for custom app development on the Google Apps platform. Since being founded in 2008, Cloud Sherpas has brought more than 600,000 end-users from hundreds organizations onto Google Apps.

And the new cloud VAR model, Cohn said, relies heavily on the recurring revenue stream, which takes many queues from a SaaS business. That, plus the lack of reliance on up-front transactions, gives VARs with a SaaS model a new, almost self-sustaining business model.

"When we're born in the cloud it's a whole lot easier. We don't have a lot of that baggage … we're starting with a clean slate," Cohn said. "This is the Channel 2.0 model. The lines between resellers, integrators and ISVs blur."


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