Part 1: Public Cloud is NOT a Threat to Channel Partners

Written by Pete Manca, President & CEO, Egenera

I recently came across a terrific post by The Cranky Admin (aka Trevor Pott). The post, “Does Public Cloud Spell Doom for Channel Partners” should really be required reading for anyone and everyone in the channel.

There are so many excellent discussion points in the post that I’m going to write a couple of blogs on key topics in the article and post them over the next few weeks.

Trevor’s post starts out by saying:

Companies that sell, support, manage and maintain computer systems face an existential threat from public cloud computing providers. If the organizations that buy hardware, software and services from them move all their workloads into the public cloud, what role remains for the companies that make up what we have traditionally called “the channel,” and how does this impact IT practitioners?”

It’s no secret that the rapid adoption of public cloud has altered the conversation with end users and has changed the landscape for the channel.

It’s easy to view public cloud as an existential threat, but it’s the cold, hard reality of doing business these days. It’s critical that successful channel organizations completely and totally analyze the cloud service provider (CSP) marketplace and do the homework necessary to get in front of their clients’ “move to the cloud” decision and prepare themselves with a well thought out cloud strategy.

Fortunately, technology consumers tend to dig only as deep as the price lists take them.

So, when clients ask about the cloud, it’s critical that channel organizations fully understand the “race to the bottom” pricing touted by the behemoth CSPs, but the answer shouldn’t be based on pricing only. As a trusted advisor, clients deserve more research than simply a list price bakeoff.

For example, the quality of partner support and associated costs are critical metrics that should take precedence over list price for any company in the channel, because in the end, if you receive poor support from the CSP, your clients will suffer – and you will pay the wrath in terms of your reputation, relationships and revenue.

And if issues around partner support aren’t enough, you’ve got to worry about losing account control to a certain behemoth CSP – the one who has a very successful and lucrative SaaS business unit. Pott’s post speaks volumes about this.

MSPs I talk with are nervous about the cloud, and I don’t blame them. The technology services business is very sticky. Cloud services are even stickier. When you have big CSPs using Trojan Horse tactics to infiltrate accounts it’s reason to be nervous.

Smart channel organizations who operate as trusted advisors need to do their homework so that they can live up to their clients’ expectations. The relationships and business you’ve built are worth the effort.

The best way to get in front of the big CSPs is to help your clients understand that they can benefit from cloud technology only by using you to deliver the cloud services they need, and that from your (and their) point of view, nothing will change other than the location of their IT infrastructure.

The best approach for a service provider is to partner with a CSP who has a channel-only model and a partner-first mentality with good SLAs and support.

Pott wraps up his initial section by saying:

“In the same way, disties often perform basic VAR work, and the line between VARs and MSPs has gotten very blurry over the past few years. VARs and MSPs have both been evolving into CSPs in an attempt to pull some of that subscription revenue away from the large public cloud providers. More importantly, everyone is desperate to hang on to ownership of the customer relationship.”

You know how important that last sentence is. The message is loud and clear. Cloud is blurring the lines between distributors, VARs, MSPs, CSPs, etc. But one thing that’s perfectly clear is that they’re all in a battle to secure the client relationships they’ve worked hard to establish over the years.

The only way to do this is to work with a mid-sized CSP who knows its success depends on its partners. Partner programs and 24x7x365 support should not be viewed as revenue generating business units. When you perform your due diligence on the big CSPs be sure you dig into their tiered partner programs and support fees. You’ll be amazed at what the total cost is for working with these “low price” CSPs. It’s called sticker shock.

Check out the next entry – click here!

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