“Cloud infrastructure is becoming very commoditised and I don’t see how these small-to-medium integrators are going to be able to compete with the big boys,” says Josh Rubens, director of Australian cloud services integrator Cloud Solutions Group.
“They’ll need to partner with someone, but unfortunately cloud vendors are not always that channel-friendly. Channel partners need to do their due diligence to determine which cloud strategies are going to work for them and which cloud players they can work with.”
Sydney-based cloud integrator Online One began life reselling NetSuite’s online ERP system, but business boomed when it began developing NetSuite modules and integrating NetSuite with other cloud services, says co-founder Don McLean.
“At the end of the day we always ask ourselves the question; why would the customer want to buy from Online One rather than directly from someone like NetSuite?” McLean says.
The experiences of Online One and Cloud Solutions Group point the way for channel players looking to stake a claim in the cloud. Those which don’t add value risk becoming little more than digital-box or bit-shifters, warns Intelligent Business Research Services (IBRS) analyst Kevin McIsaac.
There’s no room for small to medium-sized players to build their own capital-intensive cloud infrastructure, he says. Instead they must augment existing cloud services.
“The question then is: why wouldn’t the end customer go straight to the cloud provider rather than come to you?” McIsaac says. “If I was a reseller I’d grab my smartest people and ask: what is our competitive advantage? It could be sales relationships, business processes or perhaps consulting processes. Once you’ve found your value-add and competitive advantage, then you should consider how to improve on those, using the cloud as an enabling tool.”
Leverage the cloud
Channel players looking for cloud partners will find major cloud providers are keen to assist with the transition. Partner programs focus on helping the channel restructure to allow for changing sales cycles and revenue models, says Terry Wise, Amazon Web Services’ head of partner business development.
“We invest quite a lot of resources in the technical enablement side of things, but for us it’s also about helping our channel partners figure out which economic model they should embrace,” Wise says. “It becomes much more of an annuity business which will frankly build a much bigger business for the channel partners over time. But there is a shift that they need to go through.”
Despite being easy for end customers to buy cloud services direct, more than a third of Rackspace’s new business comes via the channel, according to A/NZ country manager Mark Randall.
“Some resellers see the cloud as an opportunity because it means business growth is no longer constrained by how many technical staff they’ve got running around,” Randall says. “The ability to leverage the cloud means that bottlenecks which prevented their business from growing can be alleviated.”
As with Infrastructure-as-a-Service, Software-as-a-Service resellers find more success when using cloud services as the basis of wider solutions, says NetSuite’s Australian managing director Mark Troselj. NetSuite offers cloud-based ERP along with a range of extra modules.
“A lot of our partners resell NetSuite and wrap services around it, but some go that step further and build specialised industry-specific solutions on the NetSuite platform. This approach lets the channel develop a stronger ongoing relationship with customers,” Troselj says.
These multinational giants of the cloud have certainly made their presence felt in the local market, but channel players will also find plenty of local cloud services providers.Australian-based cloud service providers recognise just as well as their monolithic rivals the importance of assisting channel partners with developing successful business models.
The need for assistance can be difficult for some to accept, says Shane Muller, managing director of Sydney-based cloud services provider OBT.
“If a channel player has systems integration in their blood they will lean towards doing it all themselves,” Muller says.
“People who think it’s all about the technical capability tend to miss the larger strategic plan. They need to consider their business model and their go-to-market strategy, plus they need to have the right people selling it. We spend a lot of time helping our channel partners shape their service offering, their internal product mix, their pricing and their margins.”
Fellow Australian cloud services provider Ninefold offers a channel partner program as well as an affiliate program which pays for referrals. The two programs cater for different channel segments, but the more successful channel players tend to be partners which retain the customer and add value, says Ninefold chief executive Peter James.
“Australian businesses want partners who understand them, and that’s the real opportunity for the channel when it comes to the cloud,” James says.
“Our successful channel partners tend to be the cloud integrators and solutions providers. They own the customer and offer them a range of solutions built on our infrastructure. These partners embrace the cloud as an opportunity rather than see it as a threat.”
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