Disties see the light in cloud delivery

Distribution Central

Where some disties are making money on custom solutions for smaller businesses, Distribution Central has done well out of standardised ‘blueprints’ for mid-market and enterprise. DC has put together reference architectures that automate large parts of integration for solutions for high-end collaboration and communications, storage and more complex set-ups.

“Every configuration is different,” says managing director Nick Verykios. “What is out of the box is knowing that this widget can only work with five options. Instead of buying this server and this storage, now with the complexities of AWS or Azure, you can have cloud integrated with on-premise [equipment].” 

With the cloud driving downward pressure on IT project spend, businesses are shyer than ever of wearing architecture design costs. Disties need to be more active in sorting out combinations for resellers so the initial design phase can be spread across a distie’s reseller base rather than absorbed by each reseller, Verykios says. “We are ripping the cost out of putting together these configs. The resellers are getting a contemporary solution to the problem rather than delivering something they’re designing on their own.”

DC has built configurators for pre-designed and configured solution stacks that make it easier for resellers to give quotes to clients. The distie brands these as PODs (‘product on demand’). Its RecoveryPOD, for example, includes CommVault, NetApp and Fujitsu. 

In line with Avnet’s experience, DC is seeing a strong pull towards hybrid models where cloud services are attached to on-premise infrastructure. Distribution Central is also introducing a cloud marketplace and already has a transaction gateway to simplify usage-based billing to a monthly invoice. 

NewLease

NewLease has earned its stripes in the cloud. It has long-term experience offering the Microsoft Services Provider License Agreement (SPLA), as a subscription approach to licensing that was developed for hosted software and services. NewLease has even tried to position itself as a ‘cloud evangelist’ supplying the managed service provider channel. It often uses the term ‘aggregation’ in place of distribution. 

While NewLease’s head of cloud strategy, Stephen Parker, was reluctant to discuss the particulars of the distie’s strategy, he said it represents a massive mindset shift for providers. Whereas in traditional IT sales, all the energy is geared up before the sale, in the cloud, much of the important activity occurs after the deal is struck. It is a shift from sales-focused to services-focused, from promised value to realised value, and from delivery logistics to usage reporting. According to NewLease, “the excellent process that led to success in one model becomes the blocker to success in the other.”

Parker adds: “The traditional distie was all about trying to get to the moment when they transact. All your skills were trying to get to that point.” 

This is why there is such a focus on pre-sales staff. However, with cloud services, the sell is relatively easy. A business can often trial the technology for free and walk away from a month-to-month contract. Under this model, the channel’s focus switches from making the sale to keeping the customer buying.

“That changes everything in your company from accounting right the way through to sales, who are painting a picture of what’s possible,” Parker says. “That promise has to be delivered. It’s about realised not promised value. If you make the wrong promises in a subscription world, and the value doesn’t turn up, the customer says ‘I’m walking’.

“That’s the difference between a buyer beware and a seller beware world,” Parker adds.

The future

It’s telling that Avnet, one of the earliest to commit to the cloud, says that it is still in a transition phase away from the more profitable hardware and software business. It’s a long process, and Adams predicts disruption among resellers. Not all will manage the transition to annuity revenue models. While this will thin out the herd among the traditional box-movers, the number of channel players could in fact increase, because they’re more likely to be smaller businesses. 

“I don’t see thousands of people leaving the IT channel. I do see resellers being maybe a little smaller and a little more flexible, where they can operate on lower income, which is harder for the bigger organisations,” Adams says. “A two- to five-man band can run on the smell of an oily rag.” 

If Adams is right about resellers, his comments may well prove true for distributors, too.