We all know how much cloud computing has transformed enterprise operations. Applications are today developed at blistering speed, capital expenditure on traditional IT systems is being ‘somewhat’ frozen whilst IT Directors, Finance Directors and Heads of business units figure out their next generation architecture requirements, including cloud services, with subscription payment models. Agility has become the word of the day with new business models launched on a near weekly basis.
This disruption is transforming more than just the operations of end user organisations. The growth and adoption of cloud computing has driven a wholesale structural change of the channel and a need to diversify and extend capability to include managed services, professional services and cloud. Indeed, the channel of today barely resembles that of five years ago. The channel five years hence will be even less recognisable.
Historically the channel was simple to understand. Resellers resold hardware; outsourcers delivered services; systems integrators synthesised hardware with processes; and so on. With the arrival of cloud computing in the noughties however it quickly became apparent that this model could not last forever.
Today, IT resources – both hardware and software – have been liberated from the physical business premises, while simplified user interfaces and subscription-based procurement mean anyone in the business can buy and use cloud computing resources with ease. But with businesses sending workloads to the public cloud the traditional heartland of the reseller’s business is being eroded.
Don’t get me wrong, there still is and may well always be a market for private on-premise IT infrastructure, but these are increasingly being augmented by public cloud infrastructures and services in hybrid architectures. To avoid losing the public element of the hybrid mix, resellers are having to evolve and become service providers themselves.
In fact, from my conversations with resellers I would estimate that around two thirds of them actively plan to become service providers – with roughly half of these planning to build their own service capabilities and the other half looking to resell the service capabilities of others.
But this disruption is not limited to the reseller; it is affecting every element of the channel. Take distributors. Increasingly I am seeing distributors evolve into cloud aggregators; creating catalogues of services that they then sell on to resellers and other service providers. What they are doing, in fact, is tapping in to the new market created by resellers as they look to resell services rather than hardware.
Then there is the service provider.
There are generally speaking two types of service provider. The first owe its existence to the cloud and sell only services. These service providers are finding that the direct sales model they have used to date lacks reach. As a result they are transforming to an indirect sales model that puts them on a similar standing to a vendor. This indirect model also allows them to build up infrastructures quickly and thereby remain competitive in a rapidly-changing IT ecosystem.
Members of the second type of service provider have evolved into this position as a result of changes within their own industries. The most obvious example is the mobile telco. Forced to become service providers as a result of the decline of the voice business, telcos have grown revenue by turning themselves into IT service providers, delivering Infrastructure-as-a-Service and IT-as-a-Service propositions to customers in the enterprise space.
SIs and outsourcers meanwhile have also found that they have had to evolve as a result of the cloud. With services being delivered on a mix of on and off-premise platforms – a mix that is constantly changing – outsourcers and SIs effectively need to manage these services as full service providers. This might seem like a natural progression, but less natural is the fact that many SIs and outsourcers are also finding themselves becoming resellers.
The channel has therefore completely transformed. Borders have blurred and today every channel business will do a bit of everything: a bit of resale, a bit of service provision and a bit of distribution. In fact, I am willing to bet that in five or so years the current channel definitions will not hold. Instead vendors will simply work with ‘partners’ and the only difference will be slightly different selling models. Partners, moreover, will increasingly join forces on projects as no one business will be able to meet all the requirements of ever-expanding procurement requests.
EMC is embarking on a collaboration plan between service provider and channel partner. There is a collaboration event planned in October in London for the UK market to start enabling this, with the objective of further collaboration between channel partners to be able to resell cloud services from EMC-powered service providers, through distribution. EMC is a partner-focused business, and will ensure that we continue help our extended partner ecosystem grow capability, relevance and revenue (with margin) in this changing world.