Are Vendors Becoming The New Service Providers?


IPED research indicates that 27 percent of solution providers who added vendors to their line cards, added at least one service provider in the last year. I expect this number to increase as more hardware and software vendors, who were not previously service providers, decide to take the plunge.

In 2005, IPED starting working with vendors and solution providers on the business transition to managed services. In 2009, we began working with hardware, software and now service provider vendors, in earnest, to address public cloud, the promise of private cloud and the impact to revenue, channel strategy, programs and field execution.

During these periods we, along with the vendor and distribution community, have wrestled many issues to the ground including: compensation, reporting, partner business model transformation to recurring revenue, and the required professional services automation and remote monitoring and management skills partners must now develop.

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IPED's 2010 Channel Leadership Forum hosted for IT channel chiefs closed with a recommendation to declare the company's service provider strategy so solution providers, who may have developed managed services, could plan accordingly.

We held up two cases in point. First, Microsoft declared its strategy to offer SaaS versions of several products complementing the on-premises and hosted versions, thus providing the customer the opportunity to choose Microsoft delivered in any combination. Even peripherals vendors, led by Xerox, made the declaration for managed print on a recurring revenue basis. The second case in point, NetApp, clearly stated a company strategy to "sell to" and "partner with" service providers rather than to become a service provider. NetApp then moved aggressively to align service provider investments with solution provider programs. Hewlett-Packard, at the time, was also "selling to" service providers, though later the company announced the decision to become a service provider.

In 2013, we are seeing yet another group of vendors making their traditionally on-premises solutions available to be sold "as a service"—not necessarily a cloud service. This time, the solution aspect is more heavily influencing the service offerings, especially when peripherals, bundled with other components, can be sold to the end customer "as a service," providing an ease-of-use and sale without huge incremental skills required for the solution provider.

A second example, complex application solutions not previously developed for a SaaS environment, and reengineered, are now starting to hit the market, eliminating the risk of communication latency that could have resulted in slow application performance and a negative user experience. There are more examples beyond these.

The good news for those vendors entering the "as-a-Service" space for the first time in 2013 is that there is now an established baseline of channel knowledge from which to draw. This knowledge base was developed in conjunction with solution providers, distributors and the vendors who made the market, including Salesforce.com, Google, Amazon and Rackspace, as well as traditional vendors who were early to join, such as Microsoft, SAP, IBM, and more recently, HP, the telcos and cablecos. It begs the question, will most vendors, over time, add an "as-a-Service" option or bundle a solution to be sold "as a Service" as an alternative, or complement, to their on-premises product line? What do you think?

BackTalk: Rauline Ochs, SVP, IPED, writes a monthly opinion column for CRN.com. You can reach her via email at rauline.ochs@ubm.com.