SP500 Roundtable: Amazon, Google Are 'Seducing' Some Solution Providers

That's the message from three top executives on CRN's Solution Provider 500 list, which ranks the top solution providers in North America by revenue. The SP500 executives vented their frustrations with major cloud vendors such as Amazon and Google during a roundtable discussion at CRN parent The Channel Company’s Best of Breed Conference.

"The brands are globally recognized, there's no question," said Harry Zarek, president and CEO of Richmond Hill, Ontario-based Compugen, No. 58 on the SP500 list. "But I would say that few of them have proper channel programs. That's the problem with them."

And it's not the only problem, either. The SP500 executives said that Amazon has emerged as a thorn in the channel's side with its aggressive cloud pricing, popular brand and direct sales approach.

"I see Amazon as what Dell was in the '90s -- not what Dell is today -- which is, we're going to be direct and we're going to put performance pressure on the market," said Ron Dupler, president and CEO of Kittery, Maine-based GreenPages Technology Solutions, No. 154 on the SP500 list.

"When Michael Dell came roaring out of the gates in the '90s, he was a disrupter because of that model. That's what Amazon is today."

Zarek said Amazon Web Services and Elastic Cloud Computing are prevalent in the industry to the point where he's no longer surprised to find out clients are using some kind of Amazon cloud service. And that's a problem for solution providers, he said.

"I think they believe that every customer is self-serve and they don't need a channel," Zarek said of Amazon. "I think fundamentally they don't believe there's value in the channel."

Be that as it may, the SP500 executives say they see many of their brethren lining up to work with Amazon and Google.

Majdi "Mike" Daher, founder and CEO of Redmond, Wash.-based Denali Advanced Integration, No. 116 on the SP500 list, said both cloud giants are "seducing" partners with their strong brands and aggressive pricing, luring solution providers to do a lot of the heavy lifting for cloud migrations but cutting them out of the picture later on.

"It's a lot like how some of the OEMs created programs when they were direct," Daher said. "They created this facade of a program -- give me your customer list and let's just do a few transactions -- and then they never get a call back."

But not all cloud providers are on the channel's naughty list. The roundtable participants praised the efforts of VMware and Microsoft in particular, saying their partner programs and cloud strategies were truly channel-centric.

"I think the people who have a channel model like VMware and Microsoft have an advantage because we're going to be recommending and architecting these guys into solutions," Dupler said.

Even with Amazon's dominance in the cloud market, Daher said, the space is still very young and extremely volatile. "I don't think a customer chooses Amazon because they're Amazon. They might choose Amazon because they really don't care, they just want to be in a cloud and want something cheap for now and then they'll move somewhere else," he said.

And the cloud market is only going to get more competitive, according to the roundtable executives, as more OEM manufacturers and ISVs jockey for control of that cloud management layer.

"I think the evolving war is going to be about who owns that management infrastructure because every one of the large OEMs has its own version. All the large software publishers have their own versions," Zarek said. "So you've got five to six, plus you have OpenStack on top of it, so you probably have seven potential competitors, all thinking that if they could own that software management layer for cloud infrastructure, then they've got it made."

The SP500 executives said that will make it even more important to choose the right cloud partners -- not only for the technology and the vendor's brand, but also for channel strategy.

"You cannot drive to a hybrid cloud model without making a decision on cloud infrastructure management tools. That's a big decision," Dupler said. "And it's not necessarily the brand that matters there, but it's the strategy of the company behind the brands that really drives the decision."

PUBLISHED DEC. 2, 2013