CRN Roundtable: Distribution Is Key To Helping Partners Drive Cloud Sales Growth

Top distribution executives say they are bringing to bear the financial, services and technology muscle that is driving robust cloud sales growth for solution providers.

Distributors, which long ago shed their reliance on traditional pick-pack-ship business to focus more on bringing integrated solutions and services to their channel partners, are now playing a key role in helping partners drive cloud sales growth.

"It's not the linear value supply chain that many of us grew up with," said Tim FitzGerald, vice president of cloud channel sales North America for Irvine, Calif.-based Ingram Micro Cloud. "It's this model that requires you to think legally differently, financially differently, value-oriented differently, and be able to join together multiple components to create that solution that the end client is desiring."

Fitzgerald’s comments came at a CRN Roundtable titled “The Changing Face of Distribution which also featured senior executives from Tech Data, D&H Distributing and Pax8.

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One of the key messages from the distribution executives: new offerings are unlocking the door to big cloud sales growth for partners.

Ingram Micro, for its part, recently enhanced its Ingram Micro Cloud Marketplace with new capabilities to help solution providers and ISVs more easily do business with each other. In addition, the new version of the Ingram Micro Cloud Marketplace – which is now being used by 55,000 partners- now includes the ability to quickly publish new services for partners, a new cloud marketing hub for helping partners make sales, and a new API for easily connecting to third-party services.

Training is also a key benefit distributors provide to solution providers, said Kevin Kennedy, senior vice president of advanced solutions at Clearwater, Fla.-based Tech Data. The key is to focus on helping partners with the kinds of people, technical expertise, and new sales capabilities needed to be successful, Kennedy said.

"[We get] them prepared to go out and actually have the conversation and to be able to paint the picture. … We had a lot of partners who heard the buzz words for a long time but really didn't know how to change the motion for what they did on a day-in-day-out basis," he said.

The level of investment partners need to make in developing cloud capabilities can be quite big, Kennedy said. In some cases, a distributor may only need to help partners channel their existing in-house expertise in the right direction, he said. "In others, you're talking about adding some significant staff, so your SG&A is going up and that becomes a really big business decision, especially for some of these smaller companies," he said.

Distribution can be both a quick way to gain immediate cloud capabilities and a long-term part of running a successful cloud business, said Todd Shaffer, cloud practice director at Vandis, an Albertson, N.Y.-based solution provider.

Vandis works with Ingram Micro for its Microsoft Azure and Amazon Web Services business, Shaffer told CRN. Vandis uses Ingram Micro's help desk as part of the solution provider's Azure CSP program, which requires access to a 24X7 help desk, he said.

"It's easier to consolidate both relationships under Ingram Micro," he said. "It eases up our paperwork flows."

For Vandis, which already has a large cloud business, that support, while welcome, may be a short-term solution, Shaffer said. "For us, we don't want to go after the paperwork on our own," he said. "It's easier for us to share points. It may be a 24-month relationship."

However, Shaffer said, distribution for much of the channel is a long-term base on which to build a cloud business.

"For a lot of channel partners without a plan to build a consulting arm, this is the end-all, be-all model for them," he said. "For us and a small handful of companies, distribution is a good way to get started. For the larger partner community, distribution is the best way to do it."

A study done early this year by the Institute for Partner Education Development, or IPED, a sister company to CRN, shows that 45 percent of solution providers saw moderate to high growth in customer demand for public cloud services in 2018, but that 52 percent expect moderate to high growth in the next 12 months.

Forty-four percent of solution providers said they Microsoft Azure as a strategic supplier for their business compared, to 34 percent for AWS and 17 percent for Google Cloud, according to the study.

Pax8, as a born-in-the-cloud distributor that has thrived with its traditional distribution-is-broken mantra, has moved beyond the standard cloud marketplace to focus on pulling together multiple advanced technologies into packages aimed at end customers, said Ryan Walsh, chief channel officer at Greenwood Village, Colo.-based Pax8.

Pax8 – which now has more than 5,000 cloud MSP customers- provides what it terms the "wingman" experience to help channel partners take advantage of cloud-based tools and make multiple cloud-based tools and applications available instantly as a solution for clients, Walsh said.

"It's important to understand the broader tool and ecosystem these partners are using, like the PSA tools that we have to integrate into. ... It's not just a matter of delivering these cloud products on a marketplace," he said.

Pax8 has won raves from cloud partners by tying cloud services to business processes rather than merely offering a cloud marketplace, Walsh said."The [discussion now] is how do you incorporate it into their regular processes to bill their customers, to market to their customers, to know what they've sold to their customers," he said.

The secret to Pax8’s success has been providing all the services solution providers need in one place to move to the cloud, Walsh said.

"We spend a lot of time on the services to help them mitigate that sense that the investment is big and maybe they don't want to do it, or maybe they don't want do it right now," he said. "[We] focus on trying to remove that hurdle, that assumption that, 'This is new, I don't know how to do it, I don't have time to do it today.'"

Distributors are key in helping solution providers understand where they currently stand in terms of the cloud and how they can leverage assets they already have to fuel their transformation to the cloud, FitzGerald said.

"We spend a significant amount of time with partners that start to get a sense of how daunting the level of investments might be," he said. "We [look at how to leverage what they already have] in a different way to really get after that opportunity on a faster trajectory and really minimize the amount of time that they're in that curve where it's a little bit more painful financially."

This could include a level of creative financing, FitzGerald said. "[We may be] looking at their overall business in totality and doing some creative things to help them unlock the value at their organization to be able to invest in some of these new areas," he said.

EchoStor Technologies, a Hopkinton, Mass.-based solution provider working with Tech Data, has found distribution key in terms of providing the financing muscle necessary for partners to succeed in the cloud services market, said Scott Trinque, president and chief technology officer.

"AWS does not have a good billing model for the channel," Trinque told CRN. "But Tech Data had a good cloud billing model two-and-a-half years ago. Tech Data's billing model has evolved, including in its ability to help more with consolidated billing and looking at how money is being spent. And Tech Data allows customers to pay on Net-30 terms. They don't need their credit cards."

Distribution is absolutely critical for smaller solution providers looking to have that financial conversation around how to shift from a traditional product-based or service-based model to providing cloud-based services, said Peter DiMarco, vice president of VAR sales, at Harrisburg, Penn.-based D&H.

It is an area where distributors spend a lot of time coaching partners, DiMarco said. This includes helping them with compensation loss and coaching them on hiring next-generation sales staff.

Many of these smaller partners also know that growth means expanding into the next county or the next township of small end users, and that means help with marketing, DiMarco said.

"Marketing is really pivotal to many of our partners today," he said. "You look at the old world of partners of what they used marketing for in the past, it was either to run an event, or tie everything up. Now it's really to go out and generate demand and tell a different story about transformation. We've had to coach them on marketing to a greater extent than we've had in the past."

D&H Distributing recently introduced its next-generation cloud platform with PSA integration, along with new hardware integration for its Device-as-a-Service business and expanded its collaboration offerings new as-a-service options.

Amazon, Google, Microsoft Azure, and their peers also see the benefit of working with distribution as a way to reach a wide audience of potential partners for their services, the distributors said.

The cloud providers are hiring the channel to build out an ecosystem that can actually design solutions to meet end clients' specific needs, FitzGerald said. "Whether it's line of business or IT, those vendors need help for that ecosystem to get competent faster to meet the requirements that are exploding for end clients," he said.

Those large cloud providers may not always be distribution friendly, but most of them are channel friendly, Kennedy said.

"[So] they're distribution friendly in this regard, because they need our help to go train and enable all these partners," he said. "They don't have the resources to do that on their own. They're trying to get their own heads around their businesses as they're making these moves."

The conversations with cloud providers have become more distribution-friendly in the last year than in the previous four to five years as they have learned that distributors provide the other technologies needed to help with cloud migration or build hybrid solutions, DiMarco said.

"They get the point of aggregation. … I think they're starting to understand that we have massive hardware businesses that really align to a cloud provider if there's a migration, or if there's going to be a hybrid solution," he said.

Cloud providers are smart enough to know they need help from distribution, FitzGerald said.

"It's not whether they see value or don't see value, it's a matter of economics," he said. "If they could do what we could do at the same price point and with the same scale and velocity, they'd probably do it themselves."

End clients are looking to invest in complete solutions, and cloud providers who partner with those in the infrastructure game are more likely to succeed than those who do not, FitzGerald said.

"Step back and look at the whole ecosystem, which I would argue cloud has completely fractured," he said. "You got a role that an ISV plays, a role that an aggregator plays maybe with some services, a role that a partner plays that may or may not have some services, could be other solutions that come [along], all needing to be stitched together in a legal and a financial and a delivery model that delights the end client and [provides the] expected business outcome."

It is really no different from how vendors as a whole have transformed over the years, FitzGerald said. "The vendors we've all done business with for years … change their own programs, change compensation to get us really directed where they believe they need help to create acceleration in meeting that end-client need," he said.