Cloud Execs: Channel Uniquely Positioned To Succeed

In a panel discussion moderated by Jeff Kaplan, managing director of THINKstrategies, channel experts from four of the largest cloud vendors on Thursday told solution providers that there were tremendous profits to be reaped from offering cloud services, but first they needed to rethink their entire business models.

Kaplan introduced representatives from Ingram Micro, IBM, ServiceNow and Salesforce.com, which shared their insights into what made partners in their ecosystems successful at the NexGen Cloud Conference & Expo, run by The Channel Company, the publisher of CRN.

The executives told solution providers that they were still in the early stages of cloud adoption, and businesses that acted quickly and decisively would be in the best position to capitalize.

"This is a transformation, but still an evolutionary process that we're talking about," Kaplan told attendees.

[Related: Oracle Cloud Channel Chief: Start Your Cloud Transformation Now]

Ed Bottini, director of cloud services channel sales at IBM's SoftLayer division, told attendees not to view cloud as a destination, but more a set of capabilities that empower them to serve customers and win business.

"What I think all of us as vendors are doing is providing capabilities for you to go to market," Bottini said.

"Think about how you can innovate. Think about do you know your customers," he said, adding IBM would then help them solve their business problems.

More than half of cloud sales should originate from third parties because they are closer to enterprise customers, he said.

"The good news for all of you, it's early. It's very early," Bottini said, adding, "this is still ground-floor stuff."

Ron Huddleston, senior vice president of channels at Salesforce.com, told solution providers that the cloud is in no way a threat to their industry.

Salesforce launched its channel in earnest about five years ago, and has seen phenomenal growth in that time, quadrupling in size, Huddleston said.

System integrators aligned with the CRM leader have grown, on average, 80 percent year-over-year in that period, with orders increasing on average by 70 percent.

Kaplan noted the Salesforce example undermines the "lingering sense that the cloud is going to disintermediate the channel."

Huddleston agreed, telling attendees, "What we should be worried about is the channel disintermediating us."

NEXT: Channel uniquely positioned for success

Channel companies are in a unique position where they can deliver quality user experience across a number of diverse vendors -- no other type of business can compete with that, Huddleston told attendees.

Renee Bergeron, vice president of managed services and cloud computing at Ingram Micro, said it's a useful exercise to compare the value of channel business versus direct business.

Ingram Micro did such an analysis, comparing attrition: In the direct business, it was between 20 percent to 40 percent a year.

"In our Ingram Micro business with our channel partners, attrition is 4.5 percent. If anyone doesn't believe the channel adds value, these numbers prove it," she said, adding channel companies help customers find the right solutions and implement them correctly "and that makes all the difference in terms of customers for life."

Dean Hervey, director of regional partners for ServiceNow, told the audience, "My partners are absolutely the tip of the spear for us in implementing strategy. There's no other way to do that."

"For Ingram, the cloud is very strategic. It was a threat a couple years ago; now it's an opportunity," Bergeron said.

Ingram Micro is transforming its own business by focusing on building a comprehensive portfolio of cloud services, offering a cloud marketplace and launching programs to enable partners.

"We realize our reseller partners are not at the same stage of maturity in developing cloud businesses," she said. Some want to be opportunisti; others are very far along in delivering cloud services.

The successful partners are the ones that have transformed their business models.

"Those that fail try to make their cloud business fit into their existing on-premise business model," Bergeron said. But the value proposition from the cloud is different -- the buyer is different, and you have to sell it in a totally different way, rethinking sales, marketing and operations.

"If all of your sales force actually spent years building relationships within the IT department, then they're going to struggle to sell the cloud, because those are not necessarily the buyer," she said, advising solution providers to "rethink every single aspect of your company, including your financials, because it requires a completely different business model."

IBM's Bottini extended that point, telling attendees that the compensation model for sales agents needs to change from the days when they were making hardware deals.

But the benefits of the technology to the customer make it all worthwhile.

PUBLISHED DEC. 5, 2014

"When you solve an individual workload, the cloud allows you to scale that workload out and address it more rapidly," Bottini said.

And IBM has compiled data on how that translates to solution providers making more money, he said.

The margin for solution providers selling their own value-added service was seven to 10 times greater than for those just selling the company's products, he said.

"It's a lot of money, disproportionally for you, in that model," Bottini said.