The Role Of The Cloud Broker: Solution Providers Have The Inside Track

The real opportunity around cloud services for solution providers lies in a "cloud broker" role, according to executives who participated in an Infrastructure Services Roundtable at the XChange 2015 conference.

Executives from Verizon Enterprise Solutions, Comcast Business and IBM described what the role entails -- and why it can be a boon to any solution provider's business.

The cloud broker model allows solution providers to partner with cloud providers, including companies such as Verizon, as well Google and Amazon. But instead of rebilling end customers for a cloud provider's services, partners can provide consultation, migration services and hourly advice, said Comcast Business Vice President of Indirect Channels Craig Schlagbaum.

Schlagbaum sees the role of a cloud broker as being similar to the role of a financial adviser or insurance agent in which their value comes from their advice and selling business outcomes.

"It's a very lucrative business model, the model of agency. I see that as being much more mainstream over time," he said.

Providers that follow a cloud brokerage model won't be concerned about simply rebilling cloud services, he said. For their part in brokering these services, partners can expect a mid-teens percentage in commissions in something they'll have no receivable for, Schlagbaum said.

"You don't have to provide the end-user support for the call. It's not a resell, rebill model where you endure all the costs of bad debt and all the support cost. … You're not rebilling it, you're brokering it. It's a fundamental difference in the model," he said.

Solution providers who identify cloud service providers they want to work with and learn everything they can about how to sell their services will be able to wrap their value around those cloud services. Schlagbaum said that some of the best partners Comcast has are doing just that, and making the most money.

But the broker model might come easiest to "born in the cloud" providers, said IBM Vice President of Worldwide Channels Dave Carlquist.

"[VARs] all have their sights set on … monthly recurring revenue as an important part of their business model, but at the same time getting there from here is a challenge for them," he said.

One approach would be to sustain the reseller business they're used to while they figure out how to get the recurring cloud revenue meters running, Carlquist said.

"If you don't do it the right way, it can wreak havoc on your balance sheet. At the same time, it requires investment. Most of the firms that are going to be successful are jumping in right now and trying to figure out how to make that work," he said.

Avant Communications, a telecommunications and cloud services provider that focuses on IT consulting, has seen success with the cloud broker business model. The Chicago-based provider believes that while there will be many flavors of the broker model, solution providers stand to increase their profit if they can successfully broker -- as opposed to resell -- cloud services, said Ian Kieninger, CEO of Avant Communications.

There isn't a lot of margin in reselling someone else's cloud, but partners can create a line of professional services to wrap around that cloud service, including consulting, and transition and planning services, Kieninger said.

"I think there are going to be many versions of this. There might be some small solution providers that hire a couple of cloud [professionals] … and then are able to broker cloud services once they are able to determine what the best fit for their client is," he said.

While there aren't many providers acting as cloud brokers today, Kieninger believes that the marketplace will eventually "explode" because customers need help from a technology partner they can trust, he said.

"Customers have no idea what to do -- they are just reading headlines … and see Amazon in the news and think they should adopt that [service] too," he said.

"The whole cloud model is crushing margins and pushing things out … it comes down to customers wanting support because there's so many options," Schlagbaum said. "The trusted adviser still is going to be required because the customer needs their help. [Partners] can charge a premium for that service."

The best weapon solution providers possess that large cloud providers don't have is a more intimate level of customer service support, said Adam Famularo, Verizon's global channel vice president.

"[These partners] really have intimate knowledge of that customer and of their environment, and what they're trying to get accomplished," Famularo said.

Not every VAR or solution provider is going to be able to take on the role of a cloud broker overnight, but leveraging their existing vendor relationships with service providers, as well as their understanding of their customer needs, will be a good way to start bringing solutions together, agreed IBM's Carlquist.

"Partners bring a unique skill set. They bring relationship. They do it at a local level. IBM has a pretty robust solution portfolio, but there's a lot more that's out there in the marketplace and it's our partners that put that together, make it real, and deliver it to the customer," he said.

PUBLISHED OCT. 19, 2015