IT and Business Insights for SMB Solution Providers

Capitalizing on Cloud Services

With the growth and proliferation of cloud services, resellers must reevaluate their business models to remain relevant and profitable. By Paul Andersen

As few as five years ago, reseller competition was limited mainly to other resellers. Or perhaps technology vendors sold direct to key customers, cutting the partner out of additional revenue. Today, however, the cloud is emerging as a disruptive force in the reseller community, with implications more complex and consequential than traditional friction between resellers and vendors.

With the emergence of software as a service (SaaS), customers are now able to purchase turnkey solutions for applications such as CRM, marketing automation, ERP, workforce productivity, and many others. Because these are purchased as a service, with the onus on the provider to deliver the underlying infrastructure and expertise, many businesses no longer require an IT department. Without IT departments, it becomes more difficult for resellers to sell products and services via traditional models. What’s more, SaaS adoption is accelerating because it drives down capital expenditures and enables businesses to purchase services in direct proportion to business demand.

While there will always be a market for traditional IT offerings, the influence of cloud services should not be ignored. Another example is infrastructure as a service (IaaS). For businesses that retain substantial IT departments, there is a trend toward purchasing servers, storage, and networking functions as an on-demand public cloud service. When businesses buy IT infrastructure from cloud providers, it directly affects the reseller partners who have traditionally provided the gear and expertise to ensure successful application deployments.

Awareness is the key to resellers navigating the potential disruptions introduced by cloud services. The cloud will not affect all resellers the same way. For instance, resellers that make their numbers selling bare-metal servers and storage to large financial firms may see minimal impact from SaaS or IaaS. In contrast, resellers with a focus on SMBs may be among the first to experience a significant impact to their businesses. By determining to what degree the cloud will affect their businesses, they can make adjustments to ensure continued relevance and profitability.

Other Side of the Coin
On the flip side, the cloud presents opportunities to adapt and capitalize on new high-growth markets. For example, with many different cloud offerings on various platforms—and the need for cloud services to interoperate in hybrid environments—resellers with the expertise can help businesses of any size navigate these new solutions. One approach is to become an expert on cloud offerings and help customers select the right cloud services and integrate them with their traditional IT solutions.

Another approach is to create a branded “marketplace” where many cloud services are available from a single pane of glass. While this approach might require some up-front investment on the part of the reseller, it can offer value to customers. With the ability to acquire cloud services in bulk, resellers can offer discounted rates to customers and can act as a single point of contact and provide unified billing for a spectrum of services. 

Resellers might also create their own managed services or cloud offerings to supplement their traditional resale and integration services—to roll with cloud momentum and offer customers software and infrastructure on a pay-as-you-go basis. Or, resellers may decide to adopt some combination of these options, so long as business model changes are based on analysis of customer requirements.  

Resellers should also engage the vendors they work with to understand their roadmaps for cloud solutions. Ideally, vendors should have product offerings that span traditional and cloud-centric models, to remain nimble in the face of changes brought about by the cloud. 

In the end, the rise of cloud services can break one of two ways. For resellers who put their heads in the sand, there is the real possibility of significant decline in business and profits. For those who embrace the cloud, however, there is plenty of room to provide expertise to help customers make a more seamless and supported transition.

PAUL ANDERSEN is senior director of marketing at Milpitas, Calif.-based Array Networks Inc. He has more than 15 years of experience in networking and has served in various marketing capacities for Cisco Systems Inc., Tasman Networks, and Sun Microsystems Inc.

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