The channel has evolved rapidly over the past few years, driven largely by cloud and its wider adoption. For a lot of channel organisations, this has meant they've had to adapt their business models, operations and approaches with a view to becoming more "as-a-service" centric. For service providers the landscape has also changed as they venture more into channel territory.
While there remains a place for hardware and on-premise resources, consider the popularity of the as-a-service IT environment and the shift becomes clear. Over the past 18 months there has been a transition by resellers, VARs and MSPs to move closer towards fully adopting cloud. And, to add to that, there's been the general recognition, particularly by large licensing resellers, that in order to grow business and ensure success, there needs to be a stronger focus on the services around cloud.
But what does that actually mean for the channel? In the past, looking particularly at cloud service providers, they have been viewed as clients by the channel and its resellers. Over the past three or four years, however, as more service providers have started moving into the channel itself, they are now seen as both partners and clients, making the relationship more multifaceted and complex. This relationship is made even more difficult to navigate as a lot of vendors themselves are providing their own direct cloud offerings through the channel or partner ecosystem.
Staying in the game
The IT space is more crowded and competitive as a result; and how do VARs, vendors, and ISVs survive? How do you stay relevant in the market? By adding cloud to your product portfolio. Sounds simple enough. But is it really?
The aim of the channel is to add value. Traditionally this was done by staying on top of technology, understanding how it could benefit your customers, and then educating your customers about these advancements.
This approach can be applied to cloud, except that it is now a learning curve for both your business and your customer. The shift to sell cloud incorporates so much more than merely adding it to your set of solutions.
The services model or SaaS approach means that the channel needs to be more proactive. In the past the channel was driven largely by hardware vendors who wanted businesses to sell their products, stock them, and provide credit. But what SaaS is doing is placing an emphasis on the partnership angle. So instead of driving business and fulfilling it through the channel, the sales process is more collaborative; instead of a sell-to approach, you've now got a sell-with approach, which requires a more joined-up business development tactic.
Revenue models: a new challenge
While there is definite opportunity in this changing channel environment, there are also significant challenges in adopting the more service-focused approach. In addition to changing sales and marketing approaches, working with more partners and adopting new operational mindsets, there is also a large barrier when it comes to revenue. Cashflow, operations and commission are all affected. In the past the process was simpler – getting a PO, issuing an invoice, and then receiving payment after a specific number of days.
However, for channel businesses, particularly those working on skinny margins, the challenge now comes in the fact that instead of getting their margin immediately, it is now paid in bite-sized chunks which has a huge impact on cashflow and will take some time to get used to.
In the same vein, resellers also run into issues with their own ERP systems not being equipped to change the billing model.
The final hurdle lies with rewarding salespeople. Again, as the margins are paid in increments, so too are commissions. While in the longer term this probably makes more sense, salespeople will lose out if they change jobs. As a result, there has been a lot of movement of sales staff within the channel.
The premise of evolution is that it continues. As a result, the advent of cloud is not the end of change; instead, it is merely another feature in the ever-changing landscape. The key thing for channel businesses to remember is that they need to remain relevant and adapt to the changes in order to stay successful.
Chris Roberts (pictured) is channel director at Pulsant
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