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This Research Note was jointly authored by Janet Waxman and Tom Petrocelli.

A PDF version of this Research Note can be found at the end of this post.

Analysis

Both the channel and the cloud are getting a lot of attention In the IT market these days. That’s nothing new: analysts have long predicted the hegemony of the cloud and demise of the channel because of cloud computing for eons. In many ways it is logical to raise the question “Does cloud kill the channel or can they co-exist?” Perhaps the better question is “can the channel enhance the cloud experience for customers?”

Neuralytix believes that not only can the channel and the cloud co-exist but that the sum of the parts is greater than the whole. Instead of a confrontational situation it is a symbiotic relationship. In aggregate, channel partners are not threatened by but are embracing cloud computing. A response from one partner when asked “will the cloud kill the channel or vice versa” a very quick reply was “that question is oxymoronic”. Well said, well put!

The “channel” is a group of companies selling and delivering IT solutions to the organizations that need help with integration, deployment, solution creation and financing. Not all partner models are the same, but the majority are focusing on helping customers use IT to solve a business problem. It is an intimate business that requires close attention to the needs of individual customers. Cloud computing presents a new opportunity for channel companies to deliver even more value to their customer’s IT solutions.

Different partners for different needs

The cloud providers, both newer pure cloud vendors (Amazon, Rackspace, Joyent, etc) or more traditional suppliers with cloud offerings (SAP, IBM, HP etc) are seeking out partners with the skills to help deliver their cloud solution to the market. Instead of abandoning these long term relationships, they are seeking to expand them in order to develop the fastest growing portions of their businesses.

Each will still need to provide value-add beyond delivery and deployment. Value-add is defined differently for hardware dominant and software dominant partners. Partners who have relationships to hardware vendors deliver value through migration and management services, not just delivery and deployment. Just because hardware infrastructure is in the cloud doesn’t mean it there is no longer a need for management, migration and performance tuning. Customers know they can trust channel partners to bring these skill to bear for their cloud infrastructure just as they do for their on-premises systems.

Partners with expertise in software, especially applications traditionally are called upon for assistance with customization and integration. In fact, integration with cloud applications represents unique challenges and skills that are not in abundance. Deep knowledge of APIs and methods to securely move information between the on-premises and cloud environments or between cloud applications are necessary to create fully formed systems that include cloud and on-premises applications.

More importantly, partners bring an in-depth knowledge of the customer and industries they serve to solution creation. Not only are they better at determining the needs of customers but have can develop a more personalized solution.

Guidance

There is nothing in the combination of these two dynamic and multifaceted aspects of the IT landscape, cloud or on-premise, which suggests a one size fits solution that works for every individual customer. Neuralytix believes it is important to remember that, at its heart, cloud computing is really a way to simplify the deployment and financing of IT. Cloud helps move a CAPEX expense to an OPEX one and frees IT resources from the drudgery of maintaining hardware systems. Cloud computing doesn’t negate the complexity of IT business solutions, especially for large enterprises.

Unfortunately, many channel partners will find themselves competing against vendors for commodity services or find that those services are no longer relevant in the cloud age. Commodity services will likely diminish over time and for partners to continue to thrive they will need to provide something that the vendor cannot – in other words provide true value-add. They may no longer be able to provide better pricing or delivery but can create custom solutions that no vendor is capable of. The closeness of the channel partner to the customer is an asset that can be leveraged to deliver true value-add.

Neuralytix more specifically believes that traditional hardware, systems, and infrastructure partners will need to add or augment to current service sets data migration, performance tuning of cloud instances, data security in the cloud, and management of multi-vendor cloud environments.

Software-centric partners, especially those who specialize in enterprise applications, will need to focus their skills on application integration across cloud vendors and between cloud and on-premises applications. It will also benefit partners and their customers if they can continue to deliver application customization services in the cloud the way they do now for on-premises applications.

Channel partners of all types should also embrace the subscription model. Subscriptions can lock in customers for extended periods of time. That is nice for the companies that won the business but create a smaller available pool for revenue for that that have not.

Conclusion

There is no question cloud computing is changing the IT market landscape. This change affects all aspects of the market including suppliers, partners, and their joint customers. All elements of the business models can and should remain intact but those that will thrive will be the ones that adapt their concept of their value-add to the new environment.

 

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