Is Channel Distribution Merging in the Cloud?

By Khali Henderson Comments
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Gartner's Bova agreed. "Without value-added services there is little to compete on if everyone is offering the same services except price. Falling back on a lowest-price strategy is a slippery slope and one which is not sustainable over the long term," Bova said.

While their cloud supply bases may have some similarities, it remains to be seen if master agents and distributors will be successful courting partners outside their traditional spheres of influence.

"The question is whether to focus on recruiting new partners or working to get the existing partner ecosystem to expand into new areas," Bova said. "The answer will depend on the willingness of the master agent or distributor to invest in training and enablement tools to help their respective partner bases get into new product categories."

Some partners already are looking across the traditional aisle to find their cloud-enablement partner. VAR IPLogic signed first with master agency Intelisys to offer cloud services. IPLogic's Mayo-Pike said her company isn't "shying away" from the distributor programs, but it purposefully wants to keep its cloud partnerships limited while learning a recurring revenue business.

"The value they add as a master agent is helping their existing reseller base understand recurring revenue businesses, training for and enabling the transition of product sales to recurring services and helping these resellers aggregate multiple hosted services on a single bill," said Mark Arman, vice president of international sales and worldwide distribution for ShoreTel, which offers premises-based UC as well as cloud-based UC through ShoreTel Sky (via its acquisition of M5 Networks in early 2012).

"If the distributors do not adapt, partners will migrate to where the business is easy to do and have a higher margin," Arman added. "If a master agent builds the right services and pricing model and the partners can understand recurring revenue, their model may be more attractive in the long run."

On the flip side, Jeremy Kerth, president of telecom agency Wired Networks, said his company has had to seek out distributors to support its effort to "stay relevant and competitive" by offering hardware, software and also cloud services. "As an agent of the future, we not only need to be able to sell [cloud], but we will likely need to be able to design and build it too," Kerth said. "It has become more apparent that master agents stand to lose long term if they don't start to offer more of the traditional VAR-type distribution services in order to  build relationships with those entities that have major building blocks to the cloud."

Analyst Ryan Brock, vice president of worldwide SMB cloud and channels for AMI Partners, might agree. He argued that "with the cloud, there isn't a lot of value in aggregation. Where the value lies is in meaningful integration."

That said, he gives neither master agents nor distributors good odds for attracting new partners or retaining their existing ones for cloud services. That's because small and medium businesses are turning to cloud providers directly for help. "SMB customers and their partners don't have the patience or risk tolerance to wait for traditional [information and communications technology] distributors and agents to figure out how to effectively support them across a range of cloud solutions," Brock said. "This is why we have seen many partners realigning with cloud vendors and hosters that have years of experience in offering and servicing hosted infrastructure and applications."

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