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Lawrence Walsh

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Lawrence M Walsh is the president and CEO of The 2112 Group, a US-based channel consulting and research firm; editor-in-chief of the blog Channelnomics; and founder of the Cloud & Technology Transformation Alliance and Channel Vanguard Council.
By | Lawrence Walsh 24th August 2012 12:28

'Will cloud murder the channel?' and other stupid questions

Why you shouldn't believe the hype....

During a recent cloud computing webcast in which I was participating, a solution provider asked: “How much time do we have left before cloud computing completely disrupts the channel?”

It’s a surprising question – as nonsensical as it is simple, much like the viral video produced by The Onion on Hewlett-Packard’s cloud ambitions: The faux reporter asks a developer: “How much capacity do the HP cloud users have access to?” The developer answers: “One thousand.”

What would you say to a question about when the channel will die? I said: “Thursday.”

When will the channel die?

Actually, what I should’ve done is completely dismiss the question and the sentiment. Both are a reflection of something we’ve long suspected: Value is dead, and hype has taken over the market.

Analyst firm Gartner has even come out with a positioning statement calling cloud computing “the most overused and hyped term” in technology, which is sweet irony considering Gartner was one of the chief architects of defining and popularising "the cloud".

The vendors saw this coming a decade ago. Every technology brought to market over the last 10 years has been an iterative improvement to previous generations, not a net-new product. We’ve been fielding better, simpler and more affordable products, not new technologies.

Yes, the iPhone is remarkable. Yes, tablets are amazing. And, yes, the cloud is revolutionary. But we’ve had all of these for many, many years. The first touch-screen, app-driven smartphone was released in 1992 by IBM. The first tablet (not counting anything on Star Trek) was released in 1993, again by IBM. And the first cloud services – initially known as application service providers – have been around since the mid-1990s.

With each technology iteration comes improvements in performance, usability, manageability and total cost of ownership. Moreover, with each iteration the need for complex professional and managed services decreases, thus decreasing the value to which solution providers can add.

The advent of cloud computing is completely disrupting the remaining value potential as solution providers are increasingly relegated to a sideline role. Worse, cloud computing is creating a barrier-to-entry: End user expectations for capacity, performance and functionality are advancing faster than the market can deliver.

Once again, vendors recognised this more than a decade ago and have been steadily eroding their channel partners’ positioning by recapturing value-add services for their own delivery. Solution providers have been compensated for this switch with back-end incentives – and it’s gotten to the point where the average solution provider is almost entirely dependent on promotional incentives, rebates and spiffs for their profitability. Now, with the "cloud" skyrocketing, vendors want more of what’s left, leaving partners to scramble. How much time does the channel have left, indeed.

10 tough truisms about the channel’s future

Vendors will deny this to the hilt, claiming they rely on partners for their livelihoods. Ensuring partner profitability, they’d say, is essential to their own viability. They will even point to “reference architectures” as tools for partners to supply value to their customers. Reference architectures are, in fact, wonderful tools for homogenising solutions, ensuring everyone has access to the same technology – but, as economist Karl Schramm said: “When everyone has access to the same technology, the technology has no value.”

Is value completely dead in the channel? Hardly. There’s still plenty of opportunity for solution providers to define themselves in new value propositions that advance their position in the market and ensure profitability. Cloud brokering and management; on-premise integration; back-up automation and Big Data; mobile enablement and management; and process consultation and implementation services are among many of the emerging opportunities.

Value in the channel will only die if solution providers allow it to. Solution providers – as a whole – have done a wonderful job of surrendering value. Now is the time for them to take responsibility for their own futures and profitability: by defining what will make them different and how they will bring more benefit to their customers.

Those who build and invest in platforms for the future will always do good business. ®

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