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Peter O'Neill

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Peter O'Neill is Vice President and Principal Analyst at Forrester Research. His research and advisory is targeted to technology marketers including those who work in channel marketing. He services global clients from his home office in Stuttgart, Germany.
By | Peter O'Neill 21st February 2013 10:30

Hey, cloudy channel bods: Vendors have problems too...

You can't cram a round cloud peg into a square channel hole

The tech industry channel has faced a variety of challenges over the past year or so when it comes to cloud computing. Distributors in the channel have faced a battle over customers with telecommunications vendors, and some channel partners have found themselves unsure about outlining a cloud strategy. This time we're taking a look at the challenges from the vendor’s point of view.

Based on the briefings we get, our current estimates are that the channel portion of cloud or subscription technology business is at about 25 per cent, whereas two-thirds of the on-premise or licensed technology business is sold through channels. So it is early days as yet.

We are hearing from many channel managers that adapting their channel partner strategy to account for the impact of the cloud on their partners and their business is now critical to keeping pace with the competition.

When it comes to cloud computing, channel partners fall into two camps:

  • The “born in the cloud” camp, and
  • The “help me” hybrid (transition) camp.

Each calls for a very different go-to-channel strategy and programme thinking.

The former is more a recruitment programme but, of course, the loyalty drivers of these start-ups are quite different than the more traditional channel partners.

Meanwhile, the partners in transition have the major problem of transforming while keeping their plane flying.

But one thing is now becoming very clear to channel managers: their existing partner programme construct of incentives, enablement and tools does not work in cloud computing. We are talking square peg into round hole here.

Channel pros and the cloud

One issue for the vendors is certainly that, as I wrote back in November, many traditional partners are still unsure of what they want to be in the cloud ecosystem. Our latest survey of partners showed 42 per cent were planning to become managed service providers and 29 per cent preferred to morph into hosting service providers. Each of these channel partner types require quite different vendor services. Here are the typical inquiry topics we are hearing from the vendors.

  • How can we help partners balance an annuity revenue stream and standard commission structure?
  • Should we pursue a reseller or service provider strategy?
  • What do we do with implementation-dependent partners?
  • Can partners survive on smaller margins?
  • Can we continue to distinguish partners based on business models (VAR, MSP, hoster, etc.)?
  • Who owns the data centre? Who owns the customer?

What do you think?

If you are a vendor, are there other questions you are posing? If you are a channel company, what are you looking for from the vendors in the cloud context? Please let me know in the comments below. ®

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