ChannelTrends: Has the Cloud Reached the Point of No Return?

As we head into a long weekend and celebrate the 235^th anniversary of the signing of the Declaration of Independence, it’s a great time to reflect on what may be a pivotal point in the “cloud revolution”. The news coming out of Redmond this week wasn’t quite what many channel experts predicted, and has many VARs reevaluating the status of their vendor relationships—or at least the portfolio they wish to represent. Of course I’m referring to the much discussed announcement by Microsoft CEO Steve Ballmer of the availability of the company’s cloud business productivity solution (Office 365).


As expected, the service includes an on-demand version of Office, SharePoint, Exchange and Lync software, but the disclosure that billing will be direct is causing a shift in optimism for the VAR channel.

Many long-time Microsoft partners have expressed concern at handing over any of their account details and part of their customer communications to any vendor, regardless of their previous relationship.  It’s nothing personal, just a good business practice.


Who Controls the Customer Relationship?
One critical channel issue with some of the latest cloud offerings being sold through the channel is management and control of account information. Where the traditional reseller arrangements had the vendor handing off products or services to a VAR or MSP, a number of cloud offerings require channel partners to give up their “firewall of client protection”. While it may seem like a minor issue to decision makers in large boardrooms, those working day to day in the IT channel understand the potential repercussions of giving their suppliers direct access to their accounts. My intention is not to disparage Microsoft, as Google and other cloud providers have taken the same direction in assuming part of the responsibilities channel partners have typically taken on. While some tout the time and frustration VARs will avoid by not having to bill or provision each account, others point out they still need to do that for the other services they offer. Saving a few minutes of time in return for handing over partial control of your customers is not seen as a fair trade in the industry.


The decision on which vendor to align with for cloud services typically comes down to one question: do you want to be a “sales agent” or a “reseller”? The Google and Office 365 models provide their partners with a fee for the first year their clients sign on for a service, then a smaller fee for subsequent years. Microsoft will offer “a 12 percent one-time partner of record fees in the first year, and 6 percent in recurring fees,” according to their Corporate Vice President of the Worldwide Partner Group John Roskill in his partner blog. If you calculate the potential revenue based on those numbers and it fits with your business model, then it makes sense to sign up. For consultants or smaller VARs who would rather not handle the billing of these services, and are not concerned with potential channel conflicts with their supplier, the Office 365 and Google models are suitable options. Based on the number of providers that fall into those categories, it presents those vendors with a sizable partner base. But the larger MSPs will be hard to convince, since they’ve made significant investments in building their client portfolio through their marketing efforts and years of relationship development. Are they eager to provide any vendor more access to their accounts? Not from most of the comments I heard this week in a number of media reports and personal conversations.


Cloud Channel Options Still Growing
On the heels of the Microsoft news this week, several vendors rolled out new offerings and enhanced programs targeting the IT channel. For solution providers, that opens up the options for new partnerships and complementary services they can offer as part of their portfolio.


In addition to Microsoft, Google, HP and IBM, a number of tech titans are getting in on the virtual application market. Earlier this week, Michael Dell emphasized his company’s enhanced push into the cloud, in discussions prior to their scheduled analyst meeting. This comes just a week after Dell announced it would integrate, manage and re-sell the QualysGuard suite of security and compliance services, including vulnerability management, web application scanning, PCI compliance and policy compliance services. While the company has been soft spoken on the topic, it appears they have been putting together a formidable offering that could add to (or compete with) their VARs’ portfolios.


Another cloud-based file sharing and collaboration company is looking to compete for with Microsoft SharePoint partners with its announcement this week. Box (otherwise known as Box.net) hopes so, as they introduced details of their certified reseller and solution provider programs. With promises of high margins for the lifetime of the account and the ability to control all aspects of the sales cycle, the company appears to be taking advantage of the perceived weakness in the competitors’ offerings. Their push should make things interesting this summer, as Box rolls out their API and other sales/marketing tools to help their partners succeed.


These are just a few of the cloud news pieces this week. Despite the mass exodus of people heading out to enjoy the Independence Day weekend a little early, a number of companied made headlines with their virtual technology introductions and programs. Is everyone jumping on the cloud bandwagon? Looking at the news this week, perhaps we have reached that point of no return.


Brian Sherman is founder of Tech Success Communications, specializing in editorial content and consulting for the IT channel. His previous roles include chief editor at Business Solutions magazine and industry alliances director with Autotask. Contact Brian at [email protected].