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Dawn of the Cloud Channel

While we are all numb to the “C” word in the IT Channel, we are seeing Cloud become the main driver of channel growth. More and more MSPs and VARs are building their business around everything-cloud or everything as-a-service. More Cloud vendors are also realizing that they need the channel especially as they mature and hit a growth ceiling.

Unless the vendor is prepared to hire an army, navy and air force of sales people, then the smart choice is to leverage the sales force of the channel. Of course, some will say that digital marketing will replace the need of a sales force. To which I say, good luck with that!

Many Cloud vendors are coming to the realization that their direct to end-customer dreams are not as they had hoped. As some smart Cloud vendors predicted, their bet on the channel is paying off big. Just take Datto as one example that is not only channel friendly, but is 100% channel. When a vendor is all-in with the channel, then they can focus all of their energies on building channel success. When the vendor is on the fence, then they are not as focused, so their success will take a lot longer and may never become clear. As the Vendor’s direct and indirect sides push and pull each other, their precious energy gets wasted.

The debate on if Cloud vendors should leverage traditional distribution or Cloud-Only distributors or no distributor at all, is ongoing. Many Cloud vendors are seeing their go-to-market path as either direct to end-user or direct to channel partners. They are not seeing the added benefit of leveraging a middle player. Their product needs no physical warehousing or shipping. It also does not need any financing as it is already on a pay-as-you-go plan. Distribution could offer access to the VARs, MSPs and ITSPs (if you are able finance a way to stand out from the thousands of products), but this too is being challenged by the VARs, MSPs and ITSPs themselves, as they are seeing that a direct partnership with Cloud manufactures to be more beneficial and profitable.

We are also seeing this trend as more Cloud vendors leverage our channel marketing vehicles to reach and recruit channel partners directly, especially for those now entering the channel. With few exceptions such as Microsoft’s Cloud offerings being a good-fit for distributors, it is unsure of the larger Cloud play in distribution. Another factor is the vast number of Cloud vendors plunging into the market. There were about 100,000 SaaS vendors at the recent Salesforce conference. As these company mature, many will be seeking partners in the channel.

We are currently only tracking about 5,000 Cloud vendors. We also saw a 20% surge in voting for Cloud vendors at our recent Reseller Choice Awards. The innovation that we are seeing is incredible but so is the overlap. As such, many Cloud vendors will have a huge challenge in differentiating from their competition. We are becoming very selective as to which Cloud vendors that we work with as the channel is seeking more channel-focused vendors with the right solutions, programs and partnerships. The old spiff and rebate games are coming to an end. Sustainability and predictability of profits is becoming key. Relationship and partnership integrity are also big factors.

As the new Cloud Channel grows up, we are expecting anything to happen. Size may actually not matter all that much when it comes to Cloud. The playing field at the moment is still level. It is like the dawn of the PCs back in the early eighties. For those who lived through this era, you know just how crazy the ride was. The dawn of the Cloud Channel has a lot in common and it’s exciting! I learn new stuff every day!

It’s getting close to that time for Cloud vendors to pick a side and be all-in. We welcome a conversation with all channel-focused Cloud vendors looking to build their go-to-market partner ecosystem. If you want to hear what the MSPs, VARs and ITSPs are saying, then check out their comments at the recent Channel Manager Summit. If you want to hear what distributors are doing, then check out my interview with the President of Tech Data. It matters less on how you decide to go to market so long as you put the channel into your game. Eventually you should see your dawn of your Cloud Channel.

Julian Lee