EMC chief: Why today's IT channel will soon cease to exist

It's cloud or never

If I had to suggest just one hallmark of the IT channel, I would choose stability.

The various organisations that make up the chain have clearly defined roles and well-established business models. But this state of affairs is about to undergo a period of great change.

This change has already started, but the pace is set to increase over the next few years; the channel structure of today will effectively cease to exist. In its place will be a much more fluid structure; one where the roles of the different entities will have blurred and merged, and some wholly new ones created.

Even today the beginnings of this change are visible, with the roles and responsibilities of the different organisations within the channel beginning to overlap. More and more we see service integrators becoming resellers; resellers becoming service providers; and even users becoming service providers. This evolution is unprecedented, but is only the tip of the iceberg.

The readjustment of the channel is taking place more rapidly in the telecoms sector than in any other, a change forced on operators by prevailing market conditions. In just two to three years, phone operators will no longer be able to rely on voice minutes for revenue, which will force them to look into the development of wider service portfolios.

As organisations move towards a consumption model, a major part of this transformation will be the provision of Infrastructure-as-a-Service as well as IT-as-a-Service propositions to customers in the enterprise space. This is a long way from their origins as network operators and will no doubt stand on the toes of the more established cloud providers.

It does, however, offer the only realistic way in which telecoms operators can target growth. And it makes perfect sense: mobile network operators own the infrastructure that much of the public cloud runs over, so why shouldn’t they offer such services themselves?

Another good example of how the channel is transforming, this time from the IT and services sector, is the newly founded company Canopy. Atos, whose business is largely based on systems integration and IT outsourcing, has teamed up with EMC and VMware under the brand of a joint company, Canopy, to deliver cloud services to customers. This is a clever move and one that will help Atos mitigate any potential losses as cloud computing eats away at the large integration projects that were formerly the bread and butter of systems integrators.

As with the telecoms example above, the transformation of the channel is about surviving in a world where the cloud has eroded traditional revenue streams.

Such changes will be more and more common over the next three years, and in every sector. As resellers build propositions to provide further expertise to service providers, they become service providers themselves - or broker relationships between customers and service providers. The latter will become particularly important as the cloud increasingly dominates the enterprise IT space.

It is probable that the traditional mix of end-user, channel, alliance and service organisations will change, merge or disappear completely. However, new opportunities will also drive profitability as successful vendors increasingly allow trusted partners to provide professional services, opening up new revenue streams in the process.

While there is no way of knowing exactly how much longer systems integrators, and value-added resellers and distributors, will last in their current forms, it is clear that the distribution channel will go from strength to strength in 2013.

Regardless of what happens to the wider channel, the value-add benefits that distributors offer today will continue to be in demand. There is still no way to beat distributors for features such as one-stop shopping, stock availability, financial management, credit-line coverage and logistics, delivered at a low OPEX. Distributors also play the important role of cloud aggregator – bringing together all the necessary components. The distribution channel will therefore provide a sturdiness in an ecosystem that is increasingly marked out by its fluidity.

The clear fact of the matter is that, for the wider channel community, the evolution of their business models is no longer a choice – it is a matter of survival. Penetration of public and private clouds will only increase, and in just a few years they will have completely replaced traditional on-premises infrastructures.

It seems to me that channel businesses will only be left with one choice in the future: whether they build a cloud offering by themselves, or whether they team up with other businesses to partner on a cloud solution.

The answer to this choice will largely depend on what type of organisation the channel business is. For example, a systems integrator will often own significant datacentre resources and will have built up a wealth of experience in hosting services for customers and managing BPO. What they lack, however, is the customer access in the mid-market that IT resellers have based much of their successes upon. The combination of this mid-market access with the expertise and assets of the systems integrator makes a strong basis for a compelling cloud proposition.

In the future vendors and channel organisations alike will need to monitor the situation closely and adapt accordingly. Those that can follow the market and map their offerings suitably will succeed. Those that fail to adapt may well find themselves struggling to keep up.

Resellers need to ensure they partner with a vendor that has the right long-term strategy in place if they want to avoid being stranded. This will take time, but we are seeing enquiries about such partnerships increase on a daily basis. The cloud is already starting to shape a channel that will be service driven; a very different prospect from what we’ve become accustomed to. ®

Philippe Fossé is Vice President of Europe, Middle East & Africa (EMEA) Channels at EMC Corporation. Fossé is responsible for driving business growth throughout the channel in EMEA, which represents approximately 60 per cent of the total EMC EMEA business. Philippe brings more than 15 years of experience acquired across several Senior Executive Sales and Marketing positions, at companies such as: Digital, StorageTek, McData, Xiotech and HDS.

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