Distie: Build the cloud and resellers will come... so WHERE ARE THEY?

Some have arrived, but financials are stacked against it

Disties have built cloudy aggregation platforms for channel types under the assumption they would come… but they are still waiting for mass adoption.

It would seem that reseller solutions provider reseller demand for brokerage services, such as the one that Arrow ECS launched 18 months ago has been a little underwhelming.

Some 16 vendors plugged more than 50 services into the ArroweSphere rig, which provides centralised billing and allows resellers in the UK, France, Germany, Spain, and North America to white-label the wares.

"We now already service more than 100 customers in the countries where ArrowSphere is available," said Julien Peronneau, EMEA veep of services and transformation at the distributor in a statement.

But that doesn't look like a lot given that Arrow trades with tens of thousands of channel types across those five countries.

NYSE-listed Arrow, which does not host these cloudy things but provides the "gateway" that allows companies to resell the service, resisted calls to discuss its expectations further.

Distie giant Tech Data has several surgeries in its cloud initiatives including a billing platform named StreamOne and an education and biz development academy TDCloud.

Around 400 resellers in the UK and Belgium have used StreamOne, it said, and this will spread to 16 countries across Europe within 12 months.

But Tech Data reckons the entire distie community is trying to develop innovative ways to lure in more channel customers.

"What can we do to make sure cloud in the mid-market is accelerating? Every vendor and distributor is trying to work that out," said Joel Chimodes, European cloud services director at Tech Data sub Azlan.

"We've got huge interest levels measured by quotations and demos being done but revenues in the mid-market channel in the cloud, Microsoft Office 365 aside, are relatively small," he added.

Chimondes said it is trying to use "compelling events" such as Microsoft Small Business Server going end of life this month to encourage reseller customers to discuss ways to shift customers' tech to the cloud.

Money talks and earlier this year Microsoft rolled out a massive financial incentive to lure channel partners to sell its cloud services, including a $40-per-seat rebate for the first 3,000 seats.

Yet Microsoft doesn't break out cloud from traditional licensing turnover so it is nearly impossible to determine how far its cloudy biz has come.

As Steve Brazier, CEO at market watcher Canalys, pointed out in October at its annual forum, the cloud model remains unproven.

He added that many vendors have yet to report profitable cloud businesses, and more are turning to channel partners as their trusted feet on the street to spread the gospel to customers.

And perhaps it is the way these cloud levers have been developed, ie, with a vendor's direct sales force in mind, that may have limited appeal, said Matt Riley, CEO at telco and tech player Daisy Group.

Rather than trying to "bastardise" cloud services, vendors should try to reconstruct the programmes with the channel in mind, he said.

He said cloud services revenues were growing but were in their infancy and there's been more hype around the area, with "more people talking about it than buying".

Channel folk suggested one of the reasons the cloud will fail with a "multiple level distribution model" is because every link in the chain wants a cut of the margin so will prove "too expensive" for users to consume.

"Plus those resellers are too far away from the cloud detail. Customers will not find resellers credible, because the services is outsourced to someone else who is outsourcing," said one contact.

The financials of moving to the cloud will be a challenge too - smaller upfront capes investments from customers - and are fundamentally different to the way resellers and distributors have banked sales.

"[Existing] resellers may not be able to make the leap," said our channel man, who reckoned the winners in the as-a-service era will be "born in the cloud" companies, some of which flocked to Microsoft WPC this year.

New cloud resellers – integrators such as AimsOnline, Minitulip and Techquarters – are coming to some prominence, with one source saying the days of "traditional reselling are numbered".

This maybe so, but as Riley from Daisy Group pointed out: "A lot of customers have traditional systems and platforms that they invested a lot of money in and they won't simply rip those out. Cloud will grow but it will take time, and is never as quick as some predict." ®