The cloud and Internet of Things (IoT) are creating new business possibilities for value-added resellers (VARs), systems integrators (SIs) and other solution providers despite past predictions of the “disintermediation of the channel.”
However, the nature of the cloud marketplace and the way in which IoT initiatives are actually deployed also make it harder for hardware vendors and software developers to track how their systems and applications are sold and utilized.
This creates a myriad of channel sales, marketing, billing, compensation, support and compliance issues that need to be addressed if the cloud and IoT markets are going to continue to expand via third-party channels.
The NPD Group’s Distributor and Reseller Tracking Services reported earlier this year that U.S. business-to-business (B2B) channel revenue increased in 2014 for the third consecutive year. The NPD Group’s study focused primarily on traditional channel sales of PCs, networking, software, printer consumables and related component segments of the B2B technology industry. Even as these segments become more commoditized, vendor reliance on third-party channels to sell and support these products continues to rise.
As I’ve stated in my previous Sandhill.com commentaries over the past five years, the cloud industry has been working hard to enlist channel partners to extend their reach and enhance their off-the-shelf offerings. While the role of the channel in Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) is still relatively modest compared to traditional hardware and software products, cloud channel programs are evolving quickly.
In fact, some recent M&A activity in the cloud marketplace was driven in part by channel considerations. For instance, Barracuda Networks stated in its announcement of its plans to acquire Intronis, Inc. in September, “This acquisition is expected to greatly expand Barracuda’s channel reach with the addition of nearly 2,000 MSPs….”
The cloud has created three key challenges to the traditional technology channel approach:
- The subscription service model requires cloud vendors and their channel partners to rethink their compensation and incentive models in a pay-as-you-go transaction business.
- It requires a different method for tracking highly dynamic transactions in which the number of users and their usage rates could vary dramatically over time.
- Tracking virtual service transactions is very different from recording physical product sales because it is more difficult to account for intangible assets.
Just as the tech industry is beginning to get its arms around these cloud channel requirements, it is now confronted with a new set of challenges in the IoT market.
As I’ve reported in my past Sandhill.com commentaries regarding IoT, the vast new world of connected products and services requires an even greater number of channel relationships to pull together all the piece-parts necessary to deliver end-to-end deployments in the highly fragmented IoT arena. As a result, IoT exponentially increases the channel management challenge by multiplying the number of players in the vendor-to-customer supply chain, and the number of transactions also multiplies across a myriad of hardware components and software microservices.
Gartner Group estimates that 80-85 percent of IoT devices will be sold by indirect channels (see: “Mass Adoption of the Internet of Things Will Create New Opportunities and Challenges for Enterprises,” Gartner Group, February 2015; G00274959). Tracking the “route to the customer” will involve knowing the movements of the device from manufacturer to distributor, to reseller, to installer and installer to the end customer.
Zyme offers a cloud-based Channel Data Management (CDM) software solution to help vendors and their channel partners better record and share information about products and services moved through IoT networks. Zyme’s Global Channel Directory now identifies more than one million partners globally.
The company’s SaaS solutions capture this data and use them to control the billing, compensation and supply-chain management processes. By automating the data collection, Zyme also helps vendors and their channel partners document their transaction processing procedures to meet accounting and compliance requirements.
Zyme is also teaming with Cognizant, which offers a subscription enablement platform (S3P) to tie the “route to the customer” channel data with asset management, subscription management and software entitlement systems for IoT manufacturers on Salesforce.com to support vendor and channel partner sales and marketing automation functions.
As the cloud and IoT business opportunities escalate, the need to expand channel ecosystems will also grow. Adopting a CDM solution to manage these relationships and optimize the indirect, third-party go-to-market strategy will be essential.
Disclosure: Zyme is a THINKstrategies client, and THINKstrategies has been engaged by Cognizant and Salesforce.com in the past.
Jeff Kaplan is the managing director of THINKstrategies, founder of the Cloud Computing Showplace and host of the Cloud Innovators Summit executive forum series. He can be reached at firstname.lastname@example.org.