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The Disruptive Force of the Cloud in the Channel

By July 19, 2011Article

Karen (VP of Channel Marketing for one of our clients) and I were having a phone conversation the other day. She asked me how I thought the delivery of services via the cloud will impact her channel strategy. She said, “Some of our partners are really concerned that their business with us could go away if we’re successful with our cloud services approach.”
I responded that I used to think the cloud was bad for channel partners too. But our recent work has shown that that’s only true for some partners. Her real concern should be with her more sophisticated channel partners. They are becoming Managed Service Providers (MSPs) to battle the very concern Karen raised, and when that happens, the game changes for her.
Riding on the cloud, many channel partners are morphing into full-fledged MSPs
Channel partners are looking at the changes cloud services are creating and the more sophisticated ones see an opportunity to become even more important in the value chain to the end customer. Rather than be cut out of the equation, they are adding services that make them indispensable to their end customers and diminish the value of any one particular technology vendor.
This is particularly true with SMBs or within verticals. As SMBs have gotten savvy to the cloud, they want their services on-demand, and to have them scale instantly to the needs of the moment, and perhaps most importantly, to not have to manage their IT function.
When channel partners decide to become MSPs, they create an overall offering (architecture) for the market they’re serving. When that happens, for technology vendors, your product is either IN or it’s OUT of that architecture.
Full MSP management will include everything customers touch (hardware, software and services). MSPs will limit the options they provide to customers … and that will mean only one option is selected (by the MSP), about which the customers have no real choice. SMB and many vertical end customers are willing to give up that choice in order to have someone manage everything for them.
That means the MSPs decide what hardware and software they’ll offer. As an example, think of security software on PCs. Up to now, an MSP’s 100 customers might have been able to choose from three or four security software options from different vendors. But the MSP will make this choice for the customer. They will make one selection for their architecture … end of story. If you’re the provider of that security software, you can pop the cork and celebrate. If you’re not, you’re left out in the cold.
The successful MSP will grow to serve many, many customers. For those end customers, the technology vendor no longer influences their decisions. Only the MSP will.
Pay attention to the new power player
I told Karen that we are actually watching some vendors ignore this trend. And that by ignoring it, not only are they wasting tremendous dollars in marketing to people who won’t make the decision (end customers), but they’re going to lose the architectural sale to the MSPs.
Karen is smart to be paying attention to these observations. That will give her the chance she needs to change the nature of her channel partner relationships.
She shared with me too that she was already thinking about this at the product level. “Certain aspects of our product line need to change to accommodate this shifting dynamic. We need to start looking at things through the MSP’s eyes, not just our end customers.” She’s exactly right … and forewarned is forearmed.
For others, though, who ignore this disruption, they may find that before they’ve even considered a new battle plan, they’ve lost the war.
Glenn Gow is CEO of Crimson Consulting Group, a strategic marketing consultancy focused on B2B clients, with a particular strength in technology marketing. To read more of Glenn’s articles, visit the Crimson blog.

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