How cloud computing will impact the channel

Derek Singleton, ERP Analyst, Software Advice

The evolution and proliferation of cloud technologies is impacting internal IT departments. As we go forward, this breed of technology will require IT professionals to develop a new set of skills to keep up with the changing dynamic of business applications.

However, IT professionals aren’t the only ones that will need to adapt to the cloud, the channel and reseller community is poised to undergo some disruption as well.

Over the next five to ten years, opportunities to resell software and hardware will dwindle as more companies adopt cloud-based systems. For instance, complex manufacturing resource planning (MRP) systems–an application once thought impossible to run in the Cloud–are offered under a software-as-a-service (SaaS) model today.

Previously, purchasing and deploying an MRP system meant resellers could make sales with the servers and configuration needed to run the application. That’s starting to change. To be sure, most MRP software is still sold as an on-premise application, but it’s indicative of how processes for software procurement, implementation, and training will change in the cloud age. For instance, value-added resellers (VARs) will need to adapt to compete in the times ahead by changing their current service offerings.

In this evolving market, VARs need to offer more sophisticated services and embrace the coming changes to avoid being left behind. Partnership with a successful cloud vendor is essential, but vendors are finite. That’s why there’s a land grab going on. The strategic VAR will enter the brawl now and get to these vendors before competitors can.

The ideal cloud partner for the VAR will have three key attributes:

  • A bright outlook such that their product will be in demand
  • Plans to develop a VAR channel in addition to selling directly
  • Partner support in the form of software development kits (SDKs), co-marketing and training.

But the territorial victory of partnership is only the beginning of the cloud transition. Next, VARs should make five bold moves to gain a sturdy foothold in the market.

The 5-Step cloud era VAR survival playbook:

1. Specialize. Narrow your focus to a vertical market or application category, rather than defining your company by its geographic territory. Cloud vendors are still building up their core applications, so the industry-specific capabilities aren’t yet up to par with those of on-premises systems like Microsoft Dynamics and Epicor. Be the first to develop vertical extensions for a major cloud-based system, and learn to speak the buyer’s language. Alternatively, gain expertise with one application category, such as business intelligence or accounting.

2. Develop competency on a leading Platform-as-a-Service (PaaS). You’ve probably learned at least one SDK for on-premises systems. Now you must do the same for new cloud products. Learn and specialise in developer tools for a cloud-based platform like SuiteFlex (NetSuite) or Force.com (Salesforce.com). You can build your own applications and customisations, and then market them. You’ll build credibility in the eyes of both vendors and customers. The time is now to invest in cutting-edge skills for the future before it’s too late.

3. Make the cloud’s efficiency work for you. Just as the centralised nature of cloud-based software benefits customers, it can also benefit VARs. With cloud-based systems, there’s far less need to send staff to the site. Use the extra time to start an internal, centralised sales team serving a broader territory. You can become as good at inside sales – or better than – the ISV. ISVs respect sales machines. The same applies to service. Retrain your team to service customers remotely, such that they can serve multiple clients in a day.

4. Offer technology-enabled services. Because cloud-based systems are accessible anywhere, it’s easier to become a seamless extension of the customer’s organisation. Offer business process outsourcing. Some core business processes – accounting, for example – are essential, but don’t offer competitive advantage. Develop internal competencies so customers can outsource these operations to you. If you’re a former accountant-turned-VAR, get closer to your roots. Apply your domain expertise to services like collections, procurement, and reporting.

5. Promote the cloud to your existing customer base. If you can’t beat ‘em, join ‘em. We’re entering a major platform transition – there will soon be an incredible shift to cloud-based systems. Get in on the action now and embrace it. Your biggest asset is your existing customer base, so help them transition to the cloud. Don’t try to sell against a secular trend. If your customers are unaware of the cloud, explain the benefits and sell cloud systems to replace on-premises ones. Keep pace with the new technology at all costs.

This blog post was written by analyst Derek Singleton of Software Advice, a website the reviews ERP software vendors. 

Share with us your thoughts. How are you seeing the channel change? Please leave me a note in the comments section below.

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