New wave of SMB channel conflict in building a cloud practice

This is a two-part blog article. The first part dealt with “SMB IT channel reaching an inflection point”. Second part, below is on “New wave of SMB channel conflict in building a cloud practice”.

Turning a supertanker

Building an effective cloud practice within a channel business is a complex undertaking. Using an old metaphor, it has been compared to “turning a supertanker.” This is an inapt comparison, and not just because the vast majority of channel businesses are far smaller than a large ocean vessel. The real problem with the comparison is that turning a supertanker refers to an exercise whose success rests on an anticipation of future change. Certainly, this is part of the problem for the channel – what is the best time to invest in ramping up cloud practice resources? – but the issue has a much greater scope.

A successful cloud business practice requires new management metrics, new financial models, new sales processes (and generally, compensation models), new vendor relationships, new marketing activities, new consulting capabilities and new technical support capabilities. To use a nautical analogy, creating a cloud practice within an existing channel business is like building a second boat within your ship, sailing it off in a different direction, and maintaining alignment between the two courses in order to maximize synergies and benefits and reduce expensive discontinuities.

Abundantly Complex

If this sounds difficult and complex, well…it is. However, there is abundant reason to believe that the exercise is necessary for future viability and success. Roughly 80% of channel firms either offer some type of cloud solution today or are planning to offer cloud solutions; of these, more than 60% expect cloud revenue increases in in next one year (Techaisle’s SMB Channel Partner Trends study). This is not a single-year issue, though: the business impact of cloud within the channel is expected to continue to increase over time. Techaisle expects that over the next several years, the position of the generalist channel firm – the “one stop shop for solutions” – will become untenable, squeezed by market forces requiring higher degrees of specialization. Some channel firms will specialize in cloud, while others will link cloud with one or two other specialties, such as mobility, virtualization and converged infrastructure, and/or managed services. But very few channel businesses will remain viable without having a credible cloud business practice.

New wave of conflict

Certainly, there are and will be challenges for channel businesses and their vendor partners to address through this transition. At a relationship level, cloud is driving a new wave of channel conflict; SMB channel partners are seeking a mix of attributes that are not offered by any single supplier, requiring vendors to build recruitment and support strategies that span multiple competencies. Within channel businesses themselves, different approaches to building cloud business practices and the very wide range of cloud workloads sold by channels to SMB customers complicates the process of charting a go-to-market strategy. Almost universally, though, SMB channel members recognize that they must chart a cloud path. One of the most compelling findings in Techaisle research shows that demand-based excuses (along the lines of “SMB customers aren’t ready for cloud”) no longer apply – the market is opting for cloud, and the channel has come to grips with this. This exposes another, potentially darker set of challenges: the channel is having to face up to its own limitations. SMB channel business owners and executives are wondering whether they have the expertise, financial resources, knowledge and understanding needed to build cloud practices. It’s very likely that many are also privately wondering whether they want to jump fully into this new operating reality. Especially for owners and managers who are near the end of their careers, a fear of the unknown may be exacerbated by a reluctance to engage in yet another wrenching transition – one which may well be greater than the previous hurdles (from turnkey to LAN, from server to client/server, from centralized to decentralized) that they have already successfully overcome.

However, in the end, the impetus for decisions regarding whether to invest in building a cloud practice, how to build a cloud practice, and how aggressively to position cloud within the overall offering portfolio isn’t really subject to the outcomes of internal debate. Cloud isn’t a “religious issue” – it’s an SMB customer choice issue. Channel business management has the option of pursuing cloud or not, but at the same time, SMB customers have the option of embracing cloud or not, and competitors have the option of developing cloud practices or remaining focused on non-cloud alternatives.