SMB Cloud Computing Applications are Squeezing Channel Relationships

It is becoming quite well-known that traditional channel relationships, which developed over a thirty period based on PC, LAN, PC Server and Client Server architecture are changing rapidly based on the characteristics of Cloud Computing  products and services.  And now we have data to prove it based on Techaisle surveys of SMBs.

It is in some ways analogous to how the industries where value could be digitized were essentially transformed by the Internet because the value could move instantly around the globe. On a worldwide network, even a relatively slow one, bits gained an advantage over molecules in advertising, banking, music and entertainment, travel,  insurance, and many others.

With Cloud Computing, Remote Managed Services, Virtualization and other emerging cloud-based technology applications such as marketing automation, business intelligence and vertical applications exploding in the SMB marketplace, distribution channels face new challenges; these solutions can be efficiently delivered directly to the SMB customer, can be downloaded from the Internet, can be configured by savvy SMB customers or remotely, can be maintained, updated and upgraded online - in many cases the value can be delivered online. To further stack the deck, vendors who do not need help delivering complex solutions don't really have an incentive to work with a partner; to the contrary, they are able to sell much more efficiently by using the web channel and an inbound sales force. If you doubt it, sign up for a free SaaS trial and if they don't call within two hours, you are the exception.

SMB Channel Preference by Cloud Technology

The survey data shows a cross-tab of SMB decision makers,  and shows that for the majority of new cloud-based applications and services Vendor Direct and VAR are the preferred sources of purchase.



At this point it makes sense to discuss the channels and why some are more suited to certain types of employee size businesses than others. We categorize Cloud Services into Infrastructure, Communications, Business Applications and Vertical Market categories.  Provisioning of infrastructure services, like adding remote storage and back up services, has been simplified through web based interfaces and is well within the reach of IT staff. Similarly, horizontal SaaS applications can be up and running in minutes and customized by business users in a matter of hours or less - think GoDaddy, Constant Contact, Central Desktop, GotoMeeting, Sherweb - why pay a channel partner to implement these services?

Adding Value to Self Service Applications

Value Added Services become necessary in relation to the level of solution complexity; in business applications like robust CRM and ERP solutions from companies like Salesforce.com and Netsuite. Even if configuration can be accomplished with Internal IT staff, it may be better to let a VAR  or specialist do it to save time and money, as with configuring Enterprise Applications like Siebel and SAP. Cloud Data, Network and Application Integration Services are also in high demand and capable Service Providers have no shortage of potential partners.

As discussed in an earlier post, these relatively easy-to-deploy solutions have also given rise to an  important new source of advice, recommendations and services - the independent IT consultant - which will be the subject of one of our next posts.

Davis Blair
Techaisle