Define Cloud. The two simple words which kicked off the inaugural Reseller News Distributor Roundtable in New Zealand

Straightforward in delivery but complex in interpretation, defining cloud is proving to be a meticulous task for the channel market, with the devil very much in the detail.

Despite its labelling as mere hype by the buzzword barmy army, behind the veil of media sensationalisation and marketing rhetoric lies a term that is significantly changing the ICT landscape as the channel knows it.

Yet for an industry led by distributors and followed by resellers, to move forward in unison shouldn’t cloud, in all its ambiguity, be appropriately characterised?

Distributor View

“Before we get started let’s put down some strong definitions,” opened Darryl Grauman, APAC Services and Cloud Director, Westcon. “Because it isn’t difficult to take hardware and software and cloud wash it really easily. So the real question is what’s actually hardware, software and cloud?”

While the rebranding of old services through a deceptive game of cloud word association is a method well highlighted, Grauman’s approach to cloud reflects Westcon’s own pathway to the skies, from the olden days of shipping boxes from A to B to the licensing world of software distribution before emerging at the gateways of the cloud, and all it encompasses.

“When I look at cloud I look at it as-a-service,” adds Grauman, who helped spearhead Westcon’s global cloud initiative, which was developed in New Zealand. “I look at it as software-as-a-service or platform-as-a-service and I believe once you get that definition right, as a distributor you can begin to provide a value wrap.”

Built through acquisition, Grauman’s Westcon is a Westcon opening the door to cloud service providers, enhancing the distributor’s catalogue and making it relevant.

For Westcon now holds virtual inventory, possessing global buying power and the ability to aggregate everything at a global level, as the US$6 billion company moves away from adding value through warehouses in hardware and licensing in software.

While Westcon’s transition reflects the journey of the traditional distributor, at Rhipe headquarters however the self-appointed Cloud Channel company has lived and breathed cloud air since the company’s inception, operating as a born-in-the-cloud distributor with a focus on offering value-add to services providers.

Yet for Stephen Parker, VP Market Research, Rhipe, the term cloud still remains as much as a marketing phrase as it is a piece of technology, but crucially for the channel, it has flipped the balance of negotiation between resellers and customers.

“Balance in the respect that customers are now driving the conversation instead of the channel,” added Parker, emphasising the growing opportunities for the channel within the cloud space.

“The channel used to be in that nice position of saying we know new things are coming down the line and coming into the market and we’ll choose when we launch them to our customers because we have all the cards and all the knowledge.

“Whereas customers are now saying, ‘hold on I can do this, this and this’ and informing what our partners are having to do so our value-add changes.”

In positioning Rhipe as the new way of channel distribution, Parker, who helps businesses “find their cloud story”, believes cloud is “just as much about how a change is driving decision makers in technology.”

“We all have our places as distributors in the middle ground,” he explained. “In creating value between vendors and customers, as distributors we do the same thing, we just have our own ways of doing it.”

Consequently, Parker believes the cloud has jolted the channel into understanding that the transaction of today should be made with the transaction of tomorrow in mind.

“We’re invested in ongoing success rather than how big we can make the sale today,” he added. “Today’s transaction is, at minimum, 1/36th of what we want it to be in the cloud.”

Across the table of industry leaders, and since embarking on Distribution Central’s cloud journey over two years ago, Managing Director Nick Verykios views cloud, and its emergence within the channel as an alternative pathway to market, not to be discarded or discredited, but also not to be billed as the all important and all conquering technology of today.

Instead Verykios finds the middle ground in the cloudy channel world, taking an objective approach because simply speaking, “cloud is not a product.”

“I can’t sell a skew called cloud,” he added, offering his experienced definition to the discussion. “It’s a pathway to market and a way that a specific solution is organised to be able to solve a customer problem in a way that it wasn’t before.”

But Verykios, in co-founding a $250 million distribution business, believes there’s a problem. “If you think as an end customer that you can solve your customer problem by borrowing technology, which is what the cloud metaphor implies, then you’re not solving your own problem and you’re actually in real trouble.”

As Distribution Central prepares to launch its own cloud play, Verykios sees cloud as another weapon in the armoury and another way of delivering to the market but vitally, in an era of hyperbole, it provides another option, not necessarily the option, to solving a customer problem.

“We believe there are three alternative pathways to market,” he explained, “and the reseller’s job is to work out which of those pathways is the best way to solve that customer problem and my job as the distributor is to provide what we think is the best pathway to solve this problem.”

Reseller View

Across the fence in the world of the reseller, and notably for Kiwi IT company Datacom, when seeking for cloud clarity there still remains “a lot of confusion” amongst Chief Information Officers in particular around how to maximise the cloud, as both individual and organisational opinion vary around the topic and its defining purpose within the market.

“At Datacom we see ourselves as more of cloud solutions integrator,” added Mark Hardie, Senior General Manager, Datacom. “We’re spending a lot of time consulting with our customers in terms of customer needs as we are a big application organisation which provides a lot of infrastructure in New Zealand.

“Across the country we’ve got data centres and our own cloud platform so we can offer customers an onshore platform as well as a public offering. At present every customer conversation involves a hybrid discussion.”

A sentiment shared by Deidre Steyn, General Manager A/NZ, ICONZ-Webvisions, a Kiwi hosting and Internet Service Provider, who also cites significant uptake and interest in hybrid models nationwide, as organisations seek more control in the cloud world.

“We’re a traditional infrastructure company who originally tried to provide everything for everybody but in the three and a half years since I’ve been on board we’ve consolidated our cloud offerings,” Steyn explained.

Speaking as a key industry player within the New Zealand cloud market, Steyn believes cloud growth across the country has stemmed from “businesses taking a small cloud, using it and growing from there.”

“We found that it was an entrant to market,” she added. “In the last year we have definitely seen a shift towards more private and hybrid cloud sales as customers become much more in control but the downside for us is that everybody now sells cloud, whether that be the distributors, the end-users or whoever, everybody is selling cloud.”

Weighing in as a fellow market leader in the cloud computing space, Steve Victor, National Sales Manager, OneNet says the company’s “entire business is built around the cloud”, hosting a wide range of software applications and data for clients.

“If I was to describe cloud to my sons or my parents,” Victor observed, “I would tell them that OneNet takes your software and data off your computers and servers, and securely delivers it back to you over the Internet to your computer or tablet in a similar view to what you experienced prior to giving it to OneNet on your desktop computer.”

A simplified approach in theory, but for Victor, what makes the process more effective than a mere transfer of applications and data is that OneNet maintains the environment including monitoring, patching and backups, all for a per user per month fee.

Providing a contrasting view from operating in a “reasonably unique” position in the Kiwi market as a specialist enterprise integrator, Open Systems Specialists, echoed the previous comments of Verykios, viewing cloud as “another tool in the toolbox”, a toolbox now brimming with hardware, software and cloud offerings.

“Cloud is not the be all and end all for us,” admitted Michael Lamont, Account Manager, Open Systems Specialists, responsible for managing a portfolio of key accounts ranging from small to medium businesses through to large multinationals.

“We’re still seeing strong growth in hardware and software and as a smaller specialist integrator we were never going to build our own cloud offering, financially it didn’t make sense.”

Lamont reports that cloud uptake hasn’t been staggering for the company, and while it’s certainly an option and relevant for certain scenarios and business needs, at present, OSS “is not seeing a whole lot of movement into the cloud.”

But as explained by Verykios, when defining cloud, shouldn’t the real question be; “What’s the best way to solve that problem? It doesn’t matter whether you’re cloud or on-premise, local or overseas, isn’t that always going to win?”

Cloud Disruption?

Irrespective of definition however, cloud computing is a disruptive force across the industry, generating both opportunities and challenges within the channel as the market digests a new approach to business.

At the heart of the change are of course the distributors, but spotlight also shines elsewhere, with opinions varied on how best to position the reseller in the market to ensure they remain competitive in their rapidly-changing high tech market.

So what does this mean for value added resellers operating in traditional IT channel markets? It is a fair assessment of the market for certain distributors to offer ultimatums such as adapt or die?

Or is the market missing the point, and as distributors develop cloud-based programs and launch them into the market, is that the real threat for resellers?

“In my opinion, distributors setting up their own cloud environment and selling them on is quite a threat in many ways,” added Stuart Stitt, VP, Managing Director, Fujitsu New Zealand, drawing on over 25 years of industry knowledge.

“Fujitsu is a multinational IT company and we have different pressures because we have a parent company which sets up their own cloud platform which we find difficulty in reselling. Also, we’re different to smaller organisations and resellers who are leveraging off a distributor or benefiting from easy access to capital or vendor finance, which again, is quite a threat to us.”

In offering a point of clarity to the discussion, Verykios was quick to acknowledge Stitt’s concerns not only as a Distribution Central reseller but also on a broader scale, believing reseller concerns to be valid, providing they exist.

“We are not competing with our customers and neither are the other two distributors at this table,” Verykios clarified. “That said, Stuart raises a valid point and we have identified seven distributors in the market who are in fact competing with their customers but through Distribution Central, you can only access our marketplace as a reseller.”

A statement endorsed fully by the accompanying distributors, with Grauman confirming that Westcon is “not competing with its resellers” and Parker revisiting Rhipe’s role as a distributor.

“Just forget what we’re selling and forget the industry,” he explained. “The role of the distributor is to sit in the middle and add value, and if we stop sitting in the middle and start sitting next to the customer then we’re not being a real distributor.”

In fact, added Verykios, the distributor becomes a “disintegrator and if that is the case they must accept that.”

But Stitt’s impression of the channel, and how cloud is impacting distribution and the changing role of the reseller is not unfounded.

According to Grauman, as little as two years ago, 60 percent of Westcon’s Cloud Service resellers didn’t exist, reflecting the pace of change within the industry and highlighting that for Westcon specifically, resellers of the past are not necessarily resellers of the future.

Speaking as a Westcon reseller of the past, and one of the future, Mark Hamilton, National Manager of Enterprise Solutions, Eagle Technology, says that for the systems integrator, “cloud is an extension of what we’ve always done.”

Almost eliminating the need for wholesale change in how resellers go to market, from the perspective of Hamilton, there are two things resellers ask of distributors, cloud or no cloud.

“We want efficiency of service and fair pricing,” he added. “It’s real simple stuff.”

Reflecting the overriding tone of the reseller community at the table, Hamilton believes cloud represents a “new bag of tricks to play with” in the market; “We now need people with expertise in visualisation, storage, security etc and we’re finding that our technical guys have real fire in their bellies because of the new advancements in technology.”

Forward-thinking in nature but traditional in approach, Hamilton acknowledged that Eagle did consider the option of going direct but quickly flagged as the company “certainly values our distribution channel.”

Value-Add

On the topic of value, and how certain distributors are in fact enabling, rather than competing, with their channel, Parker believes the role of Rhipe in particular is to educate resellers and work on their behalf, presenting knowledge to better enable resellers to go to market.

“But don’t resellers need to do that?” asked Hamilton, questioning the role of the reseller in the chain.

“Taken in context,” Parker responded, “we’re not suggesting that the distributor tells the reseller what to do but it is about adding value in helping our partners understand market changes so they can make important decisions and remain as a powerful player in the middle.

“If a reseller is thinking of Option A, our job is to also provide Option B and Option C to better enable their decision making process.”

For Hamilton however, the reseller “needs to do the thinking for themselves.”

“They have to think in the context of how they are operating,” he explained. “A recent examples includes our work with a company who has a strong GSI presence and big user base.

Reenforced by Stitt, while also concurring with Parker’s call for more reseller options, Fujitsu employs “highly skilled architects” operating at the peak of the technological mountain, tasked with pulling together information from distributor and manufacturer to ensure customers have multiple choices when making buying decisions.

But as Hardie of Datacom interestingly points out, and as the inaugural Reseller News Distributor Roundtable moves into how traditional distributors are changing their business models to incorporate the cloud, resellers should ask themselves; “What were you doing before cloud?”

As featured in Reseller News, 29 April.

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