Cloud sales channels

When Windows Azure first launched I thought that their well established sales channel and partner network would give them the edge – where loyal partners would sell the next big thing from Redmond, as they have done in the past. A few years down the line and Microsoft has been unable to turn that well-oiled machine into increased adoption of Windows Azure. Indeed, the reverse seems true where partners are corralling back to traditional enterprise IT and barely giving Windows Azure any attention. On the other hand Amazon Web Services has never had a sales channel and is, if you look at the broader Amazon philosophy, the epitome of disintermediation — where authors can sell to readers with no publishing or distribution intermediaries in between. Disintermediation is not a good brand when trying to attract ‘partners’.

Perhaps the existing Microsoft model harks back to days when software had to be shipped out of a distribution centre with manuals and media that had to be fed, one by one, into a carefully built server. That is no longer necessary and the customer can use their credit card and go directly to the source and they believe, perhaps wrongly, that going directly to the supplier is the best thing. This direct-from-source model means that the traditional channel, where SIs pass the product along after adding some margin, is non-existent. Despite the direct sales model, there are still ‘partners’, even Amazon Web Services appears to have them (with a newly announced ‘network’), but it is not what it used to be. It has gone from “We’ll market this product and you make money selling and supporting it” to “We’ll market, sell and (sort of) support this product and you make money by selling additional services to the customer (that you have just handed over to us)”. It is little wonder that the existing partners are struggling to see how this works for them.

Of course, those reading this post will be thinking that having a direct sales model is as it should be. The public cloud, it can be argued, is about breaking of traditional IT models — if planning, provisioning, development, operation and architectures have changed, then why should the sales channel and acquisition be built on outdated practices? There are potentially two reasons why a well established sales channel may be necessary, or at least useful.

Firstly, people do need help getting their cloud stuff running. Being able to rent an instance using a credit card is not the only skill that is required to use the cloud and a lot of potential buyers are left out of the cloud revolution because they don’t know what to do with cloud technology once they have their hands on it. For cloud computing to truly break into the mainstream it cannot remain within the hacker community and needs to be able to be consumed by those organisations without the full breadth of skills. Someone from the channel to help them choose, architect and configure seems logical. Unfortunately though, in their attempt to make the cloud seem easy to use and consume, cloud providers do not want to mention that a partner is advised in order to get it working properly.

Secondly, there is a lot of non-cloud IT still happening. Part of the reason for this is not technical and is related to the huge investment that the incumbents have in traditional IT and their desire to keep their market under their control. There are also a lot of talented, well connected and wealthy salespeople selling traditional kit and would never sell public cloud offerings because it makes no financial sense to them. How much commission would a salesperson get selling a one petabyte multi-datacentre SAN versus the salesperson who sells Amazon S3 as the best solution? (The answer — a lot, lot more). For every cloud ‘win’ there are thousands of traditional IT purchases simply because of the sheer number of vendors sweet talking the CTO — and the CTO has made time for them, their campaigns, their presentations and sales pitches. So while cloud providers are creating channel conflict, competing with their existing channels or simply don’t have one, Oracle, EMC and other enterprise vendors are making money hand over fist selling as much as they possibly can. And, just to rub salt in it, are branding their products as ‘private cloud’ — ensuring that the CTO can report back to the steering committee that they do have a cloud strategy and locking out the public cloud for a few more years.

I think that there is still a lot of development and maturing that has to take place with the channel strategies that get public clouds into the hands of the people who will pay every month. It may not be as complex as traditional IT where tin has to be physically put in place, but it is a lot more complicated than getting someone to read a book on a kindle. Microsoft hasn’t been able to work their channel to Azure’s advantage and is probably dismantling the channel that took them twenty years to build. Amazon has direct sales in its DNA and are dipping their toes into partnerships — while potential partners are fearful of Amazon stomping all over them if they turn their backs. There is a middle ground that needs to be found and while the big providers take their time to sort it out, old school IT (branded as private cloud) continues to rake in the cash. Perhaps it is time to start thinking less about technologies and features and focus on building sustainable ecosystems that allow big cloud providers to work in harmony with their customers and providers of specialised skills, products and services.

Simon Munro

@simonmunro

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  1. De Olho no Azure – 22/04/2012 « Pensando Azure

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