Published: December 9th, 2014

TORONTO – Channel guru Bruce Stuart of Vancouver-based ChannelCorp made his only Canadian stop at the Canadian Channel Chiefs Council (C4) event called Building Successful Cloud Channels.

Stuart startled the crowd of channel professionals from major vendor organizations by saying the old margin conversation is no longer effective.

He added that a quarter of the cloud-capable channel partners today are born-in-the-cloud-partners, while not too of the traditional solution providers have the motivation or the money to make the transition.

“50 per cent of the channel is insolvent and is finding it hard to pay the rent. My concern is that the ones left behind do not have the capability and the capital to make the changes,” Stuart said.

Current channel models being used in high tech are:

  • Traditional reseller/technology provider;
  • Master VAR;
  • Volume/value distributor;
  • Cloud builders;
  • Cloud application providers;
  • Cloud infrastructure providers;
  • Cloud service resellers; and
  • Cloud aggregators.

A master VAR, according to Stuart, is an old-school VAR that does business roughly on an 80 per cent value-added selling model. An example of this is Itelligence Group of North York, Ont. This company is considered SAP’s largest channel partner in the world. The company also has four offices in the U.S. and was founded in Bielefeld, Germany in 1989.

Stuart said in the master VAR model, SAP will act similar to burger giant McDonald’s and each master VAR would have a different spin locally.

He added that distributors are also getting into this game as cloud builders and aggregators with examples such as the Ingram Cloud Marketplace and ArrowSphere.

Forrester Research found that the cloud/SaaS/Managed Print Services/ PaaS/IaaS will have reached about $100 billion market by 2015, growing to $160 billion by 2020.

What’s crucial to channel partners is how does a transactional partner transform or transition itself so that it can survive in an annuity world? Conversely, how will the vendor community, which is used to selling products, help the channel in this transformation?

This is the pivot most channel partners are facing today, Stuart said.

“Smart cloud builders in the channel are leasing (cloud services) and with that they are becoming more successful selling cloud because it’s a financial conversation,” Stuart added.

A good example of this pivot is from a channel partner not even based in Canada or the U.S. It is Mexico City’s Compucentro, which transitioned into a cloud service reseller and only deals with re-occurring revenue that includes managed print services.

According to Stuart, Compucentro created a new company out of its old legacy solution provider business. Compucentro was a top HP VAR in Mexico, but they began to lease cloud services from a provider such as Sungard.

“This is a good success model for pivot transitions. It’s like an internal start-up or they buy a small company of five people and then include some of their own staff and move to the cloud,” Stuart said.

Stuart closed his workshop with a list of questions channel partners are looking to get answered by channel executives inside vendor companies. They are:

  • What is the state of cash for your partners?
  • What are you really asking your partners to do?
  • What species and sub-species of partner do you plan to use to go to market?
  • How will the species you decide to work with make money doing what you want them to do?
  • Do you have the internal skill sets to do what needs to be done… where is the potential problem?

“If you are a Canadian channel chief it’s not much to ask a partner these three things: How much do they have to invest, what is the risk and when will the return be realized?”