The line between traditional distributor sales and sales of cloud or as-a-service is incredibly blurred. Really, there’s little difference – almost everything can be done online now, so the barriers between the old and new worlds are eroding at a rapid pace. Distributors have spent recent years developing cloud marketplaces to help partner transact products digitally.
While they remain standalone systems for now, the day will soon come when we stop calling them ‘cloud portals’ and this simply becomes the standard way of dealing with distributors.
Services and hardware
Few resellers are 100 percent software or services, and most distributors are the same, with the exception of Rhipe. That means the channel requires systems that can deal with both cloud-style consumption services as well as traditional product sales.
Distributors have understood this need, and most offer a way to order everything in one place without having to jump between multiple systems from the one distributor. Nextgen Connect has taken a different approach as an entity with a specific focus on the Oracle cloud ecosystem, which is separate from parent Nextgen Group.
Dicker Data stresses that its CloudPortal platform is not standalone. “It’s fully integrated into the Dicker Data website,” says Ben Johnson, general manager, marketing and strategy.
“It’s a seamless experience for partners regardless of the technologies they require.” Partners use the same platform to track warranties; support contracts; and purchase hardware, software, or cloud all on a single invoice.
Synnex was also keen to emphasise its integrated approach. “Our portal provides a single place to manage both cloud services and hardware,” says Michael Tea, general manager of e-commerce and cloud services. The Synnex portal also highlights renewals, including alerts 30, 60, or 90 days in advance. “The reseller gets a pipeline alert that they can pass over to their sales team, and the sales team then has an opportunity to reconnect with the customer,” Tea says.
In a world where ongoing subscriptions create a temptation to just sit back and keep billing, a reminder helps ensure that a reseller keeps talking to their customers and looking for additional areas to help, as well as upsell and cross-sell opportunities. This drives revenue for both the reseller and the distributor.
Own or rent?
Several of the distributors we spoke to were keen on highlighting that they owned the intellectual property on which their cloud platform is built. Synnex, Dicker Data and Ingram Micro have all invested heavily in platforms that they own and control, and are convinced that this is an ace up their sleeve.
“We looked at the market offerings for cloud portals and decided that none of them suited us,” says Tea. Synnex decided that building a portal from scratch was its best option. Other distributors – namely Ingram Micro and Westcon-Comstor – started building a platform based around a third party vendor, then decided it had so much value to them that they should just buy the whole thing.
Ownership of the platform implies an ability to control your own destiny, but running the platform yourself comes at a cost. Development and maintenance of the cloud platform itself falls to the distributor, which is also selling services to resellers. In a kind of irony, rather than renting a service from a cloud vendor and reselling it with some customisations, these distributors have chosen to take on the dual role of distributor and software developer.
“In the cloud space, I don’t really call us a distributor,” says Lee Welch, general manager at Ingram Micro. “I call us a services aggregator and I call us a software company.
“What we do is very different to our traditional distribution business. I don’t like my team using the term ‘distributor’. We’re a services aggregator.”
While it’s not as exciting as some of the technologies bought and sold through the portals, the way distributor cloud portals handle money is a core part of their value to resellers. Customers like to buy in multiple ways, and different vendors like to take money in different ways. Matching these differences and all of their weird and wonderful combinations takes a strong billing engine.
Dicker Data, Ingram Micro and Synnex were all keen to explain that they have spent time designing their credit terms and payment methods to make it easy for resellers to transact with them. “Customers can pay for cloud services with the same credit terms they’ve already established with us,” says Ingram Micro’s Welch. “We can reconcile even complex billing with our own custom-built Cloud General Ledger.”
Ingram Micro is happy to take payment on credit terms, by credit card, or even do payment collection on a reseller’s behalf. Credit terms can be a little trickier, and while having a single, consolidated line of credit might make sense, Ingram Micro deliberately splits hardware from cloud services terms.
“We don’t want a single large hardware order to hit the credit limit for a customer and have that trigger issues with the cloud services,” Welch said. Keeping credit terms aligned with the nature of the underlying business makes sense, and it illustrates that understanding how to build a portal to support the reseller business is about much more than a simple e-Commerce site with a list of SKUs.
Ingram Micro stands out in one important way that we expect other distributors will copy (if they have not already done so). Ingram offers service desk software through its portal, as do many other portals, but Ingram encourages its resellers to use the service desk feature as part of their own business. It is offered as a service, complete with a staffed national phone number they can use as if it were their own service desk.
“It’s about plugging into their business,” says Welch. “We also have a dedicated person to work with local ISVs to join us as a vendor locally, and to help them go offshore.”
By more tightly integrating with their resellers, a distributor is less likely to suffer from churn as resellers join and leave their network. This keeps costs low, while also making revenue more predicable. It also encourages an ecosystem of mutually supporting vendors, much like the models of certain data centre providers that stress the networks and marketplaces available if you join them.
Avnet wants to be “the service provider for service providers,” says cloud and platform manager Greg Small. “We aim to be a one-stop shop for our partners, supporting multi-cloud, multi-vendor, multi-tenancy, multi‑currency and multi-tax.”
A cloud portal that is tightly integrated into a reseller’s financial systems creates significant switching costs, should a reseller ever want to change distributors. Smart distributors will also know that they have access to excellent market information on what is selling well, which resellers are succeeding, and how. They can use this information to help their entire network improve, and increase profits for everyone.
Much as data centre providers tend to stress their networks and interconnections as a reason for choosing them, we expect distributors to start making more noise about this aspect of their platforms relatively soon. The collection of vendors – as well as other resellers – in that network will no doubt become a point of difference that distributors can use to carve out a position for themselves in the marketplace.
In a world of commodity services, finding ways to be different becomes harder than ever, and distributors will need every bit of help they can find.