The aggressive move among distributors into the cloud space could help offset revenue declines, but will struggle to gain traction until these marketplaces can deliver a truly comprehensive suite of services.
That was the message from Canalys chief executive Steve Brazier, who used his opening keynote at the analyst's conference in Macau to discuss cloud marketplaces, which have been a huge theme across the channel in the past year.
Ingram Micro leads the pack, said Brazier, who added that "many distributors are following suit", including Tech Data and Avnet. However, no distributor marketplace is complete and hence are struggling to drive sales.
"The benefit of the cloud marketplace – the aggregation of cloud services – is you can deliver single sign-on, one employee directory, one bill, and consistent security policies across the range of software you are deploying in the cloud. It is a compelling offer," Brazier said.
"However, it only makes sense if those marketplaces are comprehensive. Today there isn't a marketplace in the world that can combine even AWS and Azure in one selling transaction, which is really holding back deployment. The [lack of a] comprehensive portfolio is holding this business back."
Alex Smith, director of channels at Canalys, hosted a breakout session focused squarely on cloud marketplaces, where he sounded a word of caution for distributors.
"Overall, there is very little evidence of significant commerce flowing through enterprise-grade marketplaces. When we look at AWS' tremendous growth, a lot of that is happening through direct engagements in terms of bringing large-scale customers onto their infrastructure," he said.
This doesn't make such marketplaces irrelevant, Smith added. While e-commerce sales are lacking, functionality such as integration of myriad cloud different services and providing integrated billing "are hugely important".
"Investing in that capability will enable them [distributors] to provide cloud services through a reseller community to customers, but that main part is I don't believe the actual procurement will happen though the marketplace," he said.
One Australian company seeking to bridge the gap is Buttonwood Cloud Exchange, founded by Allan King, owner of Canberra reseller Infront Systems. Buttonwood provides an orchestration, governance and billing layer that sits atop hyperscale cloud providers.
Management consoles and orchestration portals must go beyond spinning up vanilla workloads and virtual machines, King told CRN at the conference.
The value in cloud exists in "the native services on offer", said King, who pointed to complex services such as AWS Relational Database Service or Elastic MapReduce as the true use cases for public cloud. "Spinning up VMs... is not the true cloud use case."
The ability to truly aggregate AWS and Azure services would suit a market demand, added King. "People want multiple clouds. The services available in AWS are not the same as the services available in Azure and vice versa. The ability and skillsets for a small organisation to have skills in both clouds is a bridge too far. The industry's charter is to abstract that complexity without compromising the power."
An MVNO model for cloud
In his keynote, Brazier suggested distributors could take a leaf out of the telco book and bring a mobile virtual network operator (MVNO) model to cloud.
"Something interesting is beginning to emerge – where we learned from the mobile industry – where the marketplaces begin to aggregate cloud services. Go to AWS, buy in bulk and then break up that bulk and sell it on to local customers cheaper than Amazon can itself," he said.
"We are seeing the emergence of an MVNO model in the cloud marketplace environment, which could be very exciting if the cloud providers are willing to support it aggressively enough."
Next: Cloud marketplaces in Australia
All of Australia's major distributors have launched cloud marketplaces in the past 18-24 months, bringing a diverse spread of infrastructure-as-a-service and SaaS vendors to the market.
Ingram's marketplace leans heavily on Microsoft, particularly driving Office 365 migrations. The distributor supports complementary vendors such as BitTitan and SkyKick. Ingram acquired the Odin system behind its marketplace in December 2015.
Both Westcon and Distribution Central (now Arrow) included AWS as they launched their marketplaces. Like Ingram, Westcon went on to acquire the platform underneath its cloud marketplace, which it launched in July 2015.
Arrow has now forged partnerships with both AWS and Microsoft, following its appointment as an indirect Cloud Solution Provider with a heavy focus on Azure.
Synnex launched its cloud automation platform in March with Rackspace and IBM Softlayer as partners, and earlier this month announced the addition of Microsoft following the distributor's appointment as an indirect CSP.
Dicker Data announced its cloud marketplace in July 2015 and has since been appointed as a Microsoft indirect CSP and secured deals with a series of vendors to help partners with cloud migration services.
Rhipe's cloud play also centres around Microsoft as one of Australia's first indirect CSPs. Rhipe also aligns with IBM Softlayer to allow partners to host software on SoftLayer's "bare metal" servers.
Avnet's cloud marketplace offers support for a range of cloud providers. Its Cloud Toolset supports AWS and IBM Softlayer and allows users to track cloud usage and charges, generate bills and invoices and package subscription-based services.
The distributor is a Cloud OS Network partner with Microsoft, which means Avnet's data centre architecture is technically validated with Microsoft Azure. Avnet signed up as the first Australian distributor of US telco CenturyLink in April 2016.
Buttonwood's King said: "There are a lot of companies out there doing billing, there are companies out there doing orchestration, there are companies out there doing aggregation of SaaS services, there are companies out there doing analytics. But you need an ecosystem architecture because none of them can play harmoniously without knowledge of the other."
During Brazier's keynote at Canalys, which is the fifth APAC outing of the company's annual conference, he said distributors across the region are struggling to find growth and this has hastened consolidation. He pointed to Arrow's acquisition of Distribution Central and Tech Data's impending takeover of Avnet TS as two major examples.
"We would expect more consolidation and a move toward a market where there are maybe three or perhaps four dominant players around the globe. When industries stop growing they consolidate – across the board whatever industry that might be," he added.
CRN is a media partner of Canalys. The journalist travelled to Macau as a guest of the conference organiser.