Tuesday, 10 November 2009

Reseller Dilemma

Folks, it’s becoming increasingly clear to me that cloud-based IT and communications delivery will become a major threat to reseller serving the small and mid market customers, unless they adapt and quickly augment their business models. David Pratt, the COO of ThinkGrid, recently wrote a very insightful article for CRN called; What future lies in the Cloud, where he discussed the reseller dilemma in “cloudy conditions”.

To capitalize on the cloud wave, resellers must master the art of selling capabilities and value as opposed to selling gear and software. Have you heard that before? Of course you have, but a reseller’s ability to fully embody this becomes pivotal when there are choices in delivery models. What I mean here is; as a reseller of unified communication, the whole organization needs to be fully prepared and able to deliver those capabilities as a service OR as premised based equipment and software licenses. This is where complexities set in. Transforming a business model and its organization which is hard-wired to sell customer premised based solutions into a service based business is quite daunting. Every corporate function of the business needs to change and adapt in order to be successful in the cloud.
Mr. Pratt also makes a great point when he says that the hosting and cloud infrastructure companies don’t typically have the customer relationship and unique customer knowledge that the resellers have from years of serving a particular market. As such, the hosting and infrastructure companies are potentially great partners for traditional resellers entering the cloud.

The resellers in the voice and data space have gone through demanding transformations before. However, the business transformation required to adapt to cloud-based delivery will perhaps be their biggest challenge yet.

Are there resellers out there willing to share their experiences or comment on the challenges?


  1. Interesting post! According to me the resellers haven't yet understood the danger or/nor the challenge as you stated in the text. What I can see from my expiriences is that resellers are losing shares without realizing it yet. The vendors are taking their parts through SaaS. This trend will continue, SaaS companies will look for hosting partners and it's there they eventually should put effort. Selling SaaS is much easier then on premise solutions, and vendors will not need that much help from their res. partners. In begining yes, while they will use partner's built relations which will later be built directly with the vendor. Resellers need to focus on independent advisory/consultancy on SaaS as well implementation/integration of such services. The margins on products/service will decrease drastically.

  2. Bera, You're right in that most vendors will offer, or are already trying to offer their solutions as a service. However, I believe that the vendors will still depend on an indirect sales channel to provide sufficient market coverage (e.g. geographic, vertical and delivery model). Having said that, I think the indirect sales channel for Cloud/SaaS will look very different from that of re-selling premised based solutions. The challenge for the vendors will be to develop an eco-system of partners that can collectively drive added value and influence sales.

    a) Integrated online infrastructure. b) Online service aggregation. c) Online distribution of service. d) Large network of influencers and resellers of service value. These are 4 channel areas that need much attention and exploitation by vendors going forward. Unfortunately, I don't believe the majority of traditional CPE resellers will see a natural fit for them in the short to medium term.

  3. Roland

    I have been in the Telecom Business for 25 years and have been on both the CPE side as well as the services side...and recently involved in launching a Hosted IP Services company.

    Biggest issue is Pre-Sales support...Sales, Engineering and Operations. The first thought might be..."Go hire the best from the CPE world and train them up on the cloud/hosted model." Great idea but most cannot make the transition...its a whole different game. From the value approach of the sales team, to the design by the engineers, to the site survey/pre-qual review by operations.

    So...we looked at more IP/IT/MIS folks who get the cloud concept a bit better. Problem solved, right? Nope...just a new set of issues because voice is still voice, even if its VoIP...not a no brainer for IP folks.

    So in my mind (and experience), as it most often does, your success here is going to be directly related to the people you choose to team with...there is a valuable cross section that seem to come from the fringe of both the voice and IT/IP industries that can make the transition...find them, train them, and keep them happy.

    Hope that helps

    John Turner

  4. Hi i am MBA student. and all time i am finding such management related stuff that help in my study. i read your blog post and really it's nice.
    if you have some good site regarding it just share with me..
    Recently i am study from Business Management