The reseller opportunity

Hyperscale cloud computing presents significant opportunities, but also some unexpected hurdles, for channel players.

Alkesh Sigh, Astel Systems
South African customers, only now moving to the cloud in significant numbers, will be confronted with all new paradigms in a hyperscale cloud computing era. For channel players, it could be a case of adapt or die in the months to come.

Alkesh Sigh, CEO of billing and revenue specialists and Microsoft partner Astel Systems, works with a number of resellers that are currently getting to grips with the  mainstreaming of cloud and the emmergence of hyperscale cloud, ." At a recent Microsoft event in the UK, we discovered that cloud has become the default go-to abroad for infrastructer. I think South Africa is about 12 to 18 months behind that adoption curve, but cloud and hyper-cloud - is definately coming, and it's going to distrupt channel models, "he says.

Its an exciting time, and hyperscale cloud computing will bring with it massive opportunities. I believe it will be a game-changer for everyone, from large enterprises and public sector entities through to SMEs and startups, which no longer need huge infrastructer investement to build software and applications at scale."

In-country hyperscale datacentres are expected to overcome the last concerns some organizations had about latency and data sovereignty. For resellers, the changes bring an opporunity to expand into cloud consulting and advisory services, and to deliver add-on services such as billing and management tools.

New headache in the channel

But at the same time, hyperscale cloud computing will present new challenges to resellers, Sigh Notes.
"One concern in emerging markets is currency fluctuation in the value of the rand in a matter of hours. The question is: what will this mean for resellers and end-customers ? it's particular concern for very margin-sensitive businesses - a 4% or 5% fluctuation in imput costs makes a significant difference . It also presence a challenge for channel partners billing in rand, but paying hyperscale cloud services in dollars - how will they manage reconcilliation as the currency fluctuates? Going forward, we will see the emmergence of platforms supporting various models and structering dollar - and rand -based packages taking exchange rate variations into account. dealing with this will not be a walk in the park".

Another challenge facing resellers will be learning to operate as an extension of a ‘utility’ rather than as a straightforward reseller.
Says Singh: “We’ve seen significant uptake of cloud solutions in the past six to 12 months, and we’ve observed the channel partners doing well during this time are those investing in educating the end-customer. Cloud is a consultancy sell, not like selling an off-the shelf product.”

However, adapting to this new environment isn't always easy.

“For channel partners, a lot of effort is required to change business models. For example, their cash flows will change completely – instead of selling a client  R1 million in licensing every few years, they will now be bringing in R30 000 or R40 000 a month. In the long term, this may be more profitable, but it impacts their immediate cash flow. Many didn’t see this coming, and now they have to change their forecasts. Some resellers in the market are concerned about how to reinvent themselves in the changing environment: it’s a bit of a land grab right now, so they know they have to do it, but changing your entire business model isn’t easy,” he says.

“In this environment, customer lifecycle management will be crucial,” says Singh. “A cloud service provider operates like any utility or Telco, which means the risk of customer churn increases and it becomes ever more important to engage with customers more regularly and track communications with customers more effectively.”

Time to reinvent yourself

“Cloud, and specifically hyperscale cloud, is going to demand the reinvention of business models — both for channel players and their end-customers,” says Danie De Lange, CEO of Microsoft cloud solution reseller xContent. “We saw it coming and we ‘went cloud’ around three years ago. It changes everything from sales models to operations and billing,” he says.

The move, in line with the company’s focus on innovation and staying relevant, required a hefty investment in reinvention. “We carried out a site refresh, changed our customerfacing interfaces and essentially reinvented our internal infrastructure. On top of that, we had to reassess our operations, processes, roles and responsibilities, and review the calibre and skills of people we brought in to the company.”

Among the changes was a fresh approach to sales, says De Lange. “The sales role has changed significantly. Instead of selling a product, they must now sell a business value. This means they need personal engagement skills, technical competence and a consultative approach to sales. This reinvention of our own business model was hard work, but worth it. If we had not made the change, we might not be in business today,” he says.

De Lange says reseller success will demand an understanding of what cloud business means. “You’ll need to take traditional service offerings and recommoditise them into true cloud services; deliver services and solutions in days and hours that previously would have taken months to deploy; become leaders for change management; and help business evolve to the cloud era. This demands consultative and technical skills, as well as business insight,” he says. “In this environment, you can’t just make a sale and move on  — it’s an ongoing partnership in which the reseller helps grow and enable the end-customer.”

Change is inevitable, and resellers will have to adapt, he believes. “Hyperscale is huge. It brings access to technologies that were very expensive and only available to large enterprises, and puts them in the hands of small and mid-sized enterprises. It eliminates the need for certain skills and resources in-house and gives adopters a competitive advantage. for resellers, this means we need to lead change, guiding businesses as they evolve in the cloud era.”
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