Selling cloud is different from what the channel is used to but there's a ton of opportunity if it can adapt.
The business benefits of cloud computing are well documented. But there seems to be an undercurrent that South African businesses aren't buying into the concept just yet, and one reason is that the channel is resisting the transition to offering cloud. What's the market reality?
Linda Morris, customer experience director, Smart Technology Centre, says customers have been slow to move but do see benefit once they do.
Linda Morris, Smart Technlogy Centre
"In the SMB market, customers don't really trust the security aspect of it, and pricing is also a challenge. But once they make the initial move then they see the benefits: productivity, reliability, availability increases. Because we're an all-in vendor we're able to facilitate the communication. Where we don't have a particular skill or service, then we can help them with talking to other suppliers."
Phil Lotter, director at Piilo, entered the market in 2013. "We thought we would do it all ourselves, aiming at SMEs. We found that larger companies across Africa were interested in our solution so we moved away from selling it ourselves to engaging channel partners.
Phil Lotter, Piilo
"The size of the partner didn't really matter. We've also chosen partners who can deliver services on top of our solution. We share the risk with the partner so we'll sign a deal with the customer for three to five years but give the partner commission in annual increments."
Ian Jansen Van Rensburg, VMWareIan Jansen Van Rensburg, senior manager for systems engineering, VMware Southern Africa, says partners need to be more operationally focused. "Public versus private cloud doesn't really matter as far as we've seen," he says. "It's the partners that are best geared towards changing the operational aspects of customers that will win. Those partners that assist the customer – not just with the technology but with the operational readiness of moving towards the cloud – are the best."
Stefan Diedericks, OracleStefan Diedericks, alliances and channels director, Oracle, agrees that it's not just about the technology any more. "What we’ve seen is that building channel models for partners starts with education, but must be extended to elements of change management. It’s no longer about delivering a product to a customer. It's the melding of the service level agreement, the change management that someone else would have done as well as the advisory role, which is starting to change how the partner business works. Incentives also change. It's about how to consistently keep the customer and keep them buying and it's not possible to do that without the channel."
Stephen Green, datacentre director at Dimension Data, agrees that the operating model has changed. "The conversation is maturing with clients. There are some security concerns still but people have stopped kicking the ball around and are starting to deploy enterprise-class applications into the cloud.
Green continues: “The cloud changes the operating model of IT. The processes that have to be deployed, the way you deploy services and the way you have to deliver services to end-clients changes. That's where the bottleneck is at the moment."
Competing with Amazon
Is there room for the channel when today's customer can simply buy cloud services directly off the Web? Steven Yates, customer business development director, BT Global Services, says partners should not be competing with Amazon.
Stephen Yates, BT Global Services
"We've seen large players close down their public datacentres because they can't compete with commoditised public cloud services. But never have I seen a client where it's purely public cloud: it's always a hybrid environment with some mix of public and on-premises. That’s the opportunity for the channel. The point of the cloud is to get rid of customer lock-in but it's no longer about buying the commodity of the server but the data."
Leane Hannigan, Westcon-ComstorLeanne Hannigan, cloud solutions director, Westcon-Comstor, says her organisation's resellers have had concerns that the cloud will usurp their relationships with their customers.
"Six months ago the fear among our channel partners was that they were going to lose the full lifecycle management of their customers. That shows that it's never been just about cloud but about everything else that wraps around it – the migration, the deployment or the multiple options that you have. They can’t maintain trusted advisor status so they have to go and partner with someone that's traditionally been their competitor. We've always spoken about price and skill in the channel but things have just got a lot more dynamic."
Wimpie van Rensburg, country manager of Riverbed, also has a somewhat reluctant channel.
Wimpie Van Rensburg, Riverbed
"From my interactions with clients and partners, I get a sense that the VARs and distributors haven't really accepted this change in the model. They're not actively selling it and they haven't adapted. Clients now have direct access to these services – they don't have to go through IT – and the partners' channel is legacy IT so they miss all these opportunities. The second thing is that they can't provide additional services. Clients still need specialist knowledge: how to integrate, how to access other backend services, how to migrate. Some partners are there but others aren't."
Johan Els, open source specialist at SUSE, agrees that the change in pricing has been an issue.
Johann Els, SUSE
"The challenges we've seen for partners is not really the technology itself but how they price it. How do they go from what they've got to cloud? Because the pricing model is totally different. We have to adapt accordingly and it depends on how they're going to move the data. We don't really care where they want to move their data – whether it's Compute or Amazon or Azure – because we can help them."
Gary Allemann, MD of Master Data Management, says the pricing transition has been an issue but that the infrastructure conversations have matured.
Gary Alleman, Master Data Management
"As a partner, we are resellers for a number of niche enterprise vendors, mostly in the US, who focus on information management. These guys have been developing cloud capabilities over the past four years. As a partner, there are some things that have been an issue. Firstly, the channel has struggled itself with the transition from a licencing model to a cloud model – that's taken a while. Secondly, customers used to be concerned about deploying data not because of security concerns but infrastructure: how could they move a terabyte of data from South Africa to wherever it needed to go? That concern seems to have gone. Customers are now asking for both on-premise and cloud. The market has matured. The kind of questions we're getting now are how to plug a data quality engine in the US with an ERP system in South Africa and a CRM system sitting in the cloud in Europe."
Willie Schoeman, Accenture TechnologyWillie Schoeman, MD of Accenture Technology, says this drive is coming from business. "There’s a massive drive from business to get critical business systems in to the cloud. It used to be non-critical but now the race is on to get the finance, procurement, payroll and supply chain into the cloud. Their budgets are fixed so this is the only way they can get into this environment."
The other major problem for resellers who want to make some margin off cloud services is the vast scope and different skills required. Cameron Beveridge, director: cloud and line of business for SAP Africa, says collaboration in the channel is definitely more important than it used to be.
Cameron Beveridge, SAP Africa
"Without it, it's difficult to move the customers quickly enough. For us it's about time to value – something that slows things down is traditional partners are shifting how their business models and roles work. Having said that, there has been a lot of momentum and change over the past eighteen months across Africa.
“The buying centres are also changing. It used to be the CIO role but there's definitely a shift into the line of business roles. The move to cloud is about being able to free up cash for innovation," says Beveridge.
Dion Harvey, Red HatDion Harvey, country manager for Red Hat SA, says cloud is forcing vendors to rethink what the channel really means. "Who really are our partners now? I point to the recent alliance between Red Hat and Microsoft: who would have thought that would be something we would see in the market? But customers are driving us to make practical choices that help them to adopt cloud. So the way to think about all of this is not to wonder what we’re doing or what resellers are doing but how are we as an ecosystem preparing ourselves to really address customer needs? Is our distributor really a distributor or a licence aggregator or is he really a market maker?"
Linda Meyer, EMCLinda Meyer, channel sales development director for EMC South Africa, says the smaller players will be needed more than ever. "A lot of the smaller traditional SIs haven't come into the market as quickly as the larger ones – I don't think we've done enough to train and upskill them. That being said, when you talk to customers they’re loathe to give everything to one partner. That means the smaller and niche players are critical to our overall ecosystem."