Indian distributors should also don mantle of cloud aggregators

by Anurag Agrawal    Aug 11, 2011

Anurag AgrawalAll leading IT vendors whether multinational or local are driving towards providing a variety of cloud based platform and application services. Complementing them are a whole host of new companies that are aggressively developing solutions for this space. As a result within the next five years, cloud based services will be the new arena of intense competition within India.

The channel comprising of ISVs (Independent Software Vendors), Systems Integrators (SIs), dealers, resellers and retailers form the essential cogs of an IT vendor’s eco-system that puts products and solutions in the hands of the businesses. This is particularly true in the small and medium business market (SME) where the vast majority of the opportunity can only be addressed through the channel. Selling direct is not economical. So it makes complete sense for IT vendors to try to find ways to engage and involve the channel in their cloud computing efforts.

Challenging the Channel Structure
The first issue to tackle is Cloud Computing’s impact on the existing channel structure. For decades the IT industry has survived on a two-tier system consisting of distributors and a large reseller base. Within India there are several additional tiers. In the case of SMBs, this reseller base is very large. While distributors aggregate products and have also begun to handle the logistics of distribution and promotion to resellers, the resellers themselves handle the final sale to customers and provide installation, integration, customization and maintenance services.

SMB needs and customer scenarios will likely drive the change in channel structure in the era of cloud services. Three scenarios will be played out repeatedly in the Indian market:

Very small businesses need a single cloud application or very few cloud applications. It is likely that a really small business will not use more than 4-5 Cloud services. These will likely be very basic such as email, web conferencing, collaboration etc. Integration and customization needs will be minimal.

SMB need few services but integration with existing systems and customization are paramount. Resellers of cloud services can capitalize on such opportunities.

SMB need multiple cloud services and subscribing to them on a one-off basis, managing multiple vendors is an administrative burden and perhaps an inhibitor to greater adoption of cloud services. Integration and customization needs may or may not be important.

The third scenario will most likely emerge over time for small businesses but very quickly for a typical mid-market business. This scenario is also potentially the most disruptive for the channel. It suggests the need for a Cloud Services Aggregator that has the capability to aggregate, integrate and syndicate cloud services to resellers and SMBs.

The interesting thing here is that an aggregator can be an IT vendor such as HP or Dell or an entirely independent entity. IT vendors that act as aggregators will be subject to some form of “cloud nepotism” i.e. their priorities will always center on their own services rather than third party services.

This makes room for an independent entity whose primary function is to integrate and deliver services that best serve their customer base. It is possible therefore those aggregators that focus on a particular industry or deliver a specific competency (and closely related competencies) will appear in due course of time.

In many ways Indian distributors should be seriously thinking about moving into the role of cloud aggregators. They will have the financial capability and marketing reach to train, educate, support and recruit resellers from Tier 1 to Tier 4 cities in offering cloud services. And IT Vendors should be seriously thinking about approaching these distributors and demonstrating a viable business model for them.

Anurag Agrawal
Techaisle
Anurag@cxotoday.com

Anurag Agrawal is the CEO of Techaisle, a global market research and consulting company focused on SMBs and Channels. Prior to Techaisle, Anurag headed Gartner’s Worldwide Research Operations and before that was with IDC.