Cloud, whether public, private or hybrid, has fundamentally challenged the traditional supply chain in a manner which both threatens and entices the channel in equal measure.
A common observation perhaps, but in Asia Pacific the conventional ecosystem is being reimagined, replaced and on occasions, ripped to shreds in the pursuit of customer value.
The emergence of new technologies in isolation seldom change market dynamics however, only when combined with a modernised business model can true disruption occur.
“The era of the cloud is well underway and its impact has changed the channel business model forever,” observed Scott Robertson, vice president of Asia Pacific and Japan, Zscaler. “Today, the skills required to be successful, or even simply to remain relevant, are no longer the same as they were a decade ago.”
In assessing the business implications of such change, Robertson - speaking exclusively to Channel Asia - recalled the traditional purpose of the two-tier distribution model.
“This was modelled so that the first layer of distribution, wholesalers and distributors, provided necessary logistical support to import products, store and distribute to a broad channel,” he explained. “This made sense when we were selling hardware, heavy physical goods that required ‘heavy’ selling through a second-layer of partners and resellers, who provided direct access to the enterprise.”
According to Robertson, such a channel model helped create a workforce that learned enhanced sell-through techniques and mechanics.
“This worked well for businesses selling on-premises technology, as you sold through a partner, or system integrator, that were heavily involved in the sales process and worked to implement the solution, integrating capability with existing infrastructure and software,” he added.
When cloud-first as a philosophy first received mainstream acceptance however, Robertson acknowledged that concern existed within a large portion of the channel, with partners fearful of being displaced by cloud.
“This is far from true, as today, the channel has as ever an important role in the market,” Robertson qualified. “There remains a continuing need for vendors and channel players to collaborate in a broader go-to-market strategy.
“But, the way channel players sell needs to change for the cloud era. Today, selling requires persuading an enterprise to embrace true digital transformation, which can be a staggeringly different method of selling from the traditional, product sell-through approach of the two-tiered channel sales model.”
During the past three years, Robertson said that “almost every major traditional service provider” has built out services capabilities through acquiring a systems integrator, with some continuing acquisitions at a rapid rate.
“This begs the question of, why?” he asked. “Now that the business model has changed, traditional streams of revenue are drying up and only those that transform have access to new channels of revenue.
“One example is how Multiprotocol Label Switching and traditional hub and spoke networks are now shifting towards more direct to internet ways of working.”
In the past, when staff needed to check emails or access a database, Robertson said this would have taken the form of internal traffic that would go directly to a core application hosted at a regional hub.
“Today, it is more likely that this interaction would be traffic that goes directly to the internet via a local broadband connection, say to connect to Office 365 or G Suite,” he said. “Modern system integrators are tapping revenue from local broadband connections that leverage applications and data which reside in the cloud.
“The traditional system integrators that are invested in generating revenue from traditional on-premises technology are losing out.”
But in looking ahead, Robertson insisted that for channel partners in 2020, “it’s not all doom and gloom”, with a shift to the cloud still representing a “massive opportunity” in the region.
According to IDC, spending on public cloud services in Asia Pacific will reach $US76.1 billion by 2023, emphasising such potential.
“System integrators and value-added resellers that specialise in cloud services, particularly around mobility, cloud applications and cloud migration are well-placed to capitalise on growing cloud adoption,” Robertson added. “If we examine recent acquisitions of system integrators and value-added resellers, they have in common a core capability that is built around at least one area of cloud specialisation.
“They recognise the value that they have, which is an understanding of the client’s needs and the ability to interpret and act on those requirements through relevant consulting, customisation and implementation of solutions to solve issues."
For Robertson, “it’s not too late” for traditional value-added resellers and system integrators to catch up.
“They inherently possess a deep understanding of a client’s needs and have the experience to manage complex projects,” he advised. “Let’s not forget the lifeblood of the firm - its people. Channel players still have time to get their people up-skilled and ready, but they must start now to reap the rewards of a cloud hungry Asia Pacific."