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Cloud marketplaces: Can channel partners make money?

Channel partners can take advantage of many cloud marketplace options as part of their go-to-market strategies. Here's what you need to know to get started.

As the cloud and software as a service become more mainstream and businesses become more interested in cloud technologies, curiosity about cloud marketplaces -- think of an online storefront -- isn't far behind. That's why channel firms need to learn about cloud marketplaces and how to go about doing business in a cloud marketplace.

There are a dozen or so active cloud marketplaces -- some are independent, such as app directory companies GetApp and Capterra, both acquired by Gartner in 2015, while others are vendor-specific such as Salesforce AppExchange, IBM Cloud Marketplace, Oracle Cloud Marketplace and Dell Cloud Marketplace, among others. IT distributors, such as Avnet, Ingram Micro and Tech Data Corp., for example, also boast their own cloud marketplaces that offer cloud apps from dozens of vendors.

There are two key things that partners need to know about cloud marketplaces: They come in a variety of flavors and they offer partner firms a mechanism to sell a broader portfolio of services.

Thinking about a cloud marketplace as an online storefront, it may consist of aisles of cloud services that span the cloud spectrum: SaaS, infrastructure as a service and perhaps, platform as a service. So, for example, walk down the SaaS aisle and you might see a section of productivity apps, another section with unified communication apps and another with CRM apps. Also, in this storefront are cloud services offerings that are relevant to consuming those products, i.e., professional services, migration services, tier 1 and tier 2 support or bolt-on services such as change management, among others.

Jeff Kaplan, managing partner, THINKstrategiesJeff Kaplan

Today, the fundamental issue with cloud marketplaces is the economics. "Overall, the cloud/SaaS are lower priced services than traditional products. So, even if there's a lot of activity in a cloud marketplace, the resale value of those services to the channel partner is relatively small. Therefore, partners can't rely on marketplaces alone to build their business," said Jeffrey Kaplan, managing director at THINKstrategies, a strategic consulting company.

In other words, cloud marketplaces should be just one component of a partner's go-to-market strategy. There are several roles that partners can opt to fill as participants in a cloud marketplace: broker, aggregator, integrator and manager. The small and medium-sized business market is likely to be most dependent on the channel to help them navigate a mobility and cloud strategy to meet their specific business needs due to a lack of internal IT resources.

Where's the money?

While there's some money to be made through the marketplace directly, the larger opportunity for partners is to use the marketplace to promote the apps and services that are available as well as promoting their own portfolio services.

Both Tech Data and Ingram Micro, for example, allow partners to use their cloud market technology to white-label a storefront. In fact, Ingram Micro earlier this month announced the Ingram Micro Cloud Store, a customizable e-storefront that can be branded by a partner.

Neeracha Taychakhoonavudh, senior vice president for partner programs, SalesforceNeeracha
Taychakhoonavudh

The 10-year-old AppExchange, meanwhile, is an e-storefront from Salesforce and offers a combination of about 2,900 free and paid apps as well as listings from consulting partners and independent software vendors (ISVs). There are also apps for partners on the AppExchange to use for their Salesforce business.

An app developer or ISV may be interested in the AppExchange to sell its products to the Salesforce installed base. For Salesforce Consulting Partners, the AppExchange is a place to list and pitch their Salesforce expertise.

"If I'm a larger consulting partner, I can pitch myself as being able to integrate Salesforce solutions and any other of these Salesforce solutions that run on the Salesforce platform," said Neeracha Taychakhoonavudh, senior vice president for partner programs at Salesforce.

Building a cloud business, positioning and modifying an existing partner business, is a journey. Partner steps on this journey include learning how to put together commercial deals that work for them and their customers while blending that with the ongoing business. Beyond that, the cloud marketplace becomes a business management platform.

John Tonnison, executive vice president for global cloud computing and CIO, Tech DataJohn Tonnison

"Because cloud services are digitally delivered, and certainly our implementation goes beyond just sell and remittance, they [marketplaces] become a business management platform for the reseller to manage their portfolio of cloud management services that they deliver to their customer," said John Tonnison, executive vice president for global cloud computing, as well as worldwide CIO, at Tech Data.

Using the marketplace to increase the scope of services a partner offers its customers combined with having all the services in one place ups the value of the marketplace to the partner and the customer.

"With the marketplace keeping a connection alive, and being part of the ongoing customer care and feeding, there's a race here to be the console that is first in place because there will be a degree of stickiness and loyalty to the platform on the part of the reseller and customer," Tonnison said.

Less than one year ago, INFINIT Consulting, San Jose, Calif., and Ingram Micro and Microsoft Gold Cloud Solution Provider partner, stood up a white-labeled online storefront to manage the entire Microsoft cloud lifecycle of their customers. The e-storefront was in development for about nine months prior to launch.

Jerod Powell, CEO, INFINIT ConsultingJerod Powell

The goal was to stand up a holistic e-storefront capable of selling more than just Office 365. "I have no interest in just selling Office 365 online -- partners need to differentiate," said Jerod Powell, CEO at INFINIT Consulting.

Today, The INFINIT Cloud Marketplace provisions, manages and supports customer subscriptions for Microsoft services and its own INFINIT services. Customers are also able to directly package their own support, products and services and combine them into a monthly or annual bill from INFINIT, according to Powell.

"By putting our packages and solutions into the marketplace, we're bringing that digital transformation story to our customers. That's what they want to see, that's what they're looking for and that's what works," he said. The marketplace is also a way for INFINIT to build a channel for its own intellectual property.

By putting our packages and solutions into the marketplace, we're bringing that digital transformation story to our customers.
Jerod PowellCEO at INFINIT Consulting

Here's what a full business transformation bundle is likely to include, according to the CEO: a virtual desktop infrastructure offering with access to over 800 apps on demand plus any custom application that a customer may have. It will also include Microsoft's Enterprise Mobility Suite and Office 365 E3 or E5 depending on a company's needs in addition to Azure services for Office 365 backup and recovery, and cloud backup and recovery plus 24/7 support.

The partner also offers migration, security services and device support. "Our goal is to break down the barriers to how a company does business," Powell said. The company's clients average between 50 and 250 users and because INFINIT has compliance experts on staff it boasts a strong financial services and healthcare client base.

At the Ingram Micro Cloud Summit 2016, held in early April, the distributor recognized INFINIT Consulting as part of an elite group of high-performance IT solutions and managed service providers.

Jason Bystrak, executive director for Ingram Micro Cloud for the AmericasJason Bystrak

"The way companies monetize cloud is by wrapping services around it," said Jason Bystrak, executive director for the Americas at Ingram Micro Cloud. Partners will reap only single or low double-digit margins if they're just selling product, he explained, compared to getting 30%, 40% or 50% in margins if a partner wraps professional managed services around a cloud offering.

Cloud marketplaces: Criteria to consider

Here's a list of criteria to consider when reviewing the landscape of cloud marketplaces and what partner firms should be thinking about:

  • Scope of offerings -- Is there a breadth of products in the marketplace that match what you need to deliver to customers? Or does a niche marketplace work for your business?
  • Purchasing automation -- The ability to integrate into multiple cloud provider data centers to purchase a subscription. This gives partners the ability to bundle multiple services from multiple vendors and purchase them all at the same time via a single transaction.
  • Provisioning -- Is provisioning of the service real-time or is there a delay between the purchase of the service and when it goes live, i.e. is it available to the customer?
  • Subscription and consumption management -- What's the opportunity for the partner to make changes to a customer's services, i.e. to extend a subscription or make end-user changes? Does the service provide for the metering and measuring of consumption-based cloud services from vendors like SoftLayer, for example?
  • Invoicing -- What's the degree of sophistication of the marketplace when it comes to invoicing functionality? Does it offer consolidated invoicing or will you be required to deal with invoices on a per vendor basis? The type of invoicing functionality impacts reconciling services for each individual customer account including billing clients on an ongoing basis.
  • Service delivery management -- What support services does the marketplace offer to help manage your experience in the marketplace, or on behalf of a customer, and how are they delivered, i.e. phone, online chat or email? And, what's the availability of the support  -- 9 to 5 or 24/7? Does the marketplace offer white-label services to take customer support calls on your behalf?

Additional food for thought: Does the cloud marketplace offer functionality that allows integration with existing partner business management platforms such as ConnectWise or Autotask?

Once you've investigated some cloud marketplaces, selecting the right one for your channel business is vital. Some questions to consider:

  • Does the marketplace distribute the cloud services most relevant to your business? Do they offer the vendor catalog that aligns with the vendors you do business with?
  • What about the functionality of the marketplace? Is it user friendly, does it offer account control, integration with existing business tools; streamlined accounting processes and so on?

Support material to help position cloud within a partner business is valuable as well.

Tech Data's Tonnison, pointed out the need for educational materials for partners because the cloud is still a nascent market.

"Not only do partners need a body of education and consulting materials, such as white papers and wisdom for selling cloud, but also for material on how partners can position themselves and modify their business as a reseller to be ready and,  well, able to sell and support cloud services alongside their existing business," he said.

Next Steps

Read about Avnet's cloud marketplace for channel partners

Gain insight into Salesforce's strategy for consultants and integrators

Learn what mistakes to avoid in a cloud business model transformation

This was last published in April 2016

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There are two key things that partners need to know about cloud marketplaces: They come in a variety of flavors and they offer partner firms a mechanism to sell a broader portfolio of services.


Thinking about a cloud marketplace as an online storefront, it may consist of aisles of cloud services that span the cloud spectrum.
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