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Cloud Marketplaces: Death Knell for Resellers?

By David Yockelson | January 24, 2017 | 2 Comments

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A few blogs ago, I posited that cloud marketplaces such as those being run by AWS, Microsoft (Azure), Google, IBM, and a few other cloud platform providers might eventually obviate the need for sellers. While the demands of enterprise technology buyers will stave that off for some time at least, we might not be able to say the same about REsellers…the channel partners that sell products created by ISVs to accounts and markets that those ISVs might not otherwise be able to reach.

What kicked off this thought today were comments I read made in December by Microsoft (Gavriella Schuster, Corporate VP of their Worldwide Partner Group) as follows: “At the end of the day, I believe that within a year, the majority of our partners will be delivering some sort of value-added differentiation and IP services on top of the technology stack in some way to deliver more value to their customer.” Now, that in and of itself doesn’t signal the demise of the reseller, but it is a logical conclusion for providers like Microsoft with significant cloud platforms and offerings/services designed to be integrated with or consumed by ISV products.

As Microsoft adds to the number of ISVs found in its marketplace on Azure, Google furthers integration of its Cloud Platform and Orbitera acquisition and AWS’ already huge ISV list extends further — and their platforms (along with those of other cloud platform providers) become more meaningful and important within both the budgets and architectures of end user organizations, a few things happen:

  1. Software (and increasingly, added value services) purchases become frictionless. While there may still be budget limits, approved buyers and suppliers, etc. within tech buyer organizations, the time and effort between decision and provisioning will decrease significantly.
  2. There will be less need for middlemen, resellers in particular. Cloud platforms and marketplaces eliminate geographical issues, and while linguistics, pricing, etc. still must be perfected globally, global expansion and distribution for ISVs will be much easier. Note: value added services (e.g., onboarding, integration) will still be required, but they’ll be more focused and themselves increasingly available as a service or on demand. Distributors face some of the same issues, at least from a software perspective (which is likely why major distributors have themselves invested in marketplaces).
  3. The relationship between cloud platforms/marketplaces and ISVs becomes a self-perpetuating combination as ISVs consume more platform services and leverage the marketing, billing, provisioning, etc. facilities therein, making the platform providers that much more central to customer lifecycle.

To be sure, the combination of cloud platforms and marketplaces today account for a small percentage of technology purchasing. But everything I hear from the platform providers as well as ISVs whose investments today range from toe(s) in the water to “we want significant amounts of spend to occur” in cloud marketplaces suggest that the percentage will increase. Buyers, who today still want certain levels of treatment and still must be marketed to, will be increasingly less concerned with hand holding as buying power extends more broadly to lines of business and “citizen IT” folks within.

Being a managed service provider (MSP) has become somewhat of a safe haven for many resellers given the ever-increasing number of services and micro-services available through the cloud platforms. Longer term, however, that opportunity will dissipate as more integrated offerings (and SaaS products) become available through marketplaces and platforms. But the writing is on the marketplace wall – if you’re a reseller, the time to find value to add is NOW.

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  • At the start of the Internet 25-30 years ago, they said FMCG & CPG brands will be able to connect directly with consumers and predicted the death of resellers. What happened in practice? The Internet created Amazon, one of the biggest resellers in history.

    When mobile apps were just an APK download away from users, they predicted that marketing / advertising / middlemen will be dead. What happened in practice? Mobile apps created some of the biggest intermediaries in history viz. Play Store.

    Now let’s come to SAAS ISVs. Cloud marketplaces may sound the death knell for resellers assuming there’s no change in the ISV’s target markets. But that assumption is not true. Because cloud lowers the entry barrier, target markets are expanding. Millions of companies that couldn’t afford to pay upfront to buy an onprem software can now subscribe to a SAAS software. Many of these new markets might require more handholding to onboard technology compared to traditional markets that might have gotten accustomed to self-service. Ergo resellers will continue to be required even for cloud marketplaces. This matches recent announcements by IBM India. The MD of the IT behemoth’s Indian subsidiary recently declared the company’s goals to deepen its reseller network, saying cloud model allows even a “small merchant in Karol Bagh (a neighborhood in New Delhi, India)” to use technology to automate hitherto manual processes.

    • David Yockelson says:

      I think you make some good points in your comments. I don’t look at Amazon as a reseller the way I wouldn’t look at Wal*Mart as a reseller, and the mobile apps spawned a very few giant “marketplaces” (or intermediaries if you wish). But there aren’t stores or people you go to to buy your apps that exist in the the marketplace and integrate them with the device – that’s what I would mean by a “reseller”. I do believe that ultimately, the marketplaces will eliminate those resellers that don’t offer value add in some form. Your example of IBM India is a good one: if the “reseller” provides value in re-engineering poor processes and providing the path to implementation, that’s OK. But there will (and already are) classes of channel partners that can’t make the jump to more value added services, and they will disappear. I agree that not every market will evolve at the same rate, but I believe this is the evolution we’ll see. Thanks for reading.