Amazon Seeks to Elevate the Channel

Amazon isn’t just out to transform the way IT applications and services are delivered; the company plans to fundamentally change the way the channel operates.

At the recent AWS Summit 2013 conference, the world’s largest provider of public cloud computing services, unfurled Business Essentials and Technical Essentials, online training modules available on the Amazon Partner Network (APN) portal. These modules provide certification for IT staff, salespeople and business executives working for Amazon channel partners.

According to Terry Wise, director of business development for Amazon Web Services (AWS), the goal behind making this training available to partners is not only to bring their IT people up to speed on Amazon capabilities, but also to educate channel partners about how to profitably resell Amazon infrastructure as a service (IaaS) technologies.

Wise pointed out that channel partners are likely to be more profitable over the long haul by selling cloud services. In addition, he added, cloud computing ultimately changes the relationship between channel partners and their end customers. Instead of focusing on reselling hardware and support services, successful channel partners will focus more on developing and managing applications, as well as providing professional and managed services.

As Amazon continues to extend its reach and customers become more comfortable with cloud computing, deal sizes involving enterprise IT customers are getting much larger, according to Wise. The reason for this, he said, is that customers are increasingly realizing they are spending 70 to 80 percent of their IT budgets just to keep the data center running. Moving application workloads to the cloud allows them to develop more applications by reallocating IT budget to application development.

“There are a lot of transformation events now where customers are looking into data center consolidation, hardware refreshes or software upgrades,” Wise said. “Rather than dealing with that on premise, many of them are deciding to make the leap into the cloud, and that involves deals worth millions of dollars.”

As a result, customers are now looking to IT service providers that can provide expertise in the area of application development and management. Wise said this should create opportunities for channel partners to manage hybrid cloud computing environments for a number of years. But long term, he said, Amazon sees the vast majority of application workloads moving to a public cloud environment.

In fact, facilitating that trend is one of the primary reasons that Amazon set up its own online store. That approach gives customers more control over which applications are deployed in the cloud, while giving channel partners access to a distribution channel for custom and packaged applications.

In time, that online store eliminates the need to engage in lengthy contract negotiation processes. It also gives a customer a single bill that provides more transparency into what resources are being consumed by specific applications.

It’s not clear whether cloud computing will result in the creation of a new class of solution providers in the channel, or whether existing solution providers will be able to adjust their business models.

Rather than focusing on narrow product categories such as servers and storage, channel partners will need to be full-service providers focused on enabling a specific business outcome for any given customer, Wise said. That shift, he added, will require channel partner to evolve into companies that can provide valued-added expertise above the infrastructure level in such a way that the IaaS platform itself is a low-margin means to a more profitable end.

“The only real barrier to entry for a business partner now is domain expertise,” Wise said.

The good news for channel partners is that the domain expertise needed to succeed is not easy to come by. That means that while there may not be much margin in IaaS specifically, the expertise required to successfully manage it is still relatively scarce.

Michael Vizard has been covering IT issues in the enterprise for 25 years as an editor and columnist for publications such as InfoWorld, eWEEK, Baseline, CRN, ComputerWorld and Digital Review.