Cloud Service Providers & Channel Partners at Odds

The COVID-19 pandemic has obviously had a major impact on the ability of channel partners to engage their end customers. 

Because most channel partners have been unable to visit a customer in person, they have needed to rely on digital marketing to engage customers more than ever. Most channel partners even in the best of times don’t have a lot of marketing expertise, so most of them needed to rely more on vendors to generate leads they could then hopefully close over a video conferencing call.

Of course, because most customers have the bulk of their employees working from home, they, for the most part, were a lot more interested in consuming cloud services that can be easily consumed from anywhere. That approach provided the added benefit of eliminating the need to send an IT professional out to physically install hardware and software needed to run it in a local data center.

Microsoft’s marketplace and direction

One of the IT vendors that stepped up most on behalf of channel partners in the last nine months has been Microsoft. This week, the company revealed there are now nearly four million active users across more than 140 countries transacting on its online marketplace. The bulk of those transactions involve channel partners to one degree or another. In fact, Microsoft in the last year has passed on more than three million sales leads to channel partners. 

With the prospects for a COVID-19 vaccine being widely distributed by the end of the year looking brighter, Microsoft channel executives have begun encouraging channel partners to focus their efforts on small-to-medium businesses (SMB) that they expect to be investing more heavily in IT as the global economy recovers. In addition to selling licenses to cloud services such as Microsoft Teams, there’s a major opportunity for channel partners to deliver additional managed services to customers that typically don’t have strong internal IT capabilities of their own, said Gavriella Schuster, corporate vice president of commercial partners at Microsoft.

“Partners can lift that burden off the customer,” Schuster said. “They can become the hero.”  

Who owns the customer relationship?

While most channel partners are grateful for the help provided by Microsoft and other vendors that continue to invest in the channel during trying times, there is always a tradeoff to be made. Providers of cloud services have deeper ties to the end customer. None of those providers is especially shy about making direct appeals to end customers as part of an effort to encourage them to spend more money on additional services. Those appeals can be problematic for channel partners, because the cloud service providers assume the end customer is theirs rather than the channel partner that signed them up. The trouble is most end customers have a limited amount of IT budget that a channel partner is usually trying to help that end customer optimally spend. Direct appeals from cloud service providers to end customers have a tendency to disrupt those relationships in a way that a channel partner is not always likely to appreciate. The cloud service provider is often focused on expanding its share of the customer wallet at the expense of all other considerations.

Value of the customer relationship

Most solution partners in the channel know full well that partnering with a cloud service provider is a very different proposition than reselling an on-premises IT solution. The cloud services provider not only directly touches that end customer more often, it often tends to view the partner more as its agent rather than the owner of the customer relationship. The partner is still enjoying the benefits of recurring revenue that is generated over the life of the contract. There may, however, come a day when the perceived level of equity a partner has in their business is viewed as being less, because they don’t own the customer relationship as completely as they once did. Selling the company one day may prove to be not as lucrative as originally anticipated.

Regardless of how big the pot of gold at the end of the rainbow may turn out to be, the way IT is being consumed has changed forever. Channel partners, for better or worse, need to come to terms with that new reality and, like it or not, all that it entails.

Michael Vizard
Michael Vizard is a seasoned IT journalist, with nearly 30 years of experience writing and editing about enterprise IT issues. He is a contributor to publications including Programmableweb, IT Business Edge, CIOinsight, Channel Insider and UBM Tech. He formerly was editorial director for Ziff-Davis Enterprise, where he launched the company’s custom content division, and has also served as editor in chief for CRN and InfoWorld. He also has held editorial positions at PC Week, Computerworld and Digital Review.

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