The Need for Channel ‘Intermediaries’ in the Cloud

Most of the solution providers that make up the channel are orders of magnitude smaller than some of the major vendors on which they rely. The end result is that small solution providers often get lost in the bureaucratic maze of programs and support systems that large vendors employ to manage their channel partners.

With the rise of the cloud, that challenge has only become more difficult because the providers of cloud applications and services are fundamentally trying to deliver a service that can be applied as broadly as possible to the greatest number of customers. That makes it even harder for smaller solution providers to add value by delivering a unique solution that in some way customizes that cloud service. Before too long, a gap starts to form between small solutions providers and major vendors such as Microsoft

Aiming to fill that gap in the Microsoft ecosystem are vendors such as Intermedia that are increasingly straddling the divide between Microsoft and smaller partners. To firm up that strategy, Intermedia, which provides Microsoft Exchange and Microsoft Office 365 as a service to channel partners, hired Eric Martorano as its senior vice president of worldwide sales. Martorano was formerly general manager of U.S. partner sales for Microsoft.

Microsoft clearly has a vested interest in lowering its channel costs by relying on Intermedia to engage more partners, Martorano said. Those partners, in turn, gain access to a turnkey cloud platform that Intermedia is committed to providing partners with instant support.

Earlier this month, Intermedia revealed that it is now on a $200 million run rate after being acquired by Madison Dearborn Partners, a private equity firm. Intermedia is currently supporting 6,000 active partners that service 75,000 customers.

Longer term, what distinguishes Intermedia is not only its ability to represent the collective interests of smaller channel partners to Microsoft, but also its ability to aggregate a broad range of third-party cloud services that partners can aggregate to drive higher margins. Smaller solution providers generally don’t have the wherewithal to negotiate individual contracts with a broad number of cloud service providers.

Of course, channel partners have been relying on distributors for years, in part, to manage vendors. The difference now is that instead of simply reselling products, channel partners are delivering services that require much higher levels of support. In that model, every dollar spent on providing that support comes right off the bottom line of the channel partner. Companies such as Intermedia essentially provide a mechanism for distributing the cost of that support across multiple channel partners in a way that frees up resources better spent generating new business than servicing a more limited number of existing accounts.

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications, including InfoWorld, CRN and eWEEK. He currently blogs daily for IT Business Edge and contributes to CIOinsight, Channel Insider and Baseline.