Channel Partners Need New Revenue Models to Avoid Being Left Behind in the Cloud Migration Process

Forrester recently released a report titled “Channel Models In The Era Of Cloud.” Forrester found that as vendors are taking advantage of cloud computing, channel partners are becoming increasingly nervous about being left behind by. According to the report, more than 60% of tech industry revenue is generated by channel partners, “often by serving customers deemed otherwise unreachable by tech vendors.” The firm cites the following as examples of channel companies: distributors, value-added resellers (VARs), direct market resellers (DMRs), managed service providers (MSPs), application hosting providers, and systems integrators (SIs) in the tech industry.

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Forrester anticipates different classes of channel partners will be affected differently. Distributors and implementation focused VARs will be hit the hardest. Channel partners are expecting to make less money in hardware and software sales and more in managed services and application hosting.

Managed services is the hottest area of growth, but everyone wants in on this game – different types of channel partners, vendors, and telcos alike. And vendors are making deals with telcos that are making channels very uncomfortable. For example, the Windows Azure Platform Appliance and Office 365 are available only to select telcos. Forrester predicts a reduction in the number of channel partner companies of about 12% to 15% as the managed services battle heats up.

Forrester does identify some alternate markets for channels to pursue. The firm’s research suggests that many organizations remain hesitant about public clouds and will prefer public-private hybrid clouds, increasing the demand for hybrid cloud integration services. Forrester suggests that these services may be “low-hanging fruit” that channels should take advantage of.

Forrester notes that channel partners are also expanding their businesses into application development, outsourcing, smart computing (or, as we’ve been calling it, “the Internet of Things”) integration, and financial consulting.

Forrester offers the following recommendations to vendors seeking to maintain mutually beneficial relationships with channel partners include:

• Help them overcome business model roadblocks
• Make them better marketers
• Connect them to each other in a collaborative ecosystem

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