Sets up a nice image for future growth.
--
The Distribution Play In Hosted Services Will
Grow
By Robert Faletra, CRN
President, Technology Solutions Group
5:08 PM EST Fri., Feb. 09, 2001
Successful products are not born, they are managed. Over
the years, many products that have been superior from a
technical standpoint have failed due to poor sales
management practices.
It's the old story. You can find
plenty of people who understand
technology, but those who
understand sales channels and
how to leverage them are a scarce
commodity.
There are success stories being
born right now, however, by
companies with senior executives
who fundamentally understand
the channel leverage point. Cable
& Wireless a-Services is one. By
creating an ASP program that can
bring in recurring profits for
solution providers, Cable &
Wireless is driving a successful
new model. Snap Appliances is another such company.
With a potentially disruptive storage technology and a channel-only market strategy, the
company has captured a dominant market share.
There are some seasoned resources behind both companies. With Cable & Wireless, it's
Compaq and Microsoft. In the case of Snap, it has been Quantum.
For those that don't have a big brother, distribution is a critical leverage point. This is
proving to be true with the new class of service products.
Distributor Avnet Hall-Mark, for instance, recently teamed up with Epoch Internet to offer a
hosting service product to solution providers. One of the real attractions for the
value-added channel is the potential to sell someone else's service and obtain recurring
revenue. Hall-Mark understands that and has the VAR customer base to leverage that point
for the new class of service provider suppliers.
Ingram Micro has jumped into this as well with a program that is driving toward an
aggregation model for application service providers. Tech Data is moving in a similar
direction. It would be hard to imagine Tech Data, Ingram Micro and others a year from now
not having well-designed programs with a number of core partners for VARs to choose
from.
As the ASP model matures, distribution will play a key role in
offering better pricing and programs for VARs interested in
selling other service providers' products. Once again, there is
value in distribution using its purchasing and marketing power
on behalf of VARs.
The efficiency gains are generally not lost on others attempting
to break into the value-added channel with products and
services. Many ASPs are discovering that attempting to sell
their hosting services or other products direct is challenging
and, more importantly, expensive.
Feet on the street is always the deciding factor in the amount of
business you can bring in. The best way to get the largest
number of feet out there is leveraging the VAR channel.
This will be as true with hosted services as it has been with
hardware over the years. The difference, of course, will be in
how hosted services are priced and managed.
Because most of these services will result in recurring revenue
for the solution provider that recommends and sells the product, distribution is likely to
have a management role that results in it obtaining a piece of that monthly fee.
There has been much written in the analyst community about the ASP model and the
likelihood that it will consolidate quickly into a few players. Like any new market, there are
too many variables to accurately predict, at such an early stage, how quickly it will evolve.
More hosted service providers are realizing that in order to be one of the survivors, they
need to use leverage points.
Distribution will play an increasingly larger role in this emerging market as we move forward,
simply because it reduces the risk for service providers attempting to achieve profitability.
That's good news for both the VARs and the service providers that understand how to
leverage the two-tier channel.
Make something happen. I can be reached at (516) 733-8612 or via e-mail at
rfaletra@cmp.com. |
