End of the beginning for everything as a service

Providers that do not diversify their business model to include "as a service" in 2015 may become obsolete, warns Jessica Meek

"This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

When Winston Churchill (pictured) made this comment in 1942, he had much more important things on his mind than the plight of the VAR. He was fighting for a freer world in which democracy - and capitalism - could flourish.

With capitalism comes business, and with business comes supply and demand - or perhaps that's the other way round. Either way, 73 years after Churchill made his famous speech as the tides of World War II seemed to be turning, VARs in the IT channel are facing a demand issue of their own.

The need for the services of a simple reseller is diminishing.

Diminishing but also evolving. So while the number one threat on the Channelnomics US top 10 emerging threats for 2015 may not be the end of VARs as they traditionally have been - that is, resellers of computer hardware and software - it is probably fair to say that it is, perhaps, the end of the beginning.

While VARs will still be selling their traditional wares - hardware, software and so on - in 2015, they will have to acknowledge a need for change to the business model.

Those VARs that do not engage with the as-a-service model in 2015 may just find themselves trampled on by their peers but also vendors who have embraced the new world of IT-related solution provision.

With all the people we spoke to the issue of as-a-service came up again and again. People had so much to say on the issue that - unlike Churchill -we had to concede defeat when it came to trying to get all the comments into this piece.

But we have done our best to capture the voice of the channel as we heard it, which was screaming at us loudly and clearly: as-a-service is the number one emerging threat for the channel in 2015.

"Customers are saying I want to consume IT as a service. What that means is that more and more of the responsibility for the service levels, the continuity, the security, all of those things, is now becoming a part of what a solution provider has to provide to a customer," says Marvin Blough, VP for channel and alliances at Dell Software group.

And the issue here is that if solution providers - VARs in particular - don't adapt their business models, they risk losing business in 2015 and beyond - first of all to each other.

Those that diversify and understand what's going on in the market will always pick up business that moves away from peers who don't move with the times.

"If you're a solution provider or VAR, the first thing you need to do is get behind mobile," opines Sam Liu, VP at enterprise file sharing and collaboration firm Soonr. "It is changing the landscape quickly and if you don't understand mobile, then you're going to mis-sell in the value chain."

Providers also need to become a service and stop thinking about a traditional business model where they're selling software, then selling a support contract, then going on site somewhere to try and manage the application, Liu explains. "You have to think about yourself as a broker of services," he says.

But solution providers need to worry about more than their peers picking up business they might lose. With the move to as-a-service there is a whole new layer of competition to worry about: the vendor.

"As-a-service I see as a big issue because whereas traditionally you would have your software deployed on site, now people can go to the likes of Microsoft, SAP and some of the bigger vendors and basically just buy as-a-service from the vendor, which will certainly reduce hardware spend in those sort of areas," says Nigel Wright, VP of enterprise solutions at Carlsbad, CA provider Abtech Technologies.

Wright is, of course, not alone in this view. "I think part of the problem is that with certain SaaS and cloud-based solutions, the vendors are trying to eliminate the middle man - the general partner," warns Mark Chinksy, managing director at Holmdel, NJ-based provider Clients First.

"NetSuite wants to sell directly to the end user or Amazon wants to sell to the end user, which means an IT service provider has customers buying more and more services in the cloud. They're seeing opportunities erode."

There are still partners out there who make money out of shifting appliances, firewalls and general hardware, according to Jeremy Nicholls, VP of channel sales and alliances at Arbor Networks, but they need to diversify along with everyone else.

"As we move towards more and more solutions being virtualised and more solutions being cloud-based or as-a-service, all of these things are forcing channel partners to work out what their core competency is and how they can create value. You can see the guys who've got this and the guys who are still wrestling with it."

But he says even though the "major" players have identified the challenge, solution providers generally still need to ensure their proposition is successful.

"It's crucial to understand how you're going to be successful in that services business when you're not actually physically going and doing what you did when you were moving boxes around."

And so to go back to where we started, I think it's fair to say that this is certainly not the end for VARs. It isn't even the beginning of the end.