Are online marketplaces a genuine threat to the channel?
Online shopping for IT might be taking business from the channel, but they are also the 'Wild West' of offerings, experts note
From Amazon to Microsoft to Salesforce, increasingly, IT vendors are launching their own online marketplaces, aggregating products and solutions and pitching them as a 'one-stop shop' for IT buyers.
These marketplaces offer everything from standard products to subscription-based cloud services and applications, which prompts the question of their impact on the IT channel: If customers can quickly and easily make their own purchasing decisions and buy whatever solutions they need using these marketplaces, what use is a technology consultant or service provider?
IT trade industry CompTIA recently asked the same question as part of its Industry Outlook 2018 report. It cited Google's GSuite Marketplace as an example - it offers access to hundreds of ISVs' cloud-based applications, from ERP/logistics to HR applications to CRM solutions.
"With the click of a button, customers can install these solutions and roll them out into their businesses," it notes. "In 2018, these IT shopping malls will only grow in influence as line-of-business workers take charge of more IT decision-making and purchasing."
But does something like the GSuite Marketplace pose a credible threat to the channel? CompTIA says yes and no.
"Ease and speed are definitely the main attractions of online marketplaces," said Carolyn April, senior director, industry analysis at CompTIA. "Those features provide customers with a path to self-procurement of IT. And that's where marketplaces are a competitive threat to many channel firms," she notes.
"However, marketplaces are also a bit of a Wild West in terms of the sheer number of offerings," April says. "For a line-of-business buyer, trying to decide between hundreds of different accounting or CRM applications can be daunting. How do you choose?"
This is key to the channel being able to use these marketplaces to their advantage. VARs and MSPs can still play the role of business consultant by helping customers vet the marketplace solutions that will best support their organisation's objectives.
According to CompTIA, they can provide accompanying business advice, application customisation, integration, security and other services. "And if the customer ultimately self-procures the solution, so be it," says the association.
Leyla Seka is EVP of the Salesforce store, AppExchange, which hosts more than 5,000 solutions. She believes that the rise of online business marketplaces is opening up more opportunities for channel partners.
"With nearly 90 per cent of Fortune 100 customers using the AppExchange, partners can reach Salesforce's entire global ecosystem of customers," said Seka.
She points to a recent IDC study commissioned by Salesforce, which says Salesforce, its partners and customers will create 3.3 million new jobs and $859bn (£619bn) in new business revenues worldwide by 2022.
Crucially, over the next six years the Salesforce partner ecosystem will gain $5.18 for every dollar Salesforce makes.
"At Salesforce, we leverage a combination of business, technology and marketing benefits, and...an enterprise cloud marketplace…to enable partners of all sizes and industries to build successful businesses on the Salesforce Platform," Seka says.
Face the facts
Alastair Edwards, principal analyst at channel analyst firm Canalys, said that online marketplaces are becoming "a fact of life" in the IT industry.
However, not all marketplaces are the same. Edwards believes Amazon's new business platform has the potential to disrupt existing product channels and distribution, given Amazon's volume scale and global logistics infrastructure.
But he also points out that other marketplaces, such as cloud or software, don't solve all the customers problems, and in fact "should create opportunities for channel partners to deliver services alongside these aggregation platforms".
"We believe many platform providers will recognise the importance of leveraging partners to deliver the services to customers who are using their marketplaces," Edwards says. "That could include giving partners the opportunity to white label these marketplaces.
"Just because the vendor makes it easier to buy directly from them, doesn't mean the customer will prefer to do this," he notes.
Ultimately, says CompTIA's April, if the channel is smart, it can take on the role of helping customers figure out which is the best solution for their business need.
She notes: "A busy line-of-business executive is going to be a lot happier if presented with a choice of three, well-vetted cloud applications versus trying to sift through 25 solutions blind."