Channel suffering a squeezed middle

Mark Herbert of intY claims cloud could spell the end of the line for mid-sized resellers' gravy train

As resellers jostle to take advantage of the cloud opportunity, it's apparent the channel is changing. And if we split the channel into small resellers, mid-tier and large service providers, we see the mid-tier being squeezed from above and below.

Cloud enables smaller resellers to punch above their weight. By offering trusted, big-brand cloud services, they're able to fulfil contracts with much larger customers that they might not previously have had the opportunity to deal with. And they have the luxury of gradually migrating from a business built on front-loaded cash deals to one based on recurring revenues - no need to cannibalise existing customers.

At the opposite end, internet service providers find themselves in an exciting place. They have three key assets to help take advantage of the cloud: a customer base who (generally) trust them and enjoy being billed monthly; subscription-based sales mentalities (and remuneration frameworks); and a lack of legacy, where sales of cloud services such as Microsoft Exchange are not cannibalising their current business.

Some mid-tier resellers may struggle to push CapEx solutions into a customer base that is increasingly enlightened to the merits of on-demand computing. Bu with competition from an army of smaller resellers with the capability to take on the mid-market, and incumbent ISPs selling commodity cloud services at a low cost-of-sale, it seems that cloud computing may signal the end of the gravy train for many mid-sized resellers.

Mark Herbert (pictured) is business development director at intY

Read his thoughts here all week at Views from the Channel