Distribution Watch: Avant Discusses The Changing Nature of Distribution in a Cloud-Centric World

With the advent of cloud technology, professionals in the channel are seeing the traditional business models of old fall away and evolve into something unrecognizable, complicated and difficult to navigate. It’s no wonder the channel is collectively sweating. As Drew Lydecker, president at AVANT puts it, “I think that the cloud is probably the best and worst of a subset of technology ever. It means so many different things to so many different people.” 

Channel partners today are required to expand their service offerings to keep up with rapidly developing technology and meet changing customer demands. Many partners fear losing control and are unsure of how to navigate this paradigm shift into selling cloud and other complex services. Their trepidations aren’t completely unfounded, either. Change in this sense can be risky, not to mention expensive and slow, and it doesn’t always work out favorably for partners. 

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The VAR Guy did some digging in order to examine the changing nature of distribution in the new cloud-centric world. We sat down with several key leaders and channel partners of AVANT Communications, a cloud distributor and sales enablement provider, to get their advice for VARs struggling to find a foothold and make the transition in this new ‘cloudy’ world. 

The Ghosts of Distribution Models Past

In this new cloud-scape, traditional distributors are having a hard time pivoting in order to provide the new types of services channel partners are clamoring for, and it’s no surprise – big legacy ships are hard to turn. How does traditional distribution need to pivot in order to compete in this new market?

In the past, software vendors were primarily concerned with application functionality, and their customers were the ones responsible for operating and managing their IT environments. Today, the responsibility for keeping it all running lies primarily with the cloud service provider, especially those that serve small and mid-size businesses. Mike Brunnick, senior vice president of worldwide sales and channel chief at Luminoso Technologies, describes how different the distribution model was just five years ago compared to now. 

“Really, you had two models,” says Brunnick. “The referral model means that the supplier holds the master services agreement directly with the customer – the partner becomes a trusted advisor. The partner works to understand the customer’s environment and their needs and wants, and then goes out to the vast ecosystem of service providers and finds the best one to meet that customer’s needs.”

The other model is the traditional one, Brunnick explains, and it is essentially a volume game. “You have a distributor who buys product in volume, gets higher level discounts than the smaller players can get on their own, and then wraps it in some level of support and resells those goods. In that case, it’s about taking on the financial risk and getting the volume incentives or discounts that would allow smaller players to compete at scale.”

How the Tides Have Turned… or Rather, Collided

So how do those principles apply today and how have they changed? Brunnick says that customers today are looking at new ways to buy technology, causing the two models to essentially collide. “It’s not about building a data center for a customer anymore,” says Brunnick. “It’s about understanding discreet applications and workloads, understanding how those applications and workloads will work on different cloud platforms, and then guiding a customer through the right decision on the front end. It’s more of a self-enablement model today.”

Essentially, being able to tie all these different pieces together is what customers are ultimately looking for nowadays. It’s not about tactical solutions. It’s not about quick hits. It’s about trying to build an IT system and strategy that helps them achieve their long-term visions. 

Growing Pains

Jeff Richards, director of global services at Paragon Micro, addresses the pain points that this shift in roles and models has caused. It’s a tale of complexity, a steep education path for VARs and sometimes misplaced roles. “I would say that having individual solutions for a customer has become 10 times more complicated,” says Richards. “It has turned us into general contractors of sorts. You’ve got to know a little bit about everything, and you have to know exactly where you’re trying to take the conversation to get the right result and engage the resources that have the component skill level in each of those categories.”

Jennifer Gallego, executive vice president of channel sales and operations at AVANT, agrees. “This landscape is so broad. There are so many service providers and so many specific needs that customers have, we can’t do it all. We need partnerships to help create the right solution for our customers.” 

AVANT’s strategy, she explains, is right in the middle of that. They want to help VARs find the right providers to address the right business outcomes so they can focus on finding solutions for customers while AVANT’s team works on the back end so that when VARs come to them with a business need, they can make the right recommendations for their customers.

Changing VAR Needs

Over the past two or three years, Gallego has noticed that AVANT no longer has to convince VARs that they need to make a shift away from just selling IT infrastructure and toward providing integrated solutions. “They know the landscape has broadened, and that with so many service providers out there combined with the increasing customer needs, they can’t do it all. We need to work with partnerships to help create the right solution for our customers.”

“Procurement responsibility has shifted from a traditional procurement group onto the shoulders of each department head in organizations,” says Greg Moss, CEO of IT service provider CloudAdvise. He’s noticed a trend of technologists taking on a procurement role, which he says has two issues associated with it: 

First, techies like to build tech. They don’t want to focus on sales-driven service RFPs. Second, they tend to not be experienced at procurement for talent. “It’s contract negotiation. It’s price negotiation. There’s a ton of research in finding out which vendors are the right vendors.”

The shift has also left VARs somewhat miffed in terms of process and revenue. From an educational standpoint, the time to revenue on this side of the business takes longer. Many partners that can wrap their heads around offering managed services can’t seem to make the leap to cloud services. There’s a significant learning curve attached to selling cloud solutions, which requires time and money to gain. 

Gallego explains that this is the reason AVANT devotes so many resources toward providing an education path for VARs. “We have to educate them on the fact that the sales don’t happen monthly and that it does take awhile to get that revenue stream going,” says Gallego. “But, if you model it out, at the end of two years, from the start of the engagement and the partnership with AVANT, you’re seeing revenue—and it’s ongoing revenue.” 

Facing the Storm

So, what happens now in terms of the need for distribution pivot? According to our experts, VARs have a huge opportunity to take advantage of this changing IT world, but they need to first understand the new landscape and expectations and just how they are different from the old ways of doing things. “Before, everybody wanted to go out and build technologies, skew things up, very similar to the way that hardware was done,” says Lydecker. “But that’s not working in this new business, because it’s oil and vinegar. You have to be a translator, you have to be in the trenches, you have to enable, you have to teach.”

Now more than ever, partners need to operate at that “400 level” and work to identify unanimity across multiple teams. Inside distribution, people have to be trained and cross-trained to be able to understand not just their technology, but technologies across the board. “We’ve got to have the cloud guys understanding connectivity. We’ve got to have the virtualization guys understanding what cloud really is and what it means, and so on down the line,” says Richards.

According to our experts, this adaption and maturity among VARs is happening faster and faster by the day. “It’s an unbelievably exciting time to help swivel the chair on the entire CapEx market and the VAR market in this unbelievably exploding OpEx world,” says Lydecker. “We feel like the VARs have the biggest opportunity to take advantage of this super, hyper, IT changing world that is really going to be a mixture of CapEx and OpEx.”

Moving Beyond Traditional and Looking Forward

To sum up, distribution used to be about selling commodities. In a cloud-based world, however, that model no longer cuts it. Cloud technology means ongoing service models, not one-time box sales. Partners can no longer just focus on IT resources and infrastructure needs – they can’t just “hook up” a customer with a cloud and fade away into the mist the way they could with a server. Customer expectations are changing dramatically, and partners need to shift their models and approach accordingly in order to align with those expectations and capture market opportunities. As customers increasingly incorporate the cloud into their evolving business needs, it has become essential that partners have the expertise to help and guide them. 

We asked our experts to provide business advice to partners looking to make the switch to the new model. There are no easy answers here, and from the sounds of it, the climb may be uphill for awhile. But there are a few key things to remember that can poke slivers of light into the hovering cloud.

“It’s really tough,” says Richards. “It’s very likely that distribution is going to need to work more closely with the providers themselves.” The way in which Richards and his team at Paragon Micro interacts with AVANT is a good example, as it allows them to pull in industry experts – the guys that actually build the infrastructures directly to understand the component architectures. “As we’re marshaling those different resources into these conversations, you get direct access into understanding things at a root level and can really bring those resources to bear. It’s huge for trying to build an adequate solution. Those experts are unicorns.” 

The demand for these “unicorns” is high. Partners are increasingly developing capabilities in cloud solutions and transitioning into new competencies in order to provide that consistent reinforcement to their customers of the value of their systems. “Distributors have to focus on building relationships with key people within these segments – meaning not just everybody,” says Moss. “You’d be very definitive in who you select as a master in each one of these segments and when you build the relationships with them, make sure they understand your value props. If not, what you have is a whole bunch of people just throwing stuff at a wall and hoping it sticks.”

We’re sensing a theme here. It appears that however difficult, complex and daunting the plunge, it all comes down to relationships. In the end, distributors have to take a lesson from VARs and MSPs and focus on relationships with both vendors and channel partners. Just like selling anything else, Moss says, customers aren’t necessarily buying the commodity. They’re buying the relationship.