Kung Po and Cloud Aggregation

I was chatting over a Chinese dinner the other evening to one of our clients from IBM. We were discussing cloud service aggregation, and the role of distribution. A heavy topic for a social night out, but actually very relevant to a Chinese dinner, as you’ll see.

Many of our clients at bChannels are driving increased share of indirect revenue through cloud and subscription models. This presents plenty of challenges in itself, as so many channel partners – and vendors – struggle with the conversion of ‘lumpy’ license revenue into monthly annuity income. However the topic that evening was around cloud service aggregation and provisioning. Many of us had wondered about the role of distribution in the cloud model, as it seemed like the legacy ‘warehouse and credit’ value was on its way out. We always used to say that good distribution was a mixture of logistics and banking. Without the associated profit margins.

But some of the big distributors are clearly seeing a role in the cloud economy as an aggregation and provisioning specialist. What this means is that they are developing ‘marketplaces’ that allow cloud vendors to promote their solutions, and that offer the channel partner a ‘one stop shop’. One invoice each month, based on usage, and aggregating services from a range of different cloud solution vendors. Very compelling.

Now back to the Chinese restaurant. The restaurant is clearly providing an aggregation and provisioning service. And a very tasty aggregation and provisioning service it is too. But it only attracts customers if the range of offers is broad – it has to offer an extensive menu – and if the customer experience is positive. No Chinese restaurant is going to survive long selling only two or three dishes, which take too long to serve. And cloud aggregation specialists face the same problem.

A cloud aggregation and provisioning specialist can only succeed if they offer a decent range of solutions, and if their back end is integrated to deliver seamless technical provisioning. And both those areas are a real challenge for any business in that market. We don’t see many channel intermediaries – just yet – with the scale and infrastructure in place to meet the complete need. So in effect we have a High Street full of Chinese restaurants, each selling part of the menu, with varying levels of customer service.

This is not just a distribution challenge. It applies equally to the so called ‘born in the cloud’ aggregators, like Vuzion, Rhipe and Computenext. We’re looking towards a time when one or two aggregators start to dominate a cloud market, but we don’t see it yet. Interestingly we decided over dinner that customer experience ‘beats’ big menu in the Chinese restaurant arena, and that it probably does in the cloud aggregation market too. Customers will tend to move to aggregators who are easy to work with, and who have the provisioning technology working. And that will allow those aggregators to build out their offering into new markets with new solutions. So a big menu is not the winning formula. It’s about doing what you do better than others, then build out.

Interested in comments and experience on all this. Focused on cloud aggregation please, not Chinese food.

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