Parallels Summit – The coming of the aggregators

Against a background of continued rapid growth in helping SMBs to move into the cloud, the strong trend to emerge from the Parallels Summit in New Orleans is the way that opportunities for channel services providers are starting to really develop. This is particularly so as they start to aggregate services together to deliver richer and more comprehensive business solutions to end users.

 

Some of these aggregators will also be numbered in the ranks of the Cloud Service Providers (CSPs) but many will also come from the traditional Value Added Reseller (VAR) and Systems Integrator (SI) communities that have served the SMB community since the early days of computing use.

 

One of the key drivers of this was identified at the Summit by Parallels’ CEO, Birger Steen. This is the growing potential for what he calls services and applications sprawl.

 

“At the moment end users have two or three cloud services running, on average,” he said, “and by the end of this year most will have five or six services running. But next year we expect to see the average rising to nine services and for an SMB that sprawl of services will get difficult to manage. This is where we see the opportunity for the channel partners. In addition, we are finding that the app-store model is not working well with SMBs. They do not seem inclined to go down the self-provisioning route and prefer to talk to someone about their specific requirements. That  is a role for the channel.”

 

So the company is now offering a growing range of support programs to help channel partners, and especially the traditional VAR and SI communities, understand how to move into the cloud so they can then exploit their existing expertise in vertical market sectors.

 

Steen also acknowledged that there is a role for Parallels to now consider playing in helping to create end user market `pull’ from the SMBs themselves.

 

“Marketing support is something they are doing it for the channel and yes, we probably should be doing more for the end user SMBs,” he said. “But it is extremely difficult to sell to 150 million very different potential customers across the world. There is no single channel to market, for example. And the rules of what each of them might need from us will be different by different countries.”

 

This view was reinforced by a panel session at the Summit attended by Eric Purcell, a senior director at Box; Hakim Annaciri, Portfolio Manager at KPN; Mathew Prince, the CEO of Cloudflare; and Steve Zimba, the President of Mural.

 

The collective opinion of the panelists was that the last year had seen the beginnings of the emergence of service brokers and aggregators. It was interesting to note, however, that these first steps into building cloud service and support channels for SMBs had largely been unsuccessful.

 

As Zimba observed, the problem is that the early cloud service bokers were largely just buying and reselling cloud applicationss with no added value except availability. That could even be a disservice for end users, as they could even cost end users more and get they get no added value from the purchase.

 

“But one or two have followed the aggregator route and are making it work – and going for vertical market sectors,” he said.

 

The panel did see the channel being like the old reseller business: being the trusted counsel for the SMBs as they always have been. This is because they are the ones that understand the vertical market issues the SMBs face.

 

“But as well as targeting a definable market sector with the right tools and applications they will have to provide a white glove level of service and support,” Zimba said. “There is no money to be made in reselling cloud applications, but there are now business opportunities in providing services around those applications.”

 

This does lead to a significant change of emphasis in one area – SLAs. Most technology vendors have their own SLAs and want to maintain `ownership’ of them. But as KPN’s Annaciri pointed out, this can create a real issue for any service providers. This is because it becomes all but impossible to manage so many different – and often clashing – SLA requirements.

 

“The answer is that the reseller has to become the arbiter and owner of the SLA of the overall aggregated service,” he said. “This is something applications vendors will just have to get used to.”

 

This is, in practice is a significant indicator of the fundamental change of emphasis that is going on, where the relationship between the customer and the service solution provider – the reseller and their primary resources provider, the CSP – is now paramount and they need to be the owners of the SLA, not the technology vendors.

 

There are impediments to this of course. One of the most important is the still vexed issue of how CSPs can generate trust in end users. This especially the case when the CSP sits between the user business and its customers, which is seen by many as source of considerable risk.

 

There is also the threat that cloud service offer to the existing legacy applications providers, and especially those that are not able to adapt quickly. They are seen as having a significant potential for interfering.