One of my favorite business books is Who moved my Cheese by Dr. Spencer Johnson. Its central message: Don’t expect the status quo to survive forever. To be a successful business owner, you must always keep an eye on the future. New technologies and new ways of doing things are constantly emerging, which means one day your offering or service proposition may no longer be relevant or competitive. The advantage you held yesterday may soon be replaced by tomorrow’s trends. Think about some examples: Today Uber is now the largest taxi company in the world without owning any cars; AirBnB is the largest hotel chain without owning any property.
How resellers have been delivering DaaS
I just joined Workspot’s team after having spent the last 3 ½ years working for Citrix and building their service provider partner programs. These partners were offering hosted workspace or Desktop-as-a Service (DaaS) solutions. It was an exciting time as customer demand gained momentum, and the space saw tremendous growth from both Managed Service Providers (MSPs) and Cloud Service Providers (CSPs).
However, many of these partner solutions were built using available technologies and leveraged VDI 1.0 to deliver them. Many of these solutions were successful because they provided disruptive innovation, something which attracted many early DaaS adopters who were primarily in the small to medium business market (SMB) in key industry verticals.
Here is how I characterize these offerings:
- Partners bore the risk and cost of building a “platform” with the associated hardware and software while trying to keep costs as low as possible
- Customers came along for the ride
- New entrants won
- An incomplete solution was good enough
- Solutions were engineering-led
- Partners made money from services because of solution complexity
Customers want more
The move to the Cloud (Azure and AWS) will dramatically impact traditional VDI reseller channels that have specialized in on-premises solutions. Resellers have traditionally earned a substantial gross margin from on-premises revenue streams such as hardware installation, support and project services. The size and frequency of these opportunities have become more scarce and customers are asking for alternate models. This prompts the question: “Where has the Cheese moved to?". Where will the channel’s revenue and, more importantly, gross margin come from?
The business landscape keeps changing. Customers increasingly value simplicity, deployment speed and ease of management for their IT solutions. Subscription-based and on-demand pricing models are quickly becoming the norm. Customers also want to have the flexibility to leverage new technologies, such as public clouds (e.g. Azure) or hyper converged infrastructure and add-on higher margin services.
A different approach for resellers
Resellers need to adopt an enlightened approach when it comes to selling and servicing cloud-based solutions. In my previous blog I discussed these key tips resellers should follow to surmount the challenges they face and maximize their potential in the cloud:
- Invest in sustained innovation
- Recognize new partnering models from "born in the cloud" vendors
- Adapt and bolster offerings with complementary solutions