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Cloud marketplaces: The death knell for resellers?

Wed 25 Jan 2017
FYI, this story is more than a year old

A few blogs ago, I posited that cloud marketplaces such as those being run by AWS, Microsoft (Azure), Google, IBM, and a few other cloud platform providers might eventually obviate the need for sellers. While the demands of enterprise technology buyers will stave that off for some time at least, we might not be able to say the same about REsellers…the channel partners that sell products created by ISVs to accounts and markets that those ISVs might not otherwise be able to reach.

What kicked off this thought today were comments I read made in December by Microsoft (Gavriella Schuster, Corporate VP of their Worldwide Partner Group) as follows: “At the end of the day, I believe that within a year, the majority of our partners will be delivering some sort of value-added differentiation and IP services on top of the technology stack in some way to deliver more value to their customer.”

Now, that in and of itself doesn’t signal the demise of the reseller, but it is a logical conclusion for providers like Microsoft with significant cloud platforms and offerings/services designed to be integrated with or consumed by ISV products.

As Microsoft adds to the number of ISVs found in its marketplace on Azure, Google furthers integration of its Cloud Platform and Orbitera acquisition and AWS’ already huge ISV list extends further — and their platforms (along with those of other cloud platform providers) become more meaningful and important within both the budgets and architectures of end user organizations, a few things happen:

Software (and increasingly, added value services) purchases become frictionless. While there may still be budget limits, approved buyers and suppliers, etc. within tech buyer organisations, the time and effort between decision and provisioning will decrease significantly.

There will be less need for middlemen, resellers in particular. Cloud platforms and marketplaces eliminate geographical issues, and while linguistics, pricing, etc. still must be perfected globally, global expansion and distribution for ISVs will be much easier.

Note: value added services (e.g., onboarding, integration) will still be required, but they’ll be more focused and themselves increasingly available as a service or on demand. Distributors face some of the same issues, at least from a software perspective (which is likely why major distributors have themselves invested in marketplaces).

The relationship between cloud platforms/marketplaces and ISVs becomes a self-perpetuating combination as ISVs consume more platform services and leverage the marketing, billing, provisioning, etc. facilities therein, making the platform providers that much more central to customer lifecycle.

To be sure, the combination of cloud platforms and marketplaces today account for a small percentage of technology purchasing. But everything I hear from the platform providers as well as ISVs whose investments today range from toe(s) in the water to “we want significant amounts of spend to occur” in cloud marketplaces suggest that the percentage will increase.

Buyers, who today still want certain levels of treatment and still must be marketed to, will be increasingly less concerned with hand holding as buying power extends more broadly to lines of business and “citizen IT” folks within.

Being a managed service provider (MSP) has become somewhat of a safe haven for many resellers given the ever-increasing number of services and micro-services available through the cloud platforms.

Longer term, however, that opportunity will dissipate as more integrated offerings (and SaaS products) become available through marketplaces and platforms. But the writing is on the marketplace wall – if you’re a reseller, the time to find value to add is NOW.

Article by David Yockelson, Gartner Research VP.

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