The cloud has brought about some of the most transformational changes in IT distribution since the dot-com boom, and the most challenging part of it might just be sorting out all of the new acronyms. SaaS, IaaS, and PaaS have turned VAR’s into SP’s, MSP’s and CSP’s, many of which run their businesses on RMM’s and PSA’s. It’s all very overwhelming, and worse yet, new ones are coined every day and everyone seems to have different definitions. In fact, the Cloud Service Provider (CSP) is mysterious enough that Wikipedia doesn’t even have an entry. Seriously!? There is an article on UFO abduction insurance, but nothing about CSP’s. But I digress…
As an IT distributor, and for the manufacturers we represent, the impact is more serious. It is absolutely vital that we keep up and understand the evolving needs of our partner base, and increasingly we see that base transitioning to some version of a service provider model. I recently sat in a room with some of my colleagues and tried to hash out the differences between each of the provider types. In the end, we found ourselves wondering if these partners spend half as much time trying to define themselves as we do them. Probably not, but in case you’re curious, here are a few things that we identified as differentiators.
Who owns the entitlement?
Does it belong to the partner or is it the end user? Whose brand is on the service? If the end user owns the entitlement and the function of the partner is simply to monitor and manage that offering as an outsourced IT department, we would call that a Managed Service Provider (MSP). Easy enough. If that offering is instead being used only as a raw material or input in the production of a larger branded service offering, and the entitlement belongs to the reseller, we define that as a Service Provider. Now if that Service provider relies on the public cloud to deliver the offering, I would define that as a CSP.
Where is the service hosted?
All that compute power isn’t coming from those white fluffy things in the sky. The servers are sitting somewhere, and the location makes a big difference in defining the type of service provider. For MSP’s, central to the business model is the ability to monitor environments at remote locations, which means that the core infrastructure is mostly at their clients’ site. A service provider on the other hand is more than likely maintaining their own infrastructure, either in their own data center or at a co-location site. Lastly, the CSP will primarily utilize public cloud and may not even know the physical location of their infrastructure.
How are the services billed?
Monthly recurring revenue (MRR, another acronym!) is a foundational concept for all three groups. The real question is, are we talking about a standard monthly subscription charge or true consumption and/or metered bill? This is a bit tricky because I’m not sure we can confidently say there are hard and fast rules. However, in our estimation, an MSP is much more likely to be purchasing a monthly recurring subscription. Normalized payments make managed billing for downstream users much simpler. By comparison, service providers and cloud service providers expect and prefer pure pay-as-you-go models. These partner types require more flexibility as they are trying to optimize resource management and cost structures.
So what does it all mean?
Great! So now you know a bit more about how we can categorize IT solution providers. What does it mean? Well, everything and nothing. On one hand, the labels are important. Armed with our partner buckets we can build out frameworks for how to approach each provider type, develop profiles so that we can assimilate and share best practices, and ultimately help grow businesses.
On the other hand, I feel like when it comes to purchasing through IT distribution, the partner type shouldn’t matter. Our most important role as an IT distributor is to make the procurement of cloud services easy, and we can do that by standardizing a cloud distribution process and providing partners with choices for how to buy.
How can IT distribution help?
I believe the key to delivering these choices is to acknowledge the difference between services and SKU-s. For so long, SKU-s have been the safety blanket of the IT channel; our binky. But does anyone remember what that actually stands for? It’s a Stock Keeping Unit. Completely archaic, right?
Bottom line – As a distributor, we must do more than show partners a catalog and tell them to pick one. Cloud computing is complex and often requires highly customizable services. We need to enable partners via a cloud marketplace with configurators that simplify the buying process and make those choices easier. Further, we can use this opportunity to ask simple questions like, who do you want to provision the services to? How do you want to be billed for this services? The answers to those questions not only help us to determine the bill of materials needed, but also what partner programs are most appropriate for each product.
I think it’s safe to say the list of acronyms will continue to grow and it will probably always be somewhat confusing. In the end, it’s all about simplicity and enabling partners to make the right choices, regardless of the letters that identify them. If we as an IT distributor can deliver on that promise, we’ve created a winning strategy that builds loyalty and has us all growing in the cloud together.