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CRAIG’S VIEW: SERVICE PROVIDER AS A CHANNEL (SPAAC)

As the cloud becomes more pervasive in today’s IT environment, new business models are forming – which of course bring on new acronyms!  My latest, “SPaaC”, describes how Service Providers are becoming more ‘front and center’ in the Solution Provider community.  In fact, several of the largest Solutions Provider Partners in the channel like Presidio, Dimension Data and Logicalis are creating special practices to embrace the Service Provider model. This is indicative of the changing landscape from product to service orientation and will create a morphing of balance sheet models and roles and responsibilities in the channel.  

Of recent note is Cisco’s announcement about its Intercloud initiative, adding 30 new Service Provider partners including British Telecom, Deutsch Telecom, Telestra, Equinix, Sunguard and Peak 10—names that were rarely, if ever, mentioned in a channel publication. But today they are becoming more mainstream as are many more hosting, VoIP, Carrier, Cable and Data Center Service Provider firms.

At Comcast Business, we are also seeing a growing interdependence between Service Providers and the Channel.  For example, there are partners who sell both data center services from Equinix as the data center Service Provider and connectivity services to reach that data center from Comcast Business. After all, there is no cloud without a connectivity pathway to get there. This is why we believe that VARs need to start lining up more Service Provider relationships in their vendor portfolio because their customers are going to demand it of them.

There are many commercial models available, but traditional VARs typically favor the purchase and rebilling of a product or service on their own paper and receivable. This model has had strong traction for a long time, and for certain offerings it may still make sense. However it is very difficult to add direct value to another Service Provider’s offerings when that Service Provider owns, operates, and bills the end user for the service. And that is true not only for carrier network services but also for SaaS services, IaaS, PaaS, backup, storage, and more.  Fortunately there is a blueprint in the U.S. of partners willing to be brokers of services vs. rebillers of them. Indeed the entire financial services industry and insurance industry channels are built on this exact same commercial business model. This ensures very low overhead on the part of the partner and they can focus on what they do best: advising their clients on the best Service Provider solutions in the business without having the headaches of operating the service, billing for the service, and supporting the service after it is installed. They instead can command a premium for their knowledge of the many offerings available to their customers in the market place (just as financial advisors must know how to design financial plans for their clients or insurance agents must know the best insurance packages for their client’s needs). And they can adjust the mix if that offering is not meeting the client’s expectations.

But do these advisors ever rebill for these services? No! They simply earn a residual commission for selling them on behalf of some other company, and there are 100K+ of these advisors making very good incomes doing just that. Yes, they must be skilled and go through many certifications and credentials to earn the right to sell these services and demonstrate their skills. But they don’t fixate on rebilling for the services because they don’t need to. Instead they focus on selling and advising clients on the solutions that are most appropriate for them.

This same model can be accomplished in the IT and telecom world by partnering directly with the Service Provider as their broker, or going to a Master Agent who has access to hundreds of service provider contracts. Just look at one example of services offerings that one Master Agent offers to their advisors and you can see the possibilities of what a VAR could represent as a broker of services (vs. being a reseller/rebiller of them):

From here forward, the channel is going to rely on working with known economies of scale where they can be knowledgeable about many solutions in the business that their clients need, but without having to build them all themselves as they were once required to do when solutions were physically created on their customer’s premise. Instead more clients will want services that reside in someone else’s data center.

All things change in time and this model will too. We need to work closer as an industry with our IT suppliers who provide the hardware and software offerings we use to build our recurring revenue services and instead focus on how we can help our valued IT partners to sell more of these services to clients (but not necessarily be required to rebill them directly).

Moreover as millennials enter into the Solution Provider world, the historical costs involved in starting up a VAR business may prove to be simply too prohibitive for most potential entrants compared to what they were in 1982 when the IT channel started ramping up. But learning what solutions make sense and advising clients to buy them just as a financial advisor does, makes a whole lot of sense and it requires that the partner understand the many solutions available to their clients. The channel is going to continue to provide significant value to their clients just as financial advisors and insurance brokers do for theirs. After all, this represents the best about the new recurring revenue services world we are running towards, and it allows the possibility for even more partners to support a business’s needs over time. Whether it’s cloud, IoT, SaaS, PaaS, IaaS, your Service Provider as your channel partner can help you jump into this new world of the Service Provider as a Channel (SPaaC).

Craig Schlagbaum is the Vice President of Indirect Channels at Comcast Business.

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