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SAN FRANCISCO — In the early days of PC software, people hawked floppy disks at meetings of PC user groups and trade shows. Eventually, ambitious software publishers learned to hawk their wares at computer stores, and they eventually built distribution networks via an enormous and diversified channel of resellers, systems integrators, independent software vendors, and retailers.
A similar evolution is happening in the cloud now. Currently, cloud vendors mostly sell their services directly to their customers: If you want to use Box, you probably go to www.box.com and sign up for a free trial; if you like the service, you’ll eventually start paying Box directly.
But an emerging category of resellers is emerging. Called cloud service brokerages (CSB), these companies integrate bundles of cloud services and enable their distribution partners to sell them to small and medium-sized businesses via simple point-and-click web dashboards. Big wireless carriers, for instance, might want the option to offer a bundle of small-business services to their SMB customers. A CSB could make that easy by enabling the carrier to offer a bundle of services that include Box.
Research firm Gartner estimates that just 5 percent of cloud services are sold via brokerages today, but it estimates that this will rise to 20 percent by 2015. Brokerages currently in operation include Gravitant and CloudSherpas. The market also includes companies that are enabling CSBs to operate with management and integration technologies, including AppDirect, Jamcracker, and Parallels.
In a discussion at VentureBeat’s CloudBeat 2013 conference today, several cloud companies talked about their experiences using and supplying technology to CSBs.
“For us it’s about getting to more customers,” said Joan Fazio, a senior director of emerging channels at Symantec. “Very large service providers, telcos — it allows us to get our product out in very simple bundles that customers want. … It allows us to get to millions and millions of small businesses all over the world.”
For Box, CSBs are a small but growing channel through which the company reaches new customers. Uday Keshavdas, the director of business development at Box, said he expected many more customers to come to the company through CSBs in the next few years.
One of the things that Box has learned is the importance of picking CSB partners very carefully.
“If you allow a vendor to sell on your behalf, how do you control the messaging, the positioning, and other operational details?” Keshavdas said. By selecting vendors carefully and working with them to ensure they’re fully up to speed. It’s a time-intensive process, but is relatively manageable now, because there are not many CSBs to choose from. The situation might be different in a few years when there are thousands of cloud brokers, he acknowledged.
Fazio echoed those sentiments.
“One of the things we’re learning is the marketing aspect. You can’t just build your marketplace and expect these guys’ customers to show up — you still have to go out, do the marketing, and do the demand generation. And you’ve got to keep them coming back to the site to get more goodies,” said Fazio.
CSBs aren’t quite yet the digital equivalent of a computer software store, said Alex Danyluk, a senior director of ISV and SaaS alliances at Parallels, a provider of CSB-enabling software. For vendors that want to use a CSB to deliver cloud software to their customers, simply offering a huge array of cloud services to choose from is not a good path to success, because cloud services are still rather high-touch sales.
“The successful [vendors] are the ones who select one product, and really focus on it, with a really strong go-to-market strategy,” said Danyluk. “The ones that I’ve seen fail are the ones that have a store shelf, with 20 or 30 different products, and let the customer choose.”
The CSB market is still a tiny fraction of the overall spending for technology, Danyluk said. He stated that SMBs currently spend about $1.1 trillion worldwide on IT, and only about $34 billion on cloud services.
“We’re still at the infancy stage,” Danyluk said.
CSBs are one of the ways cloud providers can increase their reach into the lucrative market for SMB technologies. In turn, one of the ways Danyluk said Parallels is working to ensure that CSBs take off is the Application Packaging Standard.
APS 2.0, the current version, makes it easier for companies to make their cloud services automatically discoverable, manageable, and to simplify the process of customers signing up for them — and even automate integration with other cloud services the customers are already using.
“The CSB becomes the integrator, and it’s less and less likely to have standalone islands,” said Danyluk.
For Fazio and Keshavdas, the magic of CSBs is that they allow them to reach millions of potential SMB customers — the more the better.
But another key attraction of the CSB model is how much it simplifies the sales process, Fazio said. A customer shows up, orders what they want, and it’s delivered.
“We love that — that’s key,” Fazio said.
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