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The Evolving Distributor: How the Cloud Service Explosion Affects the Distribution Model

By Pete Engler

There is no denying the emerging prevalence of cloud services within the technology industry. No Peter Engler Digiumlonger are we solely relying on premises-based technologies to keep our day-to-day business activities going, but are, instead, deploying cloud technologies and accessing them from remote locations. While it seems that everyone is jumping on the new cloud services trend, it leaves many people wondering how it is affecting the traditional business channels, specifically its impact on distributors.

If we take a look at the full picture of the distribution landscape, we can see a change in the channel that began taking place even before the introduction of cloud technology. Distributors were originally simple warehouses that served as a means for getting the product from a vendor to a reseller, but, over time, this model has been changing. These so-called limited service distributors have become less prevalent and we have seen a shift towards value-added distribution as the new vogue model.

Value-added distributors are more than just large warehouses filled with products waiting to be shipped; they provide credit for resellers, carry a range of products for partners to add to their portfolios, and even offer training for those technologies. Distributors have become more of a trusted advisor for resellers than simply a quick stop in the channel, which is helping them to retain relevance in the dawning of the Cloud Age.

As a trusted advisor, distributors serve as a gateway between vendors and resellers. They are often the first to research and analyze new technologies and vendors to determine what they should offer to their reseller partners. Resellers depend on distributors’ findings to decide what solutions to add to their product portfolios. This relationship places an incredible amount of power into the hands of distributors because they have the ability to make or break a vendor and their solution. This is especially important right now because cloud technology is exploding. According to the Synergy Research Group, the worldwide cloud computing market grew 28 percent to $110 billion in 2015, and everyone is trying to get their slice of the profit pie. Cloud vendors are popping up everywhere and if resellers alone are trying to decide which vendors’ solutions are pursuable, the process may become overwhelming. Therefore, they place their trust in distributors to vet new cloud technologies and vendors to ensure they are offering clients the best solutions for their specific business needs.  

Additionally, cloud technology presents distributors with the opportunity to expand their role in the channel by offering aggregated cloud services. Oftentimes, deploying a cloud solution requires ongoing services from multiple vendors, and customers prefer to work with a reseller who can offer them a complete solution. According to research conducted by the Global Technology Distribution Council, resellers are reluctant to offer aggregated services independently due to the vast financial responsibility and the uncertainty of taking on a general contractor type role. However, distributors are in an excellent position to perform such duties with their close relationships to vendors and their financial business models, making them the ideal candidate for bundling services and selling them through the channel in one complete package.

While many people fear the emergence of cloud technologies will eventually dry up the distribution channel, research actually proves the opposite to be true. The path distributors have been following has led to their natural evolution into a more value-added role. And their ability to serve as a general contractor for cloud deployments has created for them a resiliency that will not only allow them to survive, but to flourish in the coming Cloud Age.


Pete Engler is the channel marketing manager at Digium, a business communications company based in Huntsville, Ala., that delivers enterprise-class Unified Communications.

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