software licensing 300x225 Cloud is Changing the Software Distribution Channel ModelSoftware distribution channels are the real point of customer contact. It is through the distribution channel system as each organization reaches the customer, meet their needs and gather vital information that can be used to manage customer relationships.

Customers are increasingly demanding the availability of a wide and varied range of channels. Most expect to have direct access 24 hours a day, seven days a week, while, simultaneously, seeking personalized services and products tailored to their needs.

But the growing importance of cloud in companies, governments and SMEs are altering the market and disturbing the business model of the channel.

Current Advantages of Distribution Channel

Software service providers have historically used their distributors or resellers to service customers with a local presence at a lower cost versus their own direct sales model.

As companies try to differentiate between them by enhancing customer relationships, the channels through which they provide their services become a key from a tactical point of view. Companies thus are able to offer personalized services to the general public at any time and from a wide range of channels either by consolidating the costs of the license or by settings customized prices as per competitive scenario.

The global software market is expected to reach to $299.1 billion by 2014, according to the study from market researcher DataMonitor and half of that revenue will runs through the channels.

Cloud as a Challenge

Distribution channels interested in the business of the cloud, must deal with two aspects: generating a volume to have an economy of scale and specialization to add value in the offer to hand over their customers.

For some years now, retailers can no longer live in the only sale of computer hardware or networks, or even software licenses. They are forced to seek other sources of income through the sale of associated services such as cloud services, cloud deployments, support and training etc.

In parallel, changes in the use of digital and consumption patterns of new computing and network resources would require channel partners to new skills and reoriented their expertise. This is particularly the case with cloud computing solutions.

Cloud adoption increases margins

The solution to these challenges is to adopt cloud computing as a medium and closely align sales and revenues to increase margins. Some recommendation solutions are:

Talent development

Developing cloud based products and businesses can offer a clear choice for growing new business channels. Companies can assist young talents to develop cloud products and fund channel startups more often to accelerate the process.

Cross border partnering

Most distribution channels today are catering to local or national business. Cross border partner programs can boost new cloud channel and enable customers to migrate and locate for partners across country borders.

Consolidation

In advancing cloud market, providers increasingly rely on partner sales channels, and these channels feel more comfortable if a new ecosystem is built to create profitability. Cloud services are less labor-intensive, as a result of which channels get lower margins. Consolidation of channels in combination with the cross border partnering will help the partner channels leverage its investment.

Specialization

Software channels can build partner platforms based on technology or can also focus on an industry or vertical. Specialization in one of the field will bring efficiencies required to create a profitable business.

Segmentation

Rewarding partners and segmenting the channels market based on more trusted advisor or technical capability like hosting can play a major role in unlocking the full potential of the cloud.

The strategic business process consulting, comprehensive management services and comprehensive care are some of the valuable services that distributors can provide in relation to the cloud computing and allow them to enjoy a steady income stream, as well as closer relationships with customers.

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