“History doesn’t repeat itself, but it often rhymes,” goes the aphorism by Mark Twain. Looking at historical examples can be instructive. As an example, railroad development in the 1800’s was very similar to the network buildout of the 1990s and consolidation of today. We had only to look at history to see that overbuilding, lack of interchangeability, subsequent regulation and consolidation, and in some cases nationalization might be factors in national network build outs.
The Romans used to say, “to see the future, look to the past,” and it’s in the past we learn why the Cloud favors the broker model and will continue to do so. In 1771 Richard Arkwright assembled the first modern factory in Derbyshire, England. Arkwright was known as the father of the industrial revolution not because of his textile related inventions and patents, but because of the factory system he created centralizing people and equipment. This centralized system turned out to be extremely efficient when compared to the cottage spinning and weaving each family or town craftspeople performed. Centralized machinery meant fewer machinists were needed, spare parts were on hand, and the work was uniform and of high quality.
Break Fix Reduced
Just like a factory, services in the Cloud do not require presence at the customer location to perform services. Service issues, settings adjustments, and upgrades can largely be performed by the provider which significantly reduces the need for on-site personnel. VAR models based on break/fix are now suffering because of this reality.
Emphasis on Marketing and Sales
Factories created so much efficiency that by 1812 the cost to manufacture cotton yarn had dropped by 90% http://industrialrevolution.sea.ca/innovations.html!. The challenge now was how to sell the abundance of surplus produced which would require marketing and sales efforts. The Cloud has created a similar situation of abundance. Software and computing cost almost nothing; the challenge providers have is selling and marketing their plentiful, high-margin product.
Cloud brokers focus on relationships and selling which are the primary services needed in a Cloud sales environment. These are the competencies of a partner that will be of primary importance to a Cloud services provider.
Not Everything is Automated
Some may argue the sale of cloud services will also be automated, and while that’s true for many apps you may buy personally, whenever there are complexity and choice, advisory services will appear. As an example, look at the recent rise of “robo-advisors” like Betterment and Wealthfront which use algorithms to execute trades on behalf of customers. Betterment has now added an advisory network as have the “robo” advisory services provided by Personal Capital, E-Trade, Vanguard, and others. While many things can be automated, not even Amazon has been able to automate the relationship provided by a trusted advisor.
Additional Broker Services
Customers will need additional services from third party advisors such as implementation and customization services which will largely be advisory, software integration, and monitoring and management services. Some of these services may be provided by implementation specialists who will work with providers to create a custom fit for the customer. Cloud brokers will either partner or will add this type of services to their offering as well as provide ongoing monitoring of service to ensure the quality of a customer’s experience and to ensure adoption and retain and grow customers.
The modern factory’s product is purchased through marketing channels based on customer choice. lCoud services will be purchased through the channel the customer desires and based on the historical precedent and the trends we see today, that channel is increasingly the broker channel.