Dive Brief:
- Approximately half of IT vendors maintain relationships with hyperscalers through IT distributors, according to a study by the Global Technology Distributor Council and CommCentric.
- Distributors should be in the middle of hyperscaler partnerships as cloud marketplaces enjoy mass adoption by vendors, the survey of 60 vendor leaders found. Distis are needed to support marketplace sales of cloud- and AI-based applications, many of which are not plug-and-play, GTDC said in the report.
- Distributors have evolved beyond their historical value as providers of logistical and financial services, according to the trade group. "Distribution is now a major force multiplier-helping cloud and AI and hyperscaler-focused suppliers reduce risk, scale faster, enter new markets and orchestrate increasingly complex digital ecosystems,” GTDC CEO Frank Vitagliano said. “Those services are layered on top of all the time-tested valued services that vendors have come to expect from their trusted distributor partners."
Dive Insight:
Hyperscaler marketplaces have gained traction with IT buyers and will continue to grow, according to Omdia. The research firm, Channel Dive’s sister company, expects the emergent ecosystem to garner $163 billion in enterprise software sales by 2030 — and distributors are eager to prove that they deserve a share of the business.
Distributors and resellers defended their utility over the last half-decade as analysts speculated that enterprises would purchase software directly from cloud marketplace listings, eschewing channel partners. Those fears have been largely quelled by distis forging alliances with Microsoft Azure, Amazon Web Services and Google Cloud Platform.
The deals have started flooding in. Omdia forecasts that the channel will enjoy a majority of hyperscaler marketplace sales by 2027.
However, that leaves a wide swath of deals that bypass distis and their partner communities.
“[Hyperscalers] can be a great help to the channel, because they have agreements with the end users, and partners can take profit off this … but they can also be seen as an alternative in some ways, because they can sell directly,” Arrow Global ECS President Eric Nowak told Channel Insider at the North American GTDC Summit in February.
Most vendors — 60% — have a direct relationship with a hyperscaler, though they may also leverage indirect partnerships. A solid chunk — 40% — of vendors mix direct and distributor-facilitated relationships.
OEMs quoted by GTDC say distributors can add value to cloud marketplaces. The process of buying and deploying software with a single click has proven difficult in B2B software.
“Hyperscalers need distribution to drive the full end-to-end technology lifecycle. They can’t scale without that ability and, based on my experience, don’t want to play in that space themselves,” said Poonam Advani, business development director, Global Distribution Sales for Cisco.
Omdia Chief Analyst Jay McBain said the activity highlighted by GTDC is geared toward larger distributors. Omdia’s upcoming Global Distributor 250 will show that the top 15 distributors drive 61% of the $452 billion distribution market.
“The ability to integrate into the hyperscalers and their marketplaces takes a significant investment and only a handful of large global distributors have had the capital to do it,” McBain told Channel Dive via Teams. “For example, Microsoft announced an integration with only five distributors with their marketplace in October.”
McBain added that hyperscaler infrastructure has close ties to enterprise and government customers.
“Most of the value distribution brings to the market is in the broader SMB and lower midmarket space whose access to these hyperscalers is usually buffered by a SaaS/ISV layer,” he said.
Nowak pointed to a similar distinction. Arrow is running “our own autonomous channel business” on its own digital platform. Nowak said vendors prefer to simply leverage a distributor for midmarket customers, rather than go through a cloud marketplace.
“The partners use our platform to not only procure but also manage the entire lifecycle of the subscriptions,” Nowak told Channel Dive in an email.
“With their strategic customers and enterprise business, vendors are very often either selling directly or through the hyperscalers and taking profit of the contracts/commitments that the customers have with them,” he said. “In this case, the end user can buy from the hyperscalers directly or through their usual trusted partner/advisor on the hyperscalers marketplace. This is becoming a complementary and alternative (more opportunistic than strategic) route to market for the channel, specifically for the big deals.”
Clarification: This story was updated with additional details about Omdia's characterization of the GTDC findings.
