Cloud-Based Services Challenge the Channel

One of the challenges Aiden Callaly, MX Sweep VP has to deal with is a change in the economics of the channel partner and distributor business. Decades ago, many firms that sold information technology products could make a reasonable living selling hardware and software.


These days, margins for software licenses and equipment have plummeted.  The typical way of describing the change is that voice services firms used to make their money on “moves adds and changes.” Software distributors used to make their money selling software licenses on a “per seat” basis. Computer networking firms used to build their businesses around gear that broke, needed upgraded and maintenance.



These days, as more features move to a cloud-based or hosted format, the challenge is how to convince partners that they actually can make a living selling different products in a new way. “Many aren’t sure a couple of bucks a month is a good business,” says Callaly. But profit margins for partners selling MX Sweep security products are in the 25 percent to 30 percent range, he says.



Right now, the buyers for cloud-based services largely are small and mid-sized businesses, the traditional “sweet spot” for channel partner sales. And, like it or not, most channel partners will have to adapt. As the economics of the software, communications and computing business change, it is possible the shape and composition of the channel also will change.