In an effort to add to the alphabet for “X”aaS, we at Digital Bridge Partners are proposing the addition of “E”aaS for Ecosystem as a Service…

Are we taking it too far?  Perhaps not.  Don’t be suprised if you see cloud services popping up that make it easier for service providers and customers to find related services in an attempt to assemble a complete offering or a family of related cloud services.
Let’s begin with a little channel management history that puts the notion of Ecosystems into context. In our last post we talked about how the traditional Vendor-Indirect Channel model is giving way to an Cloud-connected Ecosystem model.
The Vendor-Indirect Channel model is characterized by a big powerful vendor who ‘makes the market’ provides leads, compensates through margins, etc. and creates a downstream network of resellers who sell on-behalf of the vendor:
  • Poster Child – Microsoft and the Wintel Ecosystem.
  • Dominant Channel Model – Value Added Reseller (VAR) and OEMs
The Cloud-connected Ecosystem model is composed of inumerate service providers who build last mile cloud services on top of other cloud services.  This is more of a market of equals than the top-down command and control model of old:
  • Poster Child – Amazon Web Services.
  • Dominant Channel Model – Value Added Integrator (VAI) and Cloud Service (and APP) Providers (CSP)
Before we dive into Ecosystems and their role in the Cloud Channel, we have to de-bunk some myths.  Just as some argue that you don’t need a channel for cloud, some argue that you don’t even need an ecosystem for cloud.   In an article about how Microsoft is set to blow up its business from CNET, Marty Wolf argues that in its attempt to compete with Apple in the tablet market, Microsoft is abandoning its Ecosystem Approach and copying Apple’s walled-garden approach thus cutting its OEMs and its channel who lived off the Wintel ecosystem/franchise.  Here’s the quote that brings home Marty’s point:

“Owning the ecosystem is the best way to protect the monopoly-style rents Microsoft enjoys on the desktop. If delivering a great user experience is the customer benefit of owning the ecosystem, the vendor benefit is customer lock-in. If you want access to Apple’s elegant design, interoperability, great apps and content, and intensely loyal customers, then Apple is the only game in town. In return, Apple takes a piece of everything that flows through its hardware.”

What’s misleading about this argument is that Ecosystems do NOT go away with the cloud, they just shift value axes.
  • Ecosystem Value in the Wintel Vendor/Indirect Channel Paradigm was focused on the movement and integration of moving parts (typically hardware and software that had to be moved along a supply chain and integrated into a customers on-prem data center).
  • Ecosystem Value in the Cloud-Connected Ecosystem is focused on designing repeatable processes as software delivered as a cloud service that are integrated and tied together with other (foundational) cloud services and delivered to the customer in the cloud (and with on-prem in hybrid cloud instances).
The point is that Ecosystems are still important, we would argue even more important in the cloud because no one cloud service or one cloud vendor can ever meet the needs of a typical enterprise.  It’s about integrating multiple cloud services (hence our term Value Added Integration) and cloud service/app providers are the key end user offerings.
Punchline – If you are a traditional vendor moving from model 1 to 2 or a new entrant that has a foundational cloud service (aka you want to be a platform player that leverages VAIs and CSPs to drive your MRR), you had better be thinking about how you are going to assemble a comprehensive Cloud Services Ecosystem (see our blog on partner matching) which we think of as The New Channel Model.