Storms in the channel as cloud based collaboration gathers momentum

Last October following an informal 'getting to know you' press briefing from the recently appointed head of Cisco for Australia and New Zealand, Richard Kitts, I reported him saying that Cisco was realigning its internal organisation to match the changes impacting its partners, namely providing fewer on-premises solutions and instead moving applications into the cloud.

I said: "When questioned he was not too keen to explore the ultimate conclusion of this re-alignment: that the vast army of channel partners that sell Cisco gear to an even greater number of end user organisations could shrink to a much smaller number of larger partners selling to very large providers of cloud services. But this surely is the logic of the move into the cloud for Cisco, its channel partners and those of other IT vendors."

That prediction is being realised faster than I anticipated and has re-inforced the logic of this argument, but it's also clear that Cisco intends to try and hang to as much of the channel as possible in this changing world.

Cisco's flagship cloud collaboration offering is its Hosted Collaboration Solution (HCS), announced in mid 2010. Cisco has to date named five HCS customers in Australia and New Zealand: Telstra, Telecom NZ subsidiary Gen-I, Amcom, Anittel and CSC.

The success that Cisco has achieved in ANZ with its Hosted Collaboration Solution has drawn comments similar to mine from Ovum analyst Claudio Castelli. Reporting from the C-Scape analyst forum at the recent Cisco Live! event in Melbourne, Castelli said that Australia was "Cisco’s second-largest collaboration market, behind only the US," and that "Cisco expects that 50% of its new collaboration business in Australia will be based on HCS in two years."

He added: "This is aggressive, and sales teams have incentives to push for hosted rather than on-premise solutions. In an average HCS deployment approximately 70% of providers’ capex goes into the underlying infrastructure (generally Cisco network and data center products) and just 30% into the HCS solution itself."

Castelli concluded: "As Cisco shifts its product proposition to the cloud approach it will have to deal with any conflicts that arise when established channel partners see some of their traditional business moving to telcos.

"As more services are bought and managed online, traditional channel partners need to develop skills beyond selling and distributing hardware systems and shrink-wrapped software. They will need to move upstream into helping their clients integrate the systems and use them effectively to grow their businesses.

"As more collaboration services become embedded in the offerings of cloud providers (which are likely to be telcos), Cisco’s traditional channel partners need to avoid being left behind. They must learn how to help their customers take full advantage of cloud services, and develop their own unique sources of added value."

However as telcos implement Cisco (or anybody else's) hosted collaboration solutions they will be faced with the challenge of luring end user organisations 'into the cloud' and away from premises based solutions. They too will be relying on channel partners, and will likely be expanding the number and nature of these as they seek to recoup their investment in cloud based collaboration technology.

Telstra has given no indication of take up projections for its HCS implementation, dubbed Telstra Cloud Collaboration, but they are likely to be significant, and it is surely no co-incidence that Telstra advertised in January for a "senior channel development specialist".

However Cisco does not intend to easily give up ownership of the channel that delivers its products and services to end users. Writing last week on a Cisco blog Richard McLeod Cisco's senior director worldwide collaboration channel sales, said: "The beauty of Cisco’s go-to-market strategy for cloud is in our Cloud Partner Program, which enables Cisco-Powered HCS cloud providers to sell their services through authorised Cisco UC and collaboration resellers."

With this program Cisco seems to have all the bases covered. It includes a Cloud Builder Track for channel partners that sell the Cisco HCS and other products to cloud providers like Telstra; the Cloud Services Reseller track for channel partners that sell Cisco cloud services provided by organisations like Telstra to end users (although it's hard to see why they should be Cisco channel partners rather than Telstra's) and the Cloud Provider Track for organisations, like Telstra, that are offering cloud based Cisco services.

The channel environment for cloud based collaboration services seems to be getting very cloudy indeed!

This article first appeared on iTWire, Australia's leading independent IT&T news and information source.