20 - The Effects of Hyperscaler Marketplaces on Channel Sales & Partner Ecosystems

20 - The Effects of Hyperscaler Marketplaces on Channel Sales & Partner Ecosystems This production is brought to you by magenta Eric's. A gen tricks is a Pioneer in platforms for partner, ecosystem management and partner relationship management. This is partner relationship management. The ultimate Channel sales podcast. Welcome to another episode of the ultimate Channel sales podcast. I'm your host, Paul Byrd. Hyper scalar marketplaces are having a significant impact on channel sales. By providing customers with access to Cloud Based Services, hyper scalar marketplaces, have become an increasingly popular way for customers to purchase it services and this has led to a shift away from traditional Channel sales as customers are now able to purchase what they need directly from the cloud provider as a result Channel Partners must focus on providing value-added. Verses and support in order to remain competitive in the market. Guest intro: Tim Lowe, Director of Ecosystems, Redhat Our Guest today has lived through the evolution of Channel Partnerships over the last 20 years. In that time, he's witnessed the Revolutionary changes in the, it sector from virtualization to the emergence and prevalence of hyper scalars as he's worked. His way up through the ranks from Channel account manager to his role today, as the Director of partner, ecosystems for the southeast in the world. Our of Enterprise open source Solutions Red Hat. He's here with us today to talk about the effects of the hyper scalar marketplaces on channel sales and partner. Ecosystems please welcome Tim Speaker 2 low, baseball looking forward to the Speaker 1 discussion perfect. So, tell us a little bit about some of the highlights of your career in the channel space so far. Speaker 2 Yes. I've been at Red Hat. 16 years now started off as an inside sales rep, and work my way through. He rolls worked on the global Channel team for a little while and then got into our North America channel via distribution and sort of worked my way up through there really. You know a lot of focus on distribution across all of our segments and then focus in on mid-market where I have a mid-market channel team for a few years, we really focused on sort of those lower Enterprise style customers and then to my role. Now for the past few years, in the Southeast running all of our partner ecosystem cells so high. Hyper scalars sis is V traditional VAR, type partner. So it's been a great one. I think that think that when I started at Red Hat, what can I say we almost do more in a week now than we did in in a quarter or even six months? Then when I started, so it's been a, it's been a wild ride from a bunch of red, Hatters on a couple of floors and office building at NC State to the company we are today. Speaker 1 Absolutely, you put up some pretty big numbers. I was looking at your LinkedIn profile and those numbers are getting close or over. Billion over your time with redhead. Speaker 2 Yeah, we're a little bit over five billion dollars in Revenue now as a company. So we had great leadership throughout from Jim to Paul and now mad Hicks. And, you know, we just, we continue to stick to our core values and continue to have success. Speaker 1 So let's jump into today's discussion for people that aren't familiar who are these hyper scalars. Who are the hyperscalers? And why do we call them? That? Speaker 2 Sure, so you're hyper. Scalars are your public Cloud providers so Amazon Google, Microsoft, Azure, IBM Cloud. Ali Cloud. What they're doing is they're providing infrastructure in an on-demand fashion at a massive scale versus having all of your infrastructure in a Data Center and having your own racks. These companies provide us, the able to go up and down, as demand indicates whether it's seasonal or just frankly, even weekly demand. So as an example website, where it's legal to make some Wagers, Super Bowl, for example, right? Would obviously stand up take this past week and the computing power and etcetera that they need. And so this allows customers to be able to leverage, the advantage of being able to scale up to meet that demand without having the actual Hardware cost sitting there for an entire year. Speaker 1 Absolutely, it's interesting. How hyperscalers & their marketplaces are making a wave with channel and partner ecosystems So, how do you think these hyper scalars and their marketplaces are starting to make a wave when it comes to the channel ecosystem? Speaker 2 Yeah, it's a great question. Ian, so the traditional route especially in terms of software, right? So we've been going this way a little bit for Hardware. Everyone sort of settled in. They have some on-prem things and they've leveraged hyperscale risk for things. The hardware side is pretty well settled in but on the software side, versus a traditional yearly license or subscription in our case of red hat, customers want to be able to pay for what they're consuming, and they want that to be able to fluctuate as they consume more or Less based on whatever their needs may be. And so, your traditional ecosystem partner has to be able to Pivot from selling those sort of yearly licenses, right? Or annual subscriptions to be able to work with customers and deliver what they need. And when they need it, via the hyper scalars, or they being sort of left out of that market and a customer just being able to go directly to a hyper scalar for that piece. So that's the disruption form and ecosystem perspective. And sort of a traditional Regional of our perspective. They have to continue to find ways to add value to their customers in this new Marketplace. And what I would just say is they've done it for the past 30 years. I have no doubt, no doubt that they're going to continue to do it. But it certainly is a different way of thinking and they do have to adapt or they risk being sort of moved out from this new world. Co-innovation and co-creation: Biggest opportunities with the emergence of hyperscalers and their marketplaces So, if you think about that, kind of change that they need to make now to stay relevant. What do you think some of the biggest opportunities are with these? Of hyper scalars and their Market Speaker 2 places. So, it's a great question, right? And one of the things that we're really focused on here is co-creation. So, what these traditional bars need to do is take all of the knowledge that they have around. Their customer base around multiple Technologies, right? That actually solve a business problem for a customer work closely with the vendor to help co-create Solutions. So as an example, if you have a retail customer Stomer. And what they need to do is have a point-of-sale application that understands you. When you go to the grocery store, right? You either swipe your little card, enter your phone number, right? So you can save ten cents on a gallon of milk right. Whatever it may be you're taking that information right? In that grocery store says hey Paul buys milk every two weeks so we need to send Paul a coupon for an extra 10 cents off. Every other week to try to get him to come back in here because when he does, looks like he buys a bunch of other stuff, right? He buys, you know, hamburger meat and potato chips. Etc. So all of that information has to be captured somewhere. You have to sort the data, right? You have to manage it with inventory and shipping and supply chain, and so what the partners are doing today. The Smart Ones are saying, hey let's help build a point-of-sale application. Leverage is different Technologies across different vendors and works with it on a hyper scalar to be able to go to a grocery store chain and say, you don't care what's on the back end, whether it's this vendor versus that vendor, you just need to know that I need to send Paula coupon every other week for milk because when he comes in to buy milk, he buys a hundred dollars worth of other stuff and they give them that consumable solution that they created with a vendor to be able to deploy on a hyper scalar as opposed to having to go in and sell a customer. Mer a bunch of different piece parts. So I think that that co-creation piece is really, really important and going to be what differentiates the partners of tomorrow versus maybe the partners of five years ago. Speaker 1 That's interesting. You know, I've talked to a lot of people just about the emergence of ecosystems and what that means as they make, almost a paradigm shift, not so much but a lot of people consider it a paradigm shift and one of the focal points they have is this discussion about Channel? And well, you called a co-creation. I've also heard people call it co-innovation but that's probably the best answer that I have heard anyone share with me on what co-creation, what co-innovation would be, because that's a marked impact that it would have on a retail environment such as that. So great insight there. What about the overall effect? You know, if people are now shifting, right? It's simply easier to go to a hyper scalar To get additional, you know, technology requirements as opposed to as you were saying, basically, having it sitting on the shelf so you can use it once a year for the Super Bowl what other kind of effects on the channel. Do you think we're seeing as people now? You know, they're no longer buying hardware and putting it on a, on a rack in their office. They're now going to in Azure or a Google or an IBM Cloud, any other effects that you see on the Channel with kind of this rapid adoption of hyper scalars. Rapid adoption of hyperscalers & its effects on the channel Absolutely. So the best Partners have always been Services focused, right? That they've always made the bulk of their money delivering services for these customers. But this has further escalated that or accelerate that I guess I should say. So you no longer have this big chunk of your base, maybe it's a little bit lower margin but you have a huge chunk of sort of stable Revenue. You know, the profit margin that's going to come from it and then you Can iterate off of that. Well, you know that huge staple chunk of Revenue is not necessarily as huge and Stables. It used to be given the emergence of these hyper scalars. So what that's doing is just accelerating a company, a partner's lead to truly truly dig in more and more their customers and find out. What are they trying to accomplish? What is the business outcome that they're trying to meet? And so whatever, hyperscale that may mean, whatever is The application that may mean whatever vendor containerization or automation or platforming. That may mean, what are they actually trying to do? And so it's continuing to drive the very best Partners closer and closer to the customers into the lines of business. We've all heard it right when everyone is working with their sellers to say, Hey, listen, we need to continue to build our relationships inside of the data center, but we also have to move to CMOS and Bios. And I don't know the exact number so I don't want to misrepresent it but CMOS and cios or controlling more and more of the budget these days than in the past more of the, it budget. And so the strongest of our partners are continuing to move closer and closer to the business and the Business Leaders just it's a different cells motion and sellers are having to evolve to be able to have those different sort of conversations. It's no longer bills of materials, and feeds and speeds and feature function. Cost, it's, hey, you're trying to accomplish this and if you don't do it every day that you don't, it cost your business x amount of dollars because your websites down, and people can't go by it. I mean, think of the times where you all going, because you need to buy a new pair of shoes, right? If nike.com is down or Foot Lockers down, you'll go to fin fright or what are, you pick, your vendor of choice, you just need to buy a pair of shoes and so it's not companies can't afford. To not be available. And so you have to speak in those terms though with that customer versus whatever piece of Hardware. You may or may not have Sitting on a rack and whatever piece of software is running it. That's no longer the relevant Speaker 1 conversation and it's interesting. And those figures when it comes to loss of potential Revenue are going to resonate a lot more with a CIO and a CMO as opposed to somebody that is managing their it department. So In your kind of day-to-day interaction with your ecosystem. Future of value-added resellers (VARs) & managed service providers (MSPs) Do you see a difference in, you know, the traditional value added reseller, and that's kind of a little bit of my background. I love the speeds and feeds conversation. I'm a geek that way, but do you see a difference between the type of relationships? You would have between that traditional VAR as opposed to now more of a managed service provider, you know, do you differentiate the two in anyway and is there a future for both of them? In an era where we can work directly with the hyper Speaker 2 scalars. Yeah, it's very interesting. And, you know, I think that some of that story is yet to be written in terms of the future for each. I will say that absolutely, we would work with a partner that is more focused on that managed service right in the ability to deliver what the customer needs. Anytime anywhere. It's a different conversation versus a traditional far and the value that they bring, now both are critical to read. And vendors across the industry, but it's certainly a different conversation because you're interacting differently. And so one of the things that we really stress and I'd add is feel customer first partner always. So we are hyper hyper focused on our customers. Period, full stop. However, partner always means there is always an ecosystem partner involved with our customers. It just may not be your traditional VAR resell. So what we're doing is making Ensure that we can shift our mindset and say there's a ton of value in our traditional Channel. And we're going to continue to invest in that and continue to drive that. However, if a customer does him work in that traditional Channel, it doesn't mean that the ecosystem is hands off. We still need to make sure that we are working with our partners. Whether that's an SI that is V, hyper scalar Etc, because those customers are relying on all these different parts of the ecosystem to go accomplish the goals that they need to accomplish. So, all of that to say, again I think that the future will tell us where exactly everyone sort of Falls in these different spectrums, but you certainly have different conversations based on what that member of the ecosystem focuses on and wants to drive towards. But, you know, they're still both critically important from our perspective. And I think they will be for the foreseeable future, but we'll have to see what happens in the next five to ten years. And how they evolve, right? I think a lot of times those Partners will evolve and sort of have a little bit of both. Right. They'll serve customers and sort of the traditional way because let's be honest, Hardware is not going away. Traditional software licensing is not going away and traditional services are not going away. There are just some things that are going to stay that way so that's totally a ton of value there. But there's also the piece of hey, I need help to migrate certain applications to the cloud and how to automate that, how do I continue to rise that? So I think that what you'll see is the partners that thrive over the next five to 10 years are going to find the right balance. Between their traditional skill sets and how we serve those customers and being able to adapt to some of these new modern routes. Revenue impact? Will revenue sharing be the key source of income for MSPs in the future, versus billable services hours? Or is there still going to be demand in the market for service-based revenue? And do you think there's going to be a new impact on the way that the ecosystem generates Revenue? You know, we know how the hyper scalars are generating that Revenue, but what about the other members, the is vivi's, you know, the msps, the vars? Do you think that there's more of a rev-share model or do you think it's more of kind of a service-based revenue model? Where do you think? Think that next kind of five to ten years will take us when it comes to the expectation of how they generate Revenue. Speaker 2 Yeah so it's absolutely going to change. I just don't believe that we are going to see as many large upfront, sort of opportunities. Now that's not to say that the amount of Revenue over the course of three years is any different. I just think that instead of getting a three million dollar check today, you're going to get and I'm not going to do the math. But whatever 3 million divided by 36 is you're going to get that amount of a check each month, right? So they have to be able to adapt to those instances, right? And, you know, one of the things I think that's really interesting is the committed spend aspect of these hyper scalars. So they go and talk to a customer and say, hey, Paul, you're going to spend three million dollars over the next three years that entitles you to x amount of discount and how you consume that is completely up to you. So what partners are going to have to do is find a way to work with is v s and s eyes and then traditional vendors such As a red hat say hey we need to get customer ABC to consume this compute on top of hyperscale or ABC right in the only way that we're going to do that is we have to put these vendors Technologies on there to help them consume this ayat application because that's going to drive the consumption and burn down that spin. But oh by the way that's a really complicated process. Like it seems pretty simple. Hey take your point of sale. And throw it onto the cloud. Well, it's not that way, right? It requires a lot of different work and governance and guidance. And that's where you work as closely with some of our g-sii. He's right to say, Hey listen, we need to really re-architect what they're doing because it operates a little bit differently in the cloud than it would on Prim. And so, all of those things together are absolutely a different Revenue model, right? It's definitely more services based and you're sort of traditional, again, as we talked about before, Your traditional Hardware spend or software spend is going to be spread out like the hardware spends going to change a little bit Partners can still participate by the way. Just in consumption from the hyper scalars. Right. It doesn't just have to be the solve for p so there's ways for partners to participate in that as well. But to your point it's not an upfront sort of Chunk. And so they're going to have to adjust their models in the way that they're going to Market to be able to meet these customer demands. Hey, I no longer want to pay this much upfront. You think about your cable bill, right? I don't want to just pay for a Year's worth of my cable subscription, right on my internet or my cell phone usage. I want to pay as I use it and some months if I go out of the country, I might shut my phone off. So maybe I'm not used to this much and so customers, I think that all of those things and sort of our consumer life that we've kind of been used to the past five years are starting to permeate their way into our business lives and people say, well, wait a minute, this is how I do it every day. You know, I want to consume Technology this way from a business standpoint as well Speaker 1 for sure. Absolutely. Impact of hyperscaler marketplaces on Red Hat's channel strategy So at Red Hat, as your kind of leveraging, different capabilities of the hyper scalar Marketplace, what impact has that had on your overall channel strategy, you know, in the 16 years that you've been with red hat. I mean this is a time where so much has changed in the it sector. What's the evolution? When it comes to your strategy and now an Eco systems play as well? Speaker 2 Sure. So it's absolutely a Left. And, you know, we are working more closely to use exactly the words. You did more. So with our entire ecosystem and not focus so much. On those values are not so much but not only on our value added resellers that are delivering the value of a delivery. We have to broaden our aperture and be sure that we were working with our value added reseller. But hey, what else are they touching? Right, these folks have been there. Small business owners, and they've survived all kinds of crazy. - right virtualization was going to also put them all out of business, right? And it didn't write their incredibly sharp individuals, and so they are working closely with Hyper scalars and with is vs and other. So it just broadens the lens. It allows you to have a conversation and build a strategy with a lot of the partners that you've always worked with. But it's no longer a very narrow focus of hey, how can you go sell some more Red Hat to this customer in this annual subscription, it is what we're trying to solve for this customer. What other members of the ecosystem? Where we working with and we build a broader solution for that customer. So it just really gets us a level deeper in terms of our strategy and how we go and have these conversations with these Partners. Challenges & pitfalls with hyperscalers Have you faced any challenges? As you've kind of gone through this Evolution and now with Hyper scalars, any kind of pitfalls that you've had kind of experienced or Lessons Learned along the way, so to speak. Speaker 2 Yeah, certainly right there, there's always challenges. Lunges. When you're addressing a new market, a new model, that's outside of your comfort zone. And so I think that the biggest Pitfall would be don't go into. This only focus on the way things have been, institutional knowledge, can't be understated, and success in this industry is incredibly important. So to go to someone and say, hey forget everything that you've learned over the past 20 years, is also a silly statement but go into it with an open mind and say, hey look how can we Leverage? What You've The past 20 years and then apply it to today's market in today's customer buying decision and buying process. So if you go into it, with that open mind, right? Which is I've been a red hat, 16 years, like open is in my blood, right? So the go into it with a collaborative approach, I think that you can overcome a lot of the challenges because it's new, it's still new. All right, we're still figuring out. How do you sighs out? What you're going to consume over the next three years? How do we do that? How do we all? Offer a commitment that everyone can be comfortable with with the flexibility to change as needed. We're still working through a lot of those things, right? And there's a lot of customers that have a committed spin number with a hyper scale and they're trying to figure out man, was this not enough or? Oh my gosh, this was way too much. What do I do to make sure I get to where I need to be? So those things are still going to happen and so my opinion on that would be going to it with an open mind, right? If you because if you go into it, incredibly prescriptive. That's probably a little bit of a pitfall like I just don't know that. We're going to prescriptive world anymore for a three-year period. I mean, who knows? There's going to be something that you won't talk about on this podcast in three years that we have no idea exists today. All right, there's going to be a new technology. There's going to be a new process that business of trying to overcome and so you have to be able to adapt. And so you have to, you know, the days of building out back. You know, everybody does right by has their Five-Year Plan, not really A Five-Year Plan anymore. And in my opinion, I think, you know, you have a super skeleton out loud, but you have to be able to adapt. So that would be one thing that I've noticed is going into it to sort of boxed into. This is what I'm going to do. This is always work. I'm going to do these same things because it's been successful. That's where you could potentially trip up. If you just don't allow yourself, the ability to be a little bit Speaker 1 flexible. So do you help Partners different? Should vendors help partners differentiate from competition by leveraging the hyperscalers? You would Red Hat. Anyway, how Partners differentiate from competition by leveraging? The hyper scalars is that something that you currently do? Do you think that's something that all vendors in this space should be doing for their Partners? Speaker 2 Yeah, listen. Well, I don't want them to do it. I'm just get but yes, that's right. Yeah, absolutely. You have to leverage all the pieces of the ecosystem, whether that's again, isvs sis, hyper scalars, and you have to work together. So, as an example, if a customer needs to consume x amount of dollars, Hours over the next year to hit committed spend Target. Well, why wouldn't you go and talk to that customer find out what they're trying to do, what applications they have, that could be automated or containerized, right? And then go and work with the appropriate is vs and in our case, you know, red hat and our appropriate solutions that can help with that. And then this is partner to help them migrate that and go back to that customers. Hey, Paul, you have this x amount of dollars committed, right? We're all going to work together to help. You get these workloads moved over, it's going to drive those consumption pieces. It's going to be way more cost effective for you because you already have these dollars committed and we're going to help you achieve a business need as opposed to going in there and selling you something, right? So it's a completely different conversation in my opinion, if you're doing it right as a vendor to help customers achieve what they're trying to achieve by leveraging, all different pieces of the ecosystem versus knocking on their door and put up the The slide with these are the products we have, you know, do you have any problems at these can solve like it's just a different world and if you're doing it right then, yes, vendors are absolutely helping coach and educate customers with different members of the ecosystem and we're going in there together to present to that customer how we can help them achieve this as opposed to going in there. Past the guy on the way out, shake their hand and tell them. Oh you know, this is what we just talked about. Why don't you talk about this? You go in there and petit. Future of hyperscalers & evolution of marketplaces So I'm going to ask you, I kind of have a crystal ball and start to look into the future of the hyper scalars. Where do you think they're going? You know, what do you think the evolution of these marketplaces will be Speaker 2 if I knew for sure I would be retired in five years right. But you know I think that they're going to continue on the trajectory that they're all. I don't see anyone going back to a more locked in gated way of life. I mean our Whole lives are becoming more and more On Demand right again in our personal lives and you know as kids that grow me, my kids are only 10 and 12, right? But 20 year old kids that grew up in a technologies that never knew a world without a cell phone, that was like a little mini computer are going to be the it leaders and Business Leaders of the future, right? And so they're not going to go back to a world that they don't even know exists where you had to pick up the phone and call somebody. They have to order hardware and they give you, right. Some at all this like they only understand own Demand right? Google Docs or Office 365 and the like that's that's the only world that they know. So that is going to cause in my opinion. Those hyper scalars to continue to grow at a really impressive rate. And I think that they're going to continue to work on security and ways to sort of gate and fence certain things to where customers are more comfortable, putting more sensitive applications out. Out into the cloud to me, that's the big question. There are still some things that whether its regulatory from the federal level or whatnot, then they're like, hey man, this isn't touching the outside world, right? This lives in our building, but we also didn't think email would live outside of our buildings, 10 years ago. So, no. So, in my opinion, I think they're going to be more and more things that get moved out into these consumption on demand style, hyper scalars. And they'll just continue to beef up with are doing, which just goes to show. That they're going to continue to have to work with all sorts of the hydro scalars to be able to deliver with their customers want. Because I just, you know, I think the world is continuing to be more and more on demand. The only other thing that I would say and how perfectly honest I don't have a ton of experience in this, but the AI am L is probably the most interesting thing to keep an eye on, you know, chat GPT, right in the I've seen I've seen fun things where so my wife is a teacher and they literally had to have Meeting at her school that said, hey, here's how you check to see if a student wrote their pay for with chat GPT, and that's crazy to me. And so, on the evolution of how that stuff works in the cloud, and that's going to be a really, really fascinating thing to watch over the next Speaker 1 five years. How hyperscalers may affect the future of partnerships So, as we start to wrap up and we look at your vision for the future of hyper scalars, I agree with you completely. What do you think this will do as far as the future? True Partnerships. Do you think there will be an effect on it? Do you think it'll just be more of the same? Or do you think Partnerships will change as Speaker 2 well? Yeah, so I'll admit that I'm coming from a bias point of view but I truly believe that open source is the future of technology. It's just been proven like the collaboration, The Many, Many Eyes, sharing information, positively, correcting offering ideas. I just firmly believe that that delivers a better software. Really, really do. And so I think that, yeah, the future of Partners and ecosystems is going to have to be more collaborative. I feel that if you don't do that, you're going to put yourself in such a niche that you're not going to be able to expand and grow. Right? In years going to have to hold on for dear life, to your really narrow set of customers or market share, because it's just not the way in my opinion, that the world is going much less technology, and customers everything is Out collaboration about sharing meritocracy, let the best ideas when and so hey men, you know again Microsoft and red hat work phenomenally together when I started right at. That was kind of the case. And so I think that that's going to continue to be the trend is all of us in the technology industry from a vendor perspective, our job, and it goes back to what I said before, customer first partner Always, Alright customer, you have to be hyper Focused on meeting your customers needs and to do that, we're going to all have to work together. So my opinion is absolutely, that Partnerships are going to continue to be. There's going to be way, way more Cooperative fashion than there is your traditional. It's either us Conclusion or them. Absolutely. And that is great advice and you shared some great nuggets with us today. The co-creation, the collaboration and coopertition. Absolutely. All right. Tim, thank you so much for being on the show today. It's been a pleasure to have you here. Speaker 2 Yeah. Thanks for having me. I appreciate it. Speaker 1 Alright guys, thank you for listening to the ultimate Channel sales, podcast. Please don't forget to join us. Next time for more information, please. Visit Channel sales, podcast.com if you haven't already, please like And subscribe to our podcast. And if you enjoyed this episode today, please leave us. A five-star rating from the Apple podcast app just select our show. Scroll down to the rating and review section and click right review. And don't forget to share with your friends, or Neural network, anyone who to enjoy it, see you next time on the ultimate Channel sales podcast. This production is brought to you by magenta. Eric's magenta. 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