Not long ago, we worked with a large automotive manufacturer that had previously gone through great cost and effort to build a standard IT system for its thousands of independent dealers.

by Raj Lanka

Compared to dealers’ legacy systems, the new system provided more data, flexibility, and better service to car buyers.

But the dealer adoption rate for the system topped out at about 40%. That’s because those legacy solutions did exactly what the dealers wanted them to do.

The manufacturer decided it needed a scalable cloud solution adaptable to dealers’ needs. But the company had trouble finding value-added resellers (VARs) with an in-depth understanding of the automotive business and realized the costs of moving dealers to a full-cloud solution would be enormous.

It’s Not All About the Cloud

Those VARs had fallen into a trap that many are facing now or will soon: Despite all the advantages to, and excitement around, moving to the cloud, full cloud solutions won’t meet the current needs of many—perhaps even most—companies out there unless they can be designed and built by those with industry vertical expertise. And even then, the cost of building and switching to these systems may be prohibitive.

For VARs, it’s easy to imagine that the key to success today is to focus on building cloud migration and implementation skills. But while it’s true that those skills are very much in demand, making that the sole focus of skills building involves two big problems.

One problem is that for all the demand for cloud work, these skills are at risk of becoming more of a commodity. You must be able to work in the cloud, but so can most other VARs. As customers recognize they have a choice of many VARs with cloud skills and experience, they’re gradually starting to devalue that skill set, taking it for granted.

The second problem is that moving to the cloud isn’t in itself what usually solves customers’ problems. Ultimately, the customer wants the most cost-effective solution that meets its business needs. And suppose you look at where one of the strongest needs in the market is right now. In that case, it’s customers who do want to eventually migrate fully to the cloud but in the shorter term need to find a way to move more gradually from a legacy environment to an eventual complete cloud solution.

That sort of solution, to be sure, includes setting up the cloud infrastructure, and that’s where many VARs are focusing. But VARs that want to move up the value chain and meet the current needs of more customers would do better to expand their repertoire to include providing more affordable, vertical-industry-focused transitional stages before the full leap into the cloud.

Consider the auto manufacturer. Each independent dealer invested in its legacy systems over time and knew how to use those systems to maximum advantage. That’s why the dealers hesitated to jump to a shared solution. Whatever the advantages of any new cloud-based integrated system offered by the manufacturer might be, the dealers wouldn’t embrace it if it didn’t fit the way they did business or involved extensive switching costs.

Taking Smaller Steps

We worked with the auto manufacturer to develop a cloud-based infrastructure and then offer two alternatives to dealers. One option was building on their existing solutions to expand the systems’ capabilities and enable them to share information with the new cloud-based structure. The other alternative was to move the dealers to a new third-party arrangement that would provide an improved, shared, non-cloud solution but leave them better positioned to move to the cloud down the road.

Those options weren’t perfect solutions, but they met the business needs of the dealers and brought the manufacturer closer to getting all its dealers on the same page and offering better service to customers, which were the key goals.

As another example, we were working with a customer who owned many retail outlets. The company’s leadership wanted to transform the business to business-to-business (B2B) online sales, divesting itself of the stores. But the board of directors rejected the plan because it required an enormous investment in an entirely new, major cloud-based system to handle all the functions of the transformed business.

In that case, we could help the customer develop a more modest IT proposal that relied on leveraging its existing, business-as-usual applications into a cloud-based environment, with a catalog of self-service templates for quickly building new capabilities in-house to meet the company’s changing business needs. That way, the company could start reaping some of the advantages of cloud-based infrastructure and meet the changing needs without the large costs of a new, fully cloud-native portfolio of applications. And the customer is better positioned to make that full transition when it’s ready for that bigger investment.

It’s certainly true that some customers have a compelling business reason to fully and aggressively move to the cloud with a full suite of cloud-native applications. As VARs we need to be able to help them do that. But for most customers, the need involves taking advantage of some of the cloud’s infrastructure savings, while continuing to preserve and improve at least some legacy applications, often by adding developer productivity tools. And some customers may want to completely rule out a full cloud solution even down the road, preferring a long-term hybrid cloud solution that leaves them with edge-computing capabilities well suited, for example, to sensitive data.

For VARs, the challenge is building the different skill sets needed to provide this broader service. In recent years, the missing piece has been people with cloud migration and cloud-native experience. Finding those people is still a challenge, but increasingly the bigger problem is finding people with industry-vertical expertise in the legacy applications that companies still rely on.

Ultimately, the VARs that win will be those that can fill out their skill set with people who can work on each side of the problem to help customers now with the systems they have, help them transition to the cloud, and then later help them take maximum advantage of the cloud after they’ve transitioned.

A Focus on Business Solutions

VARs that can only help with one piece of that puzzle are forcing customers with broader business needs to look for multiple VARs and vendors who have to be separately managed. But what most businesses want today is a single VAR that can provide a fuller solution and set of options.

In addition to assembling the various technical skills needed for that sort of offering, VARs offering this more complete solution also need a deep understanding of the specific business needs of companies, not just the technical needs. That calls for a big shift in mindset, away from specializing in a specific set of technical skills and toward specializing in true business solutions. Achieving that broader, deeper understanding may require focusing on particular verticals instead of on particular technology approaches.

Most companies today are keenly aware that shifting business environments and rapidly evolving technologies require constant change and flexibility on their parts. VARs are no exception. Those that embrace the shift in interest toward fuller business solutions will do better than those who continue to search for customers whose needs happen to fit the narrow technical expertise of the VAR.

Raj Lanka is a customer-obsessed technology leader with over 18 years of consulting experience in developing technology products/services, public cloud transformation/operations (managed services), security, complex deal structuring, program management, and building professional services teams. His forte is innovation through automation and operational efficiency. He is successful in defining, developing, and delivering integrated technical solutions emphasizing cost-effective, high-performance cloud solutions supporting large-scale global delivery. He uses cloud operations/managed services product vision, strategy, and execution expertise to orchestrate a seamless customer experience.


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