AWS VP: ‘Old-Fashioned Resellers Didn’t Truly Understand Cloud’

‘They are all going through a velocity of learning that they never had to go through before,’ says Dave McCann, vice president of AWS Marketplace, Service Catalog and Migration Services. ‘There's a level of innovation that's going on that is unprecedented, and it's increasing.’

“Old-fashioned” resellers who lacked cloud computing knowledge now are learning it at high speed, less they risk extinction, according to Amazon Web Services’ Dave McCann, vice president of AWS Marketplace, Service Catalog and Migration Services.

“A lot of the old-fashioned resellers didn't truly understand cloud,” McCann told CRN in a sit-down last week at the Amazon Spheres, on the technology giant’s headquarters campus in Seattle. “Right now…they're all learning cloud at high speed.”

McCann has been overseeing AWS Marketplace, AWS’ digital catalog of software offerings from some 1,400 independent software vendors (ISVs), since late 2014.

As more and more companies and organizations shut down their data centers and move their software to the cloud, resellers have to adapt, McCann said.

“That means that for the reseller who sold (the software) in data center four years ago, that data center is shut down,” McCann said. “When the contract comes up for renewal, the reseller needs to understand cloud. Every time we launch a new capability, the reseller now has to figure that out. If they don't, then the software vendor looks at the reseller and says, 'Do you really understand cloud?' They are all going through a velocity of learning that they never had to go through before. There's a level of innovation that's going on that is unprecedented, and it's increasing.”

Resellers who don't adapt quick enough are going to miss out on the cloud revenue opportunity, McCann said.

“And the software vendors are watching them, and it's a conversation we have with the software vendor,” he said. “Some channels aren't keeping up. They're going to die off, they'll just atrophy.”

Channel Is Asking For Services On AWS Marketplace

Channel partners are interested in selling their services on AWS Marketplace, which now focuses only on software, according to McCann.

“Software is intellectual property, and intellectual property and software is governed in different countries by tax rules and accounting rules,” he said. “The procurement of services is typically labor, and how you bill and charge labor has got different tax implications. Therefore, at the moment, we don't do services as a separate thing from software.”

Some software companies will bundle their services inside the price of their software, while others want to break it out.

“Where they bundle the service inside the software, that's invisible,” McCann said. “We've not done the work yet to break out professional services as a separate line item. It's something we hear interest in from the channel.”

Consulting Partner Private Offers Well-Received

In October, AWS launched Consulting Partner Private Offers, a purchasing program that allows software companies to authorize their resellers to negotiate private pricing for customers’ software purchases.

“Private Offers, essentially, is best price,” McCann said. “The Consulting Partner Private Offer basically says the consulting partner can be free to negotiate with the buyer on behalf of the ISV. It's doing really well, and customers love it.”

Meanwhile, consulting partners or resellers also are negotiating fees or margins behind the scenes with software vendors.

“That goes on in the channel all day long, and we've made all of that work automatically in Marketplace,” McCann said. “We're moving data between the software company, the reseller, the buyer and the procurement system, and all of that becomes what we call a digital supply chain.”

AWS has more than 230,000 customers/buyers using AWS Marketplace. Its research indicates large companies could have more than 300 software suppliers, and they’re typically moving their contracts to one-, two- or three-year terms.

“The procurement departments are renewing two or three contracts a week,” McCann said. “They're negotiating price, they're negotiating number, and all that we're turning into a digital supply chain, so that it can be done in Marketplace.”

Security Is Hot

Security is the “hottest” category of software in the AWS Marketplace, according to McCann.

“That's why we had the security conference in Boston -- everybody cares about security,” he said, referring to AWS’ inaugural re:Inforce conference on security, identity and compliance held in Boston in June. “We've actually got over 300 security vendors.”

What Channel Partners Should Be Learning Now

Channel partners trying to stay abreast of new cloud computing technologies should be boning up on machine learning, the internet of things, containers and serverless, according to McCann.

“There's thousands of software vendors whose software was built before machine learning became popular, so all the software vendors now are trying to figure out how to add (it) to the software or to the data,” he said. “Consulting partners are scaling up on machine learning. That means you understand Python, it means you learn AWS SageMaker, it means that you are looking at maybe MXNet or TensorFlow as an engine.”

As for the Internet of Things, every device on the planet eventually will have a chip and an internet address, whether it's a toaster, a fridge or a device on one’s body, McCann said.

“There was a company in the paper the other day with glass windows that now have an internet IP address on the glass window, so that the glass can be programmed, and you don't need shades,” he said. “You just change the color of the glass. Now somebody's got to install it, that's got to be managed. How do you build on a network? Internet of things and machine learning are big areas of opportunity for the channel, and that's just beginning to take off.”

The software supply chain is a $440 billion industry, and it's growing at an annual rate of 8 percent, according to McCann, whose advice to resellers is to realize they can’t be knowledgeable about every technology and instead “pick their swim lane.”

“Get expert and learn quickly,” he said. “Hire good engineers. There's going to be five other resellers around the corner.”