Cloud computing is the present and future of the channel and technology industry. IT vendors, telecommunications carriers, distributors, hosting companies, telephony agents and IT solution providers are either entering “the cloud" or exploring their options in the cloud era.
And why shouldn’t they? Market analysts predict the business cloud computing market will generate between $100 billion and $150 billion in annual revenue by 2015. By comparison, the global data network switching and routing market is somewhere around $40 billion. Suffice to say, the total addressable market opportunity is huge.
The challenge for solution providers isn’t the technology, per se, but rather the business model. The two biggest cloud computing problems facing the channel today are understanding and mastering the complex cloud business model, and managing the financial burdens of transitioning to a cloud business.
The Channel Partners Cloud Convergence Council, a group facilitated by Channel Partners and The 2112 Group, noted these challenges in its trends study, “Channel Convergence and Evolution Through Cloud Computing," released earlier this year. Drilling deeper in the business model and financial burden issues, the council conducted during July a follow-up survey, Cloud Convergence Council’s “Cloud Services Margin and Compensation Study 2011," on cloud sales compensation and service margins. Nearly 200 qualified IT solution providers, managed service providers, telephony agents and cloud services companies participated. The results reveal a still immature industry trying to define the optimal business and financial model that equals greater success in cloud services.
According to the study, most of the channel still earns relatively little revenue through the sale of cloud services, margins are not as rich as some on-premises products, most solution providers are dependent upon the margins/discounts provided by vendors for their cloud revenue and sales organizations are not focused enough on sales opportunities. Additionally, the study concludes that most vendors – be they telcos, IT vendors or colocation providers – are not doing enough to give their partners the ability to succeed in the cloud era.
The Business Model Barrier
Previous research by the Cloud Convergence Council found the biggest barrier facing the channel – IT solution providers and telephony agents alike – is understanding the cloud computing business model. Roughly one-quarter of channel partners surveyed in December 2010 cited challenges as they enter the cloud computing era.