Channel Revenue Remains Slightly Cloudy

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By Lawrence M. Walsh

Cloud computing generates a lot of interest, as businesses increasingly are looking to their channel providers for cloud options to their legacy on-premises IT and telephony systems. While the channel continues to make only a fraction of its revenue from cloud computing, a new report by the Cloud & Technology Transformation Alliance (CTTA) projects steep increases in channel-driven cloud sales this year.

CTTA, formerly the Cloud Convergence Council, published its annual CTTA 2012 State of the Cloud Channel report based on a survey of more than 220 IT solution providers, managed service providers, telephony agents and master agents. The results of this annual accounting show cloud computing in the channel remains relatively stagnant compared to 2011, with cloud revenue as a percentage of total receipts remaining more or less unchanged.

The majority of the channel is earning less than 10 percent of their gross revenue from cloud products and services. Telephony agents lag behind their IT counterparts in cloud revenue by 11.5 percent. Overall, there’s been little cloud revenue movement in the channel. The lack of revenue growth reflects the channel’s overall struggle to find its place in the cloud sales.

Nevertheless, solutions providers believe cloud revenues and profits will soar in 2012. Overall, channel partners believe the cloud will represent between 25-50 percent of their revenue and profitability by the end of 2012. Telephony agents are the most optimistic, with nearly half projecting their revenue and profits to soar to a quarter to half of their revenue. 

What's interesting is how profit isn’t rising at the same pace as revenue; it’s lagging by approximately 5 percent across the board. This discrepancy shows that cloud is replacing traditional revenue sources, but isn’t as profitable as hardware, software or telephony services.

Solutions providers are seeing a sharp increase in demand for certain cloud servicers. In many regards, cloud product and service requests reflect a high demand and shorter sales cycles. It’s no surprise that the cloud services in the highest demand are storage and telephony, which are more affordable, manageable and scalable as cloud services.

Storage, backup and disaster recovery services saw the sharpest increases in demand, up 23 percent and 22 percent, respectively. Telephony agents saw the sharpest increase in demand for hosted VoIP (33 percent), but also saw a higher increase in storage and backup services relative to their IT counterparts.

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