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More Than One Cloud for Making Money

- Blog

By Lawrence M. Walsh, CEO and President, The 2112 Group

Everyone talks about "the cloud" as if it rains cash from a single source. In the cloud-computing era, there’s more than one way to make money in cloud services and more than one cloud to sell.

There’s no escaping the cloud-computing hype. If you believed all the buzz, cloud computing will eliminate the need for IT, solve all business problems, reduce operating costs, feed your children and cure cancer. OK, that’s a bit of an exaggeration, but the point is clear – so much is attributed to “the cloud" that what the cloud is sometimes gets lost in the fog.

Cloud computing isn’t a monolithic technology or business model. Many variations exist with the cloud computing spectrum, and according to the Channel Partners Cloud Convergence Council’s “Cloud Margin and Compensation Study 2011," channel partners are engaged in many cloud-delivery systems.

Many people think of the cloud as an application delivered over the Internet. That is the most popular form, particularly among small businesses and consumers. Most channel partners engaged in the cloud (55 percent) resell the cloud services of vendors such as Microsoft and Google. Reselling vendor services makes sense, considering it has a low cost of entry and a relatively predictable return on investment.

But cloud isn’t just about Google Apps or Office 365. A fair number of channel partners (39 percent) are selling their own cloud solutions, and these come in many forms. Some channel partners are working with hosting and collocation companies such as Rackspace, Amazon and Media Temple to provide their customers with virtual infrastructure and hosted applications for virtual private clouds.

Other channel partners are developing their own hosted applications for delivery as a cloud service. There’s tremendous risk in developing a cloud platform. It does have the advantage of control; channel partners are able to set pricing, terms and conditions, and operating parameters without the restrictions imposed by vendors. Channel partners can defray some costs associated with their own cloud instances by partnering hosting companies for the cloud delivery infrastructure.

One in three channel partners is making the cloud revenue by integrating and supporting hybrid clouds. These are implementations in which cloud resources are used to augment the capabilities and capacity of on-premise infrastructure. For instance, an end user may contract with a channel partner to integrate off-site storage services with their on-site resources for when extra capacity is needed. End users don’t always have the wherewithal and expertise to implement a hybrid solution, which opens opportunities for channel partners.

Nearly one-quarter of channel partners are involved in the development of private clouds. In the cloud-computing universe, private cloud services are a comfortable place for channel partners since it’s virtually no different than conventional product sales. End users contract channel partners to construct data centers that can support applications and resources delivered to their users in a cloud scenario. Ongoing maintenance and professional services support provides a recurring revenue stream for partners.

Finally, one in five channel partners doesn't sell the cloud at all, but rather recommends customers to cloud providers for referral fees. This is a clean, straightforward model that involves little risk or investment. The referral model does generate tremendous revenue, and there’s no guarantee of success since the closing of a deal falls on the shoulders of the cloud provider. However, for channel partners not wanting to invest in cloud services, this is a reasonable way of servicing customers’ desires.

Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships, and principle blogger at Channelnomics. He’s also the executive director of the Channel Vanguard Council and moderator of the Channel Partners Cloud Convergence Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at


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