By Lawrence M. Walsh
Saying cloud computing is the future is becoming passé. Channel partners and end-user organizations have spent much of the last four years virtualizing environments and migrating non-mission-critical servers, storage and applications to private, hybrid and public clouds. The future is the optimization of IT performance and the operationalizing of all assets for better revenue-producing results.
In other words, going cloud will soon no longer be about saving money, but producing better outcomes for the subscribing businesses. Often, that better outcome will be in the form of revenue generation through greater productivity or processes, and/or better use experiences. And thats where the challenge emerges for the channel.
If the first cloud wave was development and testing of virtualized infrastructure and hosted assets, and the second wave was adoption of hosted servers and storage, the third wave will be the adoption and migration of mission-critical assets and applications. When that happens, end-user organizations will see suppliers who can do more than just provide a cloud asset, but also optimize and manage assets.
The cloud challenge emerging in the channel is that few solution providers have the business acumen, technology capacity or financial backing to transform into a one-stop shop or comprehensive source of cloud services. This means channel partners will increasingly miss out on the growing adoption and expansion of cloud services because they cannot meet the increasing demand for sophisticated application, infrastructure and workload services.
Despite the channels best efforts, cloud computing remains a developing and immature segment. According to Cloud & Technology Transformation Alliance (CTTA) research, the average channel partner describes its cloud practices as either developing” or implemented and evolving.” Much of the channels cloud focus is on less-sophisticated services with a high probability for rapid commoditization, including hosted VoIP, storage, backup and productivity applications.
The immature state of the cloud is a reflection of the channels relatively poor performance in cloud sales and services. According to the CTTA, the average channel partner earns less than 10 percent of its revenue and profitability from the sale of cloud computing products and services. Conversely, 65 percent of channel partners report they lost or probably lost a sales opportunity because they could not fulfill a customers cloud need.
And the fact that channel partners are so focused on rudimentary applications and services doesnt bode well for their future prospects. General market trends suggest businesses on all levels are advancing their adoption of cloud computing to more sophisticated offerings. However, solution providers continue to invest in rudimentary cloud services that have increasingly marked adoption rates by the channel and end-user communities. As these services reach the saturation point, prices will collapse and profitability will become more challenging for resellers. Conversely, solution providers investing in advanced applications, infrastructure and cloud management services are more likely to grow sales and revenue and maintain value because they are meeting more complex market demands.
Just how much of this demand for future automation and application services is a matter of perspective? Depending on the analyst report, cloud computing is already big business and only getting bigger. Some data place the cloud market at generating more than $200 billion annually by the end of the decade. Others forecast cloud computing will double its current size $75 billion to $110 billion by 2016. And all are in agreement that cloud computing is stratifying along size-of-business levels.
And its not just the channel being challenged to reach this future cloud nirvana. IT hardware and software vendors are struggling to find their place in the cloud. Service providers carriers and hosting companies are scrambling to bring their cloud infrastructure and applications to customers. And channel partners are grappling with the challenges of teaming up with the right cloud supplier partners. The common challenge facing all technology companies is the lack of qualified and skilled professionals who can build, manage and sell next-generation cloud services.
Given the increasing appetite for more complex services and application support, and the challenges in adopting and supporting cloud computing by solution providers, a clear opportunity is emerging for solution providers on both sides of the IT and telephony divide to collaborate and enhance their capabilities.
What the CTTA research suggests is that solution providers would do well to develop their own channel programs in which they standardize peer-level relationships to address cloud market opportunities. The formation of such channels will open access to new accounts, markets and technologies. Telephony agents and master agents will gain access to the technical resources in which IT solution providers specialize. For IT solution providers, collaboration will open access to accounts and services in which the telephony channel has ample experience selling and supporting. And vendors and cloud providers need to develop programs that cultivate multilevel collaborations between service providers, traditional IT value-added resellers and managed service providers, and telephony agents.
While the cloud may simplify and scale the consumption of cloud computing for end users, the delivery and support of the cloud is anything but simple. No one company IT vendor, carrier, or cloud provider can deliver all the cloud services, applications and support needed by the end-user market. Consequently, channel relationships in the cloud will become more multidimensional and complex; it will take a combination of capabilities, capacities and reach to capitalize on the rapidly evolving cloud marketplace. Channel partners that develop and master multidimensional channels will likely survive the services transformation and thrive in the future automation marketplace.
Lawrence M. Walsh is president and CEO of The 2112 Group, a channel services company, and editor-in-chief of Channelnomics, a blog on channel business models and trends. He also is executive director of the
Cloud & Technology Transformation Alliance
. You can reach him at
Get your copy of the CTTA report, “Cloud Evolution and the Emerging Need for Multidimensional Channels,” from the Channel Partners Resource Center.
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