Managing the Mass of CloudsBy Lawrence Walsh | Posted 2009-06-19 Email Print
Solution providers are getting nervous about their future in a world dominated by cloud computing services that, in many cases, won’t need a middleman. Perhaps the opportunity for solution providers isn’t in selling the cloud, but rather managing the mass of clouds on clients’ behalf.
You can’t open a browser without hitting some report on cloud computing. Every vendor—IBM, Microsoft, Google, HP, Cisco, Dell—either has or is launching a cloud computing initiative, which promises to deliver applications directly to users via the Internet. And that, frankly, has many solution providers nervous.
Cloud computing has the potential for revolutionizing the way we deliver and consume technology. It’s equally disruptive to the current model of selling, delivering and supporting IT hardware and software. If a vendor, such as Microsoft or Google, can automate the delivery of e-mail and basically configure a deployment with little human interaction, what need is there for a VAR in the middle?
To listen to all the chatter about cloud computing would have you believe that there will be one monolithic cloud through which all services are rendered. Nothing could be further from the truth. The future of cloud computing will actually look like a storm front with multiple clouds. In fact, the opportunity for solution providers may come in the form of understanding and being able to manage that storm front on behalf of clients. Here’s why.
Solution providers learned a painful lesson over the last decade in the development of managed services. Many solution-providers-turned-MSPs invested heavily in building expensive network operations centers that resembled the bridge of the Starship Enterprise and data centers that had non-revenue-producing capacity. While the business model promised high profits and recurring revenue streams, the reality is managed services take time to develop. That required MSPs to absorb large costs while building up a revenue stream that supports operations.
Cloud computing comes with a similar problem. Those looking to deliver cloud services must be able to deliver applications with a high degree of accessibility and reliability to meet current and future user needs. That’s hugely expensive. Microsoft recently signed a partnership with Hewlett-Packard’s EDS services division to host its cloud-based applications in its data centers around the world, making up for capacity Microsoft lacks in some geographies. If building a managed services practice seemed expensive, entering the cloud computing is like a moon shot.
Because the cost of cloud computing is prohibitive for most solution providers, many vendors are developing agent-based channel programs in which the partner gets a commission for selling the service or allowing resellers to private label services. It’s a similar model to master managed service providers, such as Heartland Technology Group, Zenith InfoTech and Ingram Micro’s Seismic. Vendors such as Microsoft are offering partners relatively low margins for agent sales, claiming that solution providers will be able to make money on traditional value-add sales and services. The truth is the after-market opportunities on cloud computing sales is relatively low. Worse, in many vendor cloud programs, they ultimately own the customer relationship.
But is there another, more lucrative role for solution providers to play in the cloud equation? Most definitely, as an agent for the consumer of cloud services.
Again, there’s no such thing as "The Cloud." In fact, the future of computing will be many public and private clouds that deliver a vast array of applications and services. We’re already beginning to see "cloud sprawl," in which individuals and organizations are subscribing to multiple cloud services for everything from simple office productivity apps to CRM to rational databases. To the user, this means having multiple browser sessions and maintaining a list of sites and credentials for the different services. For an organization, cloud sprawl will mean having to manage a number of different service contracts with varying service-level agreements and performance metrics.
Understanding those agreements and then measuring the performance level of service engagements will be a logistical and managerial nightmare for businesses. And that’s where solution providers could play a significant, valuable role. Because solution providers have the expertise and technical know-how of delivering and servicing applications, they are in a perfect position to act as a virtual manager of cloud services on behalf of the end user. They can monitor utilization, SLA activity and billing to ensure the customer is getting what they pay for out of a service.
The logic is simple. Businesses have adopted Saleforce.com to replace their heavy, expensive on-premise CRM apps. But what a salesforce implementation requires is a saleforce guru on staff to manage the service and relationship with the provider. How much does that one person cost for that one service? Now multiple that across a dizzying array of cloud services that businesses will consume. The cost quickly mounts.
Businesses hate spending money on things they don’t understand because it’s typically expensive. Solution providers could ease the pain of this mystery and scale cloud management services across multiple clients, ensuring a lower cost to the customer while producing a tidy profit for themselves. The magic of cloud computing is that it will remove much of the mystery (and pain) associated with technology implementations and, consequently, drive down costs. Solution providers may find themselves a niche in providing the management layer of cloud services, where there will still be plenty of mystery among the consumers.
Lawrence M. Walsh is vice president and group publisher of Channel Insider. Read his research reports at [CI] Perspectives.