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.
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