The Channel Rises to the Cloud OpportunityBy Michael Vizard | Print
The more flexible solution providers are in terms of business models in the age of the cloud, the more likely they are to succeed.
The channel, much like nature itself, abhors a vacuum. Like it or not, cloud computing is changing IT fundamentals in a way that is forcing solution providers of all sizes to make adjustments. The real issue is whether those adjustments will make solution providers in the age of the cloud stronger or weaker.
In theory, at least, more applications running in the cloud should create more opportunities to integrate those applications. In fact, the need for more integration of cloud applications is apparently driving higher valuations for IT services companies.
But for those opportunities to really manifest themselves, cloud applications have to reach a certain critical mass. While cloud applications are clearly here to stay, the level of integration taking place between cloud and on-premise applications remains fairly limited.
There's no doubt that demand for integration will rise. But each customer moves at his or her own pace. In fact, just because an organization is using cloud applications, it doesn't necessarily follow that the organization has reached a level of cloud computing maturity that would necessarily create an immediate application integration requirement.
None of that, however, means that solution providers in the channel are not taking advantage of the cloud to create new services that are often more profitable than simply reselling products.
Case in point is SNP Technologies. While SNP still resells products, it has added a new business unit that focuses on application development and integration, according to SNP Technologies Chief Operating Officer Prakash Parikh. The one thing the cloud does for solution providers and customers alike is that it reduces the capital costs associated with building new applications. To service that need, SNP Technologies created an offshore application development team that builds custom applications that run on top of the Microsoft Azure cloud platform.
"We're leveraging Microsoft to deliver services," Parikh said. "When we need to build an application, that's when we call Team India."
At the other end of the cloud spectrum is ServNet Technologies, a provider of managed services that invests in no IT infrastructure. Instead, ServNet resells IT services that are provided via cloud platforms managed by Intermedia, a cloud service provider with a fairly robust presence in the channel.
Because ServNet doesn't have to invest in IT infrastructure, the company is more profitable, said Felix Yanko, president. The challenge, of course, is that in the age of the cloud, any service is subject to the same laws of diminishing returns as any product. To stay successful ServNet must continually add high-margin services that new and existing customers are willing to consume.
That's not as difficult to achieve as some solution providers might think, Yanko said. "Most small businesses are undercapitalized," he said. "Most of them want to use cloud services to be more productive."
While application integration opportunities are still evolving, a recent survey of small and midsize business (SMBs) conducted by Osterman Research on behalf of Intermedia suggests that cloud computing is on the verge of spinning out of control. The survey found that the average SMB organization has about 14 cloud applications deployed, which equates to roughly 5.5 applications per end user.
In general, smaller organizations appear to be moving toward the cloud, while midsize and larger entities are embracing hybrid clouds, according to Bob Leibholz, senior vice present of business development for Intermedia.
"Smaller organizations are going all-cloud," Leibholz said. "The customization, flexibility and security of a hybrid solution make more sense for other customers."
Given that SMBs are more likely to embrace cloud apps than large enterprise IT organizations that have already made substantial investments in on-premise applications, that number of cloud applications may not be all that surprising. But it does indicate that in terms of cloud computing, SMBs are approaching a management complexity that is beyond their ability to deal with on their own.
Of course, the IT industry as a whole is just at the start of the cloud computing journey. Not only will more integration opportunities manifest themselves, thanks to the rise of RESTful application programming interfaces (APIs), but a new generation of rapid application development (RAD) tools that vendors such as IBM, Informatica, SAP and Mendix are rolling out promise to create a new Renaissance period of application development in the cloud.
In the meantime, it's clear that the more flexible solution providers are in terms of business models in the age of the cloud, the more likely they are to succeed.
Michael Vizard has been covering IT issues in the enterprise for 25 years as an editor and columnist for publications such as InfoWorld, eWEEK, Baseline, CRN, ComputerWorld and Digital Review.