The fundamental challenge solution providers in the channel face as it relates to cloud computing is that many of the bread and butter applications that their business is built around are the ones that are heading for cloud.
A recent survey of 3,000 small-to-medium business (SMB) organizations with between two to 250 employees conducted by Microsoft finds that the majority of the interest in cloud computing is focused on utilitarian applications such as e-mail, voice communications, file sharing and instant messaging. That means that, for the immediate future at least, business applications will continue to run on premise for reasons having to do with security, privacy and control.
But as more utilitarian applications move to the cloud solution providers find they are competing to one degree or another against much larger entities, including Microsoft and Google, rather than just another solution provider across town. In addition, the margins associated with reselling a cloud service are not only thinner; they are often tied to the life of a multi-year contract. Solution providers, of course, could opt to build their own clouds, but the capital investment needed to make that happen is often beyond their means.
The good news, however, is change often equals opportunity. If business applications remain largely on premise, they are going to need to be integrated with the more utilitarian applications running in the cloud. In fact, Gabriele Di Piazza, senior director of marketing for the Microsoft operator channels, says one of the strategies that solution providers should seriously consider is pushing harder into specific vertical industries where more customized applications are required. That creates an opportunity for the solution provider to add real value, which can be augmented with any number of cloud services that give solution providers an opportunity to capitalize on a percentage of the recurring revenue those cloud services generate.
Of course, all of that is easier said than done. Cloud computing is not only a technology issue; it requires solution providers to transform their entire business model. Fortunately, not every customer is moving to the cloud overnight. But the Microsoft survey makes it clear that the number that number of customers shifting in that direction over the next two years is going to rise substantially. That means that solution providers still have time to develop a cloud computing strategy, but perhaps not as much as they might like.
Even though customers still have concerns about security, privacy and control, the ability to reduce costs while gaining more IT flexibility and productivity makes cloud computing too hard to ignore. After a while trends such as cloud computing begin to take on a life of their own, so even when the internal IT organization may have some reservations about cloud computing the pressure to do something about the cloud becomes incessant. As a result, customers tend to initially invoke cloud services that have minimal risk to business.
It’s not 100 percent clear what the channel will ultimately look like when everything cloud is finally said and done. But one thing that is for sure is that solution providers that are not participating in it now probably won’t be around to find out how it all turns out.