As Cloud Matures, Solution Providers Continue on the Path of Business Transformation
Cloud computing has presented countless opportunities to information technology (IT) channel firms willing to embrace business transformation, while challenging those holding on to fading business models, according to theFourth Annual Trends in Cloud Computing released today by CompTIA, the non-profit association for the industry.
Forty-five percent of channel companies from CompTIA’s survey say determining the appropriate business model around cloud computing presented a significant challenge in the past year. That assertion falls just behind the most difficult challenge cited in the findings: Developing cloud expertise across both technical and sales arms within a company, a task that logically flows after the initial business model decision is made.
“Primary business considerations depend on where a company wants to go with cloud,” said Carolyn April, director, industry analysis, research, CompTIA. “Do they want to resell a vendor’s cloud solutions? Aggregate and broker cloud services from a variety of different sources? Integrate and customize cloud-based apps and services, or simply sell the infrastructure to an end user and provide consulting? Each of these paths and more are possibilities, as are varying revenue models available for all.”
CompTIA identified four main business models to encapsulate much of what is being done by IT solutions providers today in the cloud. View a matrix of those business transformation models at http://www.slideshare.net/comptia/cloud-channel-business-models:
• Build: Firms procuring vendor-based hardware and software products to construct private and/or hybrid clouds for customers. They may also offer consulting guidance on the best IT architecture, configuration and product choices for the project.
Roughly half (48 percent) of channel firms today are currently offering some form of Build services, with another third planning to add this flavor of cloud to their lineup in the coming year. Build represents a bit of a cloud launching pad; of those firms that are also operating one of the other three cloud business models, 7 in 10 started with a with Build practice before adding the others.
• Provide/Provision: This business model for cloud positions the solution provider as the hub for provisioning various vendor-based and homegrown cloud services to the end customer.
Half of channel firms doing cloud today are participating in the Provide/Provision model, with a third of all respondents in the study believing that this business model for cloud has the most growth potential in the next two years – regardless of whether they are involved in it or not today. That compares with roughly a quarter of firms that deem each of the other three business models as the fastest growth drivers.
• Enable/Integrate: This business framework for cloud has been a sweet spot for channel firms over the past several years. Typically they are providing integration and implementation services that may include tying a customer’s on-premises IT solutions to its cloud-based solutions or, customizing cloud-based solutions to fit a particular business need or vertical.
For the past three years of CompTIA cloud studies, the number one source of post-sale dollars has been integration work. This area has routinely been a place where the channel cushions its overall profit margins. Since most solution providers charge customers on a recurring revenue basis for cloud solutions (by consumption or by number of users etc.), the project work associated with the Enable/Integrate category allows them to add revenue not included in the base contract.
• Manage/Support: In this model, firms are delivering the ongoing management and support of cloud-based services as project work or in a contractual, recurring revenue model. They are also adding, scaling or troubleshooting cloud services as needed.
Six in 10 of these firms are conducting remote monitoring of cloud solutions for customers and/or managing solutions that reside in a multicloud environment. Multicloud management is a solid opportunity area for the channel as myriad cloud apps and other solutions mushroom in the market. Likewise, the channel is wisely developing ways to demonstrate cloud ROI to customers. In fact, 6 in 10 channel firms involved in Manage/Support have created IT dashboards that allow customers to track their cloud utilization, costs and other metrics to understand their investment.
Demand Exceeding Supply
With demand sometimes exceeding supply, channel firms need to react quickly in choosing the proper business model. Two thirds (63 percent) of channel firms characterize customer demand for cloud-based IT solutions and services as either very high or high, with another 3 in 10 describing demand as somewhat high. Four in 10 channel firms said they experienced cases where customer demand for cloud solutions outstripped their capacity to deliver, while 20% lost a deal because a customer desired a cloud solution they did not offer.
However 6 in 10 channel firms say that cloud has generally strengthened their customer relationships, with just 15 percent claiming it has weakened them and roughly a quarter that said that their client bonds have remained the same. This is encouraging news since many in the channel have feared publicly that cloud would drive a wedge between them and their customers. There’s been rampant apprehension about such ill effects as a resurgence in vendor direct sales and end-user customers choosing a self-service model for their IT solutions. And while both of these trends are happening to a certain extent, CompTIA data suggest not at such dire expense to most of the channel.
“Channel firms can play a critical role in determining when cloud versus on-premises works best for their customers,” April added. “For instance, the customers’ desire to increase mobile/remote access to company data sparked 46 percent of channel firms to recommend cloud solutions, compared with 38 percent last year. This underscores the surge in mobility solutions, as well as BYOD and telecommuting trends that are happening in the marketplace. It also demonstrates the channel’s ability to tie the value of cloud into these burgeoning areas.”
CompTIA’s Fourth Annual Trends in Cloud Computing is based on an online survey conducted in July 2013 of 501 business professionals in the U.S. involved in IT decision-making and 400 IT channel companies. The complete report is available at no cost to CompTIA members who can access the file at www.CompTIA.org or by contacting email@example.com.
CompTIA is the voice of the world’s information technology (IT) industry. Its members are the companies at the forefront of innovation; and the professionals responsible for maximizing the benefits organizations receive from their investments in technology. CompTIA is dedicated to advancing industry growth through its educational programs, market research, networking events, professional certifications, and public policy advocacy. For more information, visit www.comptia.org.