How Channel Companies Can Tell if Now is the Time for the Cloud11:49 AM EST Fri. Jun. 08, 2012
The channel is slowly but surely realizing the benefit of the cloud in its product and service offerings but there is still a small contingent that won’t dive in. “The State of the Cloud Channel Report,” by the Cloud & Technology Transformation Alliance (CTTA), research indicates that many partners struggle to accept the changes the cloud will inflict on their business model while others wrestle to find the right talent or technology to incorporate cloud solutions into their offering. Here, Bostock discusses how to alleviate those fears and educate laggards on how to tell when the cloud is the right call for their business.—Jennifer Bosavage, editor
For most businesses, moving to the cloud is no longer a question of ‘if’ but ‘when.’ In many cases, the customers are adopting or looking to integrate cloud solutions at a faster rate than what channel partners are willing to offer. That is causing a significant percentage of partners to lose out on sales opportunities. According to the CTTA, 65 percent of telephony and IT channel companies lost a sale, because they didn’t have a cloud offering.
Even if channel companies do not experience immediate customer demand for cloud solutions, there will be soon. Research from the IDG Enterprise Cloud Computing Study indicates that more than one-third of IT budgets will be spent on the cloud and channel players need to be conscious of opportunities to meet more of their customers’ evolving needs and those of new customers.
Examine Profit Margins and the Impact of Cloud Solutions in the Long-Term
One common misconception holding channel players back from offering cloud solutions is that partners do not experience profit margins on cloud services that are as lucrative as on-premise hardware and software. The ‘State of the Cloud Channel’ report shows that there is an expectation that cloud computing will provide not only replacement revenue but sustained profitability through recurring fee structures for services and support. However, this is a gradual process that requires channel players assuming some risk by embracing change and a new business model.
Already capitalizing on such change is GreenPages, a national cloud, virtualization consulting and integration firm, that has kept company’s primary focus on cloud computing services since 2009. This pivotal move led UBM Channel CEO Robert Faletra to commend GreenPages at an Everything Channel event this past year for challenging the on-premise vs. cloud sales compensation question head-on by paying its salesforce up front for recurring revenue cloud computing services.
GreenPages took a risk in changing its business model, but it has paid off substantially. When GreenPages shifted its focus to the cloud in 2009, 50 percent of its customers at the time believed cloud computing services were nothing more than market hype. Today, the company continues to see success in cloud services and it has since been recognized in the CRN Tech Elite 250.
Identify What Is Driving Or What Will Drive Your Customers to the Cloud
In understanding what’s driving your customers’ decisions to the cloud, there is an opportunity to upsell customers beyond basic cloud services and create “cloud-enabled businesses” by evaluating the distinct needs of their customers.
For instance, Student Transportation (STI), the third largest student transportation company in North America, not only needed to lower IT costs – and it has since been able to reduce IT costs by roughly 72 percent above the industry average with the cloud – but also required the technology’s unique ‘Cut & Paste’ cloud workspace capabilities to keep up with its aggressive M&A activity. The advanced cloud application layer STI has in place allows the company’s lean IT staff to upload acquired companies’ data and applications and then present them via a cloud environment. That lets each of STI’s acquired companies to keep and run applications in the same way as before the acquisition while seamlessly integrating each into the larger, corporate tech ecosystem.
Alternatively, channel companies may be able to meet more of their customers’ needs with the cloud. Identifying potential growth in new markets or industries by adding a cloud offering to your portfolio, and identifying influences that are driving or may drive your customers to the cloud empowers channel partners with the knowledge of whether now is the time for the cloud. And whether that need is immediate, in the next quarter, or two years from now, it’s important to know that it will require you to modify your business model accordingly.