Cover Story: Rise Of The Cloud Provider


 

Recession-Proof Cloud

Several solution providers said the economic downturn of the past couple of years has helped their businesses. Companies of all sizes either can't or won't make heavy capital expenditure investments but still see IT as a means to increase production and lower costs. Transferring those IT costs to a fixed operating expense makes it more palatable to end users' C-level executives, said Rice.

"I would probably say half of our business opportunities come from people that said they can't afford a heavyweight form of IT that they invested in in the past,' he said. "It's something that not only drives lower costs and efficiencies, but it helps businesses be more agile. Their business has grinded to a halt and it's a very difficult move with traditional IT going forward without sizable investments. And the majority of investments were going into maintenance, not into new investments on behalf of the business. Absolutely, that has caused big things on the cloud front.'

Meanwhile, cloud providers also see business pouring in from startups. "Anybody starting a business today is not going to acquire all these servers and set up traditional IT. Anybody starting business today will start with leveraging the cloud so they don't get into the traditional pattern of maintenance and overhead,' Rice said.

New cloud-only providers also have a leg up on traditional solution providers because end users better understand cloud computing now compared to three years ago, he said.

"First, it was, 'What do you mean by cloud?' They didn't even get the concept. It was a little along the lines of, how is it different than a hosting service? As people began to get familiar with that, some of the big players started to run commercials on TV. You hear the terminology. It was a steady drumbeat and at least they know what you're bringing to the door,' Rice said. "The second wave is, 'I think I get the idea, I can accept the idea but now I am concerned about security, safety, liability, performance, response time.' That second wave was more challenging in the sense of trying to get people to a certain comfort level. We had more success with younger entrepreneurial types. Guys in their late 30s, early 40s were more inclined. They'd say, 'This makes perfect sense,' as opposed to some older types in their 50s who have been around a long time and are more skeptical to make a transition to put the jewels of the kingdom at risk. For the most part, those fears have subsided. We don't encounter much [angst] anymore. It was more borne out of IT fears than of business fears.'

Vintage and even Progressive solution providers could face big challenges trying to transform their business models to the cloud, Rice said. "It's a fairly difficult transition. We made a conscious decision not to bring legacy IT baggage with us,' he said. "The biggest problem to explain to an existing client base is the difference between what we've always done and what we want to do. That's a significant departure for most. It's tough in this situation when someone made their bread selling solutions to their customers and now they have to make the transition. What is the incentive, motivation [for solution providers] to increase [or] radically change their portfolio? Obsolescence is motivation for some, but it's hard when it's in your DNA."