Kent Erickson, president of Pointivity, a San Diego solution provider that has successfully navigated the treacherous transition to cloud services, urged solution providers at the XChange Solution Provider conference Monday to take their fate in their own hands and fully embrace the cloud as cloud integrators.
Erickson said solution providers have a rare "blue ocean" high-margin opportunity if they transform their businesses to act as cloud integrators focused on business outcomes for clients rather than point product-focused providers. "This is a huge opportunity for all of you and that opportunity is growing," said Erickson, rallying partners to pick up the cloud integrator mantle. "This is a huge market. It is not going to be fulfilled, even if we all go after it."
Erickson said cloud integrators, in effect, "aggregate and integrate cloud services, while adding their own value and knowledge of the clients business which allows them to deliver a complete custom solution."
Erickson, an 18 year IT solution provider veteran, made the changes 11 years ago to radically transform his own company from a product-based business focused on capital budget IT projects to a cloud services business focused on business outcomes.
In 1999, Pointivity had 165 employees generating $16 million in annual sales based on capital expenditure IT projects. Today, Pointivity has 29 employees generating $15 million in sales and is twice as profitable selling customers three-year contracts to consume IT as a service.
"We have a model where you don't have any risk," said Erickson. "It is the future. You only incur an expense when you book revenue. The new metric is how much revenue you drive per employee. You are no longer focused on services employee utilization rates. This is an opportunity to revolutionize how the business is organized with small, highly-profitable teams." A 25 person systems integrator focused on capital expense based IT projects today may be a nine person company as a cloud integrator of the future, said Erickson. "Think of organizing your business with no expenses unless there is revenue," he exclaimed."Technical employees in the future will be tied to business outcomes not managing servers."
The first step for partners is defining themselves as cloud integrators that can educate customers on the benefits of the cloud services model. "Do you think there is room for education in the cloud?" Erickson asked partners. "Big time! Education is power. Knowledge is power. It gives you the ability to go out and have tremendous influence."
NEXT: Position Cloud Computing As An Operating Expense
Erickson said that central to the cloud integrator business model is a focus on business outcomes rather than technology purchases, said Erickson. That means defining the cloud for clients as an operating expense, pay-as-you-go IT utility offering that shifts the information technology risk from the client to the solution provider. That opens the door for clients to focus on building their own business rather than managing IT, said Erickson. "Is it good for your insurance company to hire more agents or IT people?" he asked partners.
Erickson said that solution providers must maintain that customer "intimacy" that has defined partners since the dawn of the PC revolution. "We own [customer] intimacy," he said."We are there on Saturday night taking calls from customers."
Bob Nitrio, CEO of Ranvest Associates, an Orangevale, Calif. solution provider, said he will use Erickson's call to action to "move faster" into cloud services. He would like to move his business from one that is receiving 10 percent of annual sales on an operating expense basis to as much as 50 percent in three years. "That is going to help my clients control IT expenses," he said.
Andrew Sampson, principal of Sampson and Associates Inc., a Norcross, Ga. solution provider, said Erickson's assessment of the cloud as a "blue ocean" opportunity with vendor "sharks in the water" threatening solution provider by going direct to customers is "spot-on." He said he is focused squarely on maintaining deep intimacy as a trusted advisor.