The growth of cloud computing is forcing solution providers to rethink their business and decide how to operate in a changing market environment, a technology consultant said Tuesday.
Rauline Ochs, speaking at the Intelisys IT Solution Provider Business Transformation Executive Symposium in Sunnyvale, Calif., said solution providers must decide how they will work in the cloud and with whom to partner.
As part of this change, telecommunications and cable companies are emerging as possible partners for solution providers, said Ochs, senior vice president of IPED, MarketBridge Alliance, a research and consulting firm affiliated with UBM, the parent company of CRN.
Ochs said cloud services will grow five times faster than overall IT growth, or 19 percent annually through 2015. In addition, by 2014, 25 to 30 percent of IT spending will be used toward cloud-related services rather than traditional IT functions.
"The traditional reseller business isn’t going away," she told about 20 solution providers attending the event. “But you should be prepared to capitalize on the 30 percent of the new business.”
While businesses will tend to seek cloud services from cloud-hosting providers, solution providers will have to compete for that business. “Your job is to provide value-added services that (businesses) are never going to get from the hosters,” Ochs said.
Adding to pressure on partners, IT vendors are decreasing their use of traditional solution providers from 2011 to 2012, she said.
Vendors’ use of VARs declined from 96 percent to 84 percent, distributors’ use dropped from 71 percent to 66 percent, and direct marketing resellers and large applications resellers declined from 66 percent to 60 percent.
In contrast, interest in nontraditional channels is increasing, with use of telecom carriers moving upward from 30 percent to 40 percent.
To survive in this competitive market, solution providers need to become “transformative,” Ochs said. The models for successful solution providers will change with this transformation. To be successful, providers will have to move from selling legacy systems to setting up service models that capture “recurring revenue” that will come from service contracts.
“To make this transformation, you need to change your management persona, reset your service offerings, along with your sales, marketing and pricing.”
Telecommunications companies and cable companies are emerging as new service providers that can deliver complex services with solutions providers, Ochs said. In some cases, solution providers, such as Intelisys, are acting as agents for these telcos and cable companies as they build their infrastructure to the cloud.
“The telcos and cable companies have not stopped at broadband," Ochs said. "They’re innovating in the cloud.”