All About The Cloud: Cloud Computing Creates New Solution Provider Paradigm

Cloud computing changes the way the channel attacks the market and is ’not something for the faint of heart.’

But the cloud creates four distinct flavors of solution providers that put their own spin on cloud and SaaS models. And the market is ripe for all four types of cloud solution providers to take advantage of to make money.

’I think we all understand the cloud is very cool,’ said Treb Ryan, CEO of cloud provider OpSource in his keynote address Wednesday at the All About The Cloud conference in San Francisco. Ryan said the cloud is cheap, fast, delivers flexibility, while offering interfaces that unlock new computing capabilities.

’The cloud is completely self-service,’ he said. ’It’s not something for the fiat of heart. It’s not something you can do easily.’

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That’s where solution providers come in, providing solutions instead of products to get enterprises into the cloud and ready to reap the benefits.

’The cloud is still just servers, storage and networking,’ Ryan said. ’It’s no different than buying a server ... No one ever sat around a boardroom and said, ’You know what would make this a better company? A new server.’ But solution providers are taking the cloud and providing solutions around it.’

The first in this new breed of cloud solution providers are the software players who make and sell software to unlock the potential of the cloud and ride on top of cloud infrastructure.

Second are the traditional systems integrators and VARs, which Ryan identified as one of the biggest groups attacking the cloud out of the gate. Ryan said when OpSource launched the OpSource Cloud offering last year ’SIs and VARs made up about 35 percent to 40 percent of our signups.’

VARs are attacking the cloud in various ways, whether through consulting, implementation or traditional reselling. And VARs are also taking different tracks to get into the cloud, offering referrals that can drive 5 percent to 10 percent commission; reselling where the cloud provider bills the customers, which pays about 10 percent to 20 percent margin based on revenue and the VAR manages the relationship while the cloud provider bills; and reselling where the VAR bills the customers, in which the VAR gets roughly 15 percent to 30 percent margin and discounts on services.

Ryan said for VARs and SIs the cloud opens new, high-margin capabilities.

’You get 30 points for reselling something,’ he said. "You can’t get that reselling hardware. The cloud is a high-margin product.’

After VARs, Ryan said telecoms are emerging as another cloud computing channel. While many aren’t yet making significant money selling cloud services and offerings, those that don’t have cloud offerings on their roadmap are losing business. Ryan sited one European telecom that said it was losing $2 million per month just by not having a cloud offering.

’If they’re not offering cloud they’re not invited to the conversation,’ Ryan said in an interview.

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Ryan said telecoms are logical cloud solution providers as they can bundle cloud computing in with networking, hosting and VPN services.

’It’s amazing how much telecoms want to get in this space and they’re focusing on reselling not on building it themselves,’ he said.

Lastly, Ryan said, a new breed of cloud solution providers has bubbled up. Value-added developers, or VADs, have hit the market offering solutions that make the cloud easier and make it do more. The majority of VADs are startups that offer some form of service to ease moving apps into the cloud or offering a different service around the cloud. VADs, Ryan said, can receive a referral fee from the cloud provider and a service fee from the customer, getting paid on both sides of the equation from selling cloud-based solutions.

Overall, Ryan said, he sees roughly 75 percent of all cloud sales coming through these four channels – software players, VARs and SIs, telecoms and VADs – showing cloud computing opens up significant opportunities for solution providers.

’Most of the cloud will be sold as a greater solution,’ he said.