Cloud Services Not Driving Big Money Into Channel, Yet

Cloud services big bucks often promised by the cloud

According to a recent Enterprise Strategy Group (ESG) report that polled nearly 200 resellers, selling cloud services isn't currently impacting cloud providers' bottom lines.

"While there's a good portion of resellers that are doing something ... it's not impacting their dollars yet -- their revenue yet -- in a positive or negative way," said Jeff Hine, ESG channel programs consulting analyst, in an interview.

These cloud providers and resellers are engaging customers and winning cloud deals and are investing in the cloud as well -- getting training, obtaining certifications and "kicking the tires" with vendor and provider cloud channel programs.

"You've got these guys making some pretty substantial investments. They're getting up to speed," Hine said. "But the dollars aren't there for them, yet."

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Hine said cloud providers will start reaping the benefits of the cloud once awareness and understanding take a stronger hold on the end-user side, sparking more customer demand. It also will increase once vendors and service providers begin offering more robust channel programs centered on cloud services, Hine said.

Despite the lack of an immediate financial impact, ESG found that 78 percent of current cloud resellers feel they are taking a "proactive" approach to cloud computing opportunities. Although 54 percent of resellers said they are not offering SaaS or IaaS today, they said they plan to offer both within the next year.

And while cloud providers, or the cloud channel, are growing and evolving, there are still some major steps vendors and service providers must take to ensure channel success in the cloud.

According to ESG, sales support is the most important element of cloud provider channel programs, and the most important step technology vendors can take to help cloud providers sell more cloud services is to offer more training and education. In addition, according to ESG, most solution providers want direct relationships, with only 11 percent of cloud providers currently reselling cloud services preferring to leverage distribution.

Cloud providers are also very brand-conscious, Hine said, with 58 percent of cloud resellers noting that the underlying technology of a service provider is very important or critical, while 62 percent said they leverage the technology brand in their sales efforts for cloud services. Meanwhile, 64 percent believe that end customers care about the underlying technology used to provide a service.

Overall, ESG found that 42 percent of resellers are already offering cloud services. Meanwhile, 31 percent said they will focus on signing multiple service provider partners for best-in-breed solutions.

Cloud providers are also excited about white-label opportunities, with 29 percent of current resellers planning to offer their own cloud services directly and 22 percent wanting access to white-label solutions.

So what is driving solution providers to the cloud? According to Hine, among those already offering cloud services, the top reason is to shift to a recurring revenue business model, followed by the desire to remain a trusted advisor. However, among solution providers planning to sell cloud services, a recurring revenue model ranks last among their drivers to the cloud.

"The people who are already reselling cloud are definitely the leaders," Hine said. "They're not just following the field, but driving the business models."