UBM Channel CEO: Changing Business Models Is Key To Success In Cloud Computing Services Era

The progressive solution providers that expect to succeed in the cloud computing services era are two times more likely to have changed their business model in the last five years.

That was one of the big takeaways in a keynote kickoff presentation Tuesday by UBM Channel CEO Robert Faletra Tuesday at the BoB (Best of Breed) conference aimed at helping solution providers set a new business and channel course in the cloud computing era. The three-day conference, a gathering of 150 solution provider CEO thought leaders, is being held at the exclusive St. Regis resort in Dana Point, Calif.

Faletra said UBM Channel research shows that the progressive VARs investing in new business models and winning new cloud computing customers is in stark contrast to the 56 percent of old school vintage VARs selling capital expenditure on premise IT solutions who have not changed their business model in the last decade.

Twenty five percent of those vintage VARs claimed they simply don't see any demand for cloud computing services, according to UBM Channel research. But Faletra said that flies in the face of research that shows the cloud computing services adoption is accelerating with approximately $2 billion in cloud computing services expected to be sold in 2012.

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What's more, Faletra said, those customers adopting cloud computing services are growing at a faster rate than those sticking with the old school on premise IT solutions.

Solution providers that are unwilling to change their business model are going to find themselves serving a shrinking market and may go out of business, said Faletra. "The (Cloud computing services) migration is absolutely accelerating," he said. ’Each year, there are going to be more and more customers going in this direction."

Faletra expects those solution providers not embracing cloud computing services to find themselves being "de-emphasized" by customers who will turn to cloud computing savvy competitors without the VAR even knowing about it. "You are going to lose your customer base if you don't think about this," he told the Bob conference attendees.

Faletra said the Bob conference is aimed at helping both solution providers and vendors successfully transition to the cloud computing services era. Among the challenges, said Faletra, is changing compensation models for solution provider sales forces who have become accustomed to being compensated up front for capital expenditure based, on premise technology solutions.

That's an area where vendor partners or even distributors may be able to play a role in helping change those compensation models, said Faletra.

Next: The BoB Conference Confronts Changing Sales Compensation Models

Faletra applauded GreenPages, a solution provider cloud computing power, for confronting that sales compensation issue head-on by paying its sales force up front for recurring revenue cloud computing services. "If you're a cloud player, you have to take some risks," he said.

Faletra said the cloud computing services era transformation is making the bond between cloud computing service providers and their customers stronger than the old business model where the bond was tighter between the solution provider and the technology manufacturer.

"The point of loyalty in the old (solution provider business) model was the strategic relationship with the vendor," he said. "Now it is the relationship with the customers. That is a hard thing for the vendor community to come to grips with."

Faletra said the turmoil in the business being wrought by the cloud computing services revolution is driving higher margins for partners that are stepping up and acting as trusted advisor for customers. In fact, he said, UBM Channel research shows that 67 percent of customers feel comfortable buying cloud computing services from a trusted solution provider partner.

"Customers still believe the third party channel is the way to go," he said. "Everybody has an agenda. But the customer just feels a bit more comfortable buying from the trusted partner they have done business with in the past."