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XChange 2012: Cloud Computing Service Providers Posting Big Sales Gains

Cloud computing service provider startups are driving huge sales growth by allowing businesses of all sizes to move their IT operations to the cloud.

Ira Bell, the COO of Nimbo, a New York City company built from the ground up to tackle the cloud computing services market opportunity, said his company's sales have skyrocketed from zero to $6 million in only two years. And he expects the company to double again this year, hitting $12 million.

Nimbo, which has bet heavily on Microsoft's Windows Azure cloud platform, just closed a deal with a major New York hospital to build a hybrid cloud/on premise solution with 75,000 seats.

[Related: XChange: VARs Share Recurring Revenue Model Success Stories ]

Nimbo is one of dozens of upstart cloud computing service providers attending the XChange Solution Provider 2012 Conference in Los Angeles this week seeing astronomical sales growth by embracing the cloud computing services model.

UBM Channel CEO Robert Faletra, who kicked off the Xchange Solution Provider conference on Sunday night, calls the new cloud computing services players "transformative" companies because they derive most of their sales providing off premise cloud services in a recurring revenue, subscription model.

"You are becoming service providers," he told the hundreds of attendees traditionally referred to as solution providers or many years ago as VARs (Value Added Resellers) or even just resellers. "Recurring revenue is a wonderful thing. When you see the biggest buildings in any city built by people with recurring revenue it makes you think that is not a bad model. It sure is a lot easier to walk into January with 60-70 percent of your business already booked."

Fuse Networks, a three-year-old, Seattle, Wash. cloud computing services provider, posted a 51 percent increase in sales in 2011 to $2.3 million with 90 percent recurring revenue. The company is selling a fully managed service for hosted telephony, hosted application and a virtual desktop, says Mark Brown, a principal for Fuse.

"We literally fork lift our customer's servers and throw away their phone system and give them a whole new office in the cloud," he says.

Fuse is dramatically reducing the cost of IT with its cloud computing services model, said Brown. Fuse slashed one customers IT spend by more than half, he said, with the customer moving from budgeting 2 percent of revenue on IT to .75 percent. At the same time, the customer's IT trouble tickets were reduced significantly, he said. Brown's advice for fellow solution providers: start a new business.

Next: Leaving Break/Fix IT to Join The Cloud Computing Services Revolution


Mike Pippin, the CEO of NetsWork, Midland, Texas, did just that, deciding to get out of the traditional break/fix IT business several years ago and bet big on the cloud computing services revolution. Pippin decided he was too young to retire and saw the break/fix business as a "dead deal." So he spent $400,000 building out a data center as part of a move to provide cloud computing services and has never looked back.

With more businesses looking to offload IT operations, NetsWork's sales doubled to $2 million in 2011, says Pippin. And he's betting he can do $3 million in 2012 with a plan to hire an additional five people. The company recently added Cisco IP based phones to its cloud computing services portfolio.

"We're growing like crazy," said Pippin discussing his good fortune in a crowded ballroom. "I have been in IT since 1993 and I haven't seen anything like this. I invested the capital and I'm ecstatic that I did."

Simer Mayo, president and chairman of of ValorIT, a seven-year-old Scottsdale, Ariz. company, also has shifted from the break/fix business to a cloud computing services model. The company is now adding about five new customers a month, said Mayo. He said the rapid growth is causing him "stress and more white hair." But it's paying off in big sales and earnings growth. He said sales growth is now about 40 percent a year with earnings up about 10 percent last year.

Vendors at the conference, including cloud computing pioneer NetSuite, which is celebrating a decade of channel cloud partnerships with its cloud ERP financial software suite, are seeing a new wave of startups embracing the off premise, monthly subscription cloud computing services model. "We are seeing a lot of pioneering entrepreneurial cloud start ups," said Craig West, vice president of channel sales for NetSuite, a cloud ERP financial software suite.

Rob Gottschalk, the CEO of SaaS (Software as a Service) Consulting Group, headquartered in Austin, Texas, left an IT software management company last May to devote full time to his cloud computing services business and has already closed seven deals in only 10 months for NetSuite. "I just hired my fourth full-time person," he said. "NetSuite adoption is skyrocketing. It is easy to sell because it is such good software. There are accounting functions that take customers weeks to do that are handled in NetSuite in a matter of minutes. Customers love it!"

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