How The Cloud Is Changing The Face Of CRN's Solution Provider 500

"Our customers were asking us questions outside of our data center expertise," said Reagan Dixon, president of Lumenate. "We had to change, or we were going to become irrelevant."

The change paid off. Lumenate leaped to No. 122 on CRN's Solution Provider 500 list, up from No. 298 last year, and is a prime example of how moving forward with cloud technology can launch a business forward and revenue upward. Dixon said Lumenate has grown more than 100 percent in the past year and expects to continue at triple-digit growth rates going forward.

This year's Solution Provider 500 list-- with fast-rising companies such as Lumenate and new entries such as Cloudswell -- is proof that cloud technology is revolutionizing the industry and people are not only making money, but building entire business models around it and experiencing extreme success as a result.

PROVIDING FLEXIBILITY

Dixon emphasized one major vector of change that he believes is at the heart of solution provider success in the cloud era. He calls it "consumption economics," or business model flexibility.

Lumenate serves businesses of all sizes with a wide range of business needs. Dixon's key to success is remaining relevant in a traditional data center space while expanding the company's portfolio in cloud capabilities. Dixon said every customer is different; some smaller companies are interested in cloud services because they lack the resources to build and staff their own data center, while some large companies are looking to outsource.

"We don't try to convince our customers to outsource in a particular way. We enable a transition to cloud for someone who may be exploring it as a possibility. We can flex with them. If it doesn't work out, we have the capability to shift back closer to a more traditional model," Dixon said.

Similarly, Maron Structure, a Chicago-based solution provider that jumped to No. 64 from No. 141 on CRN's SP500 list in one year, is also heavily invested in growing its cloud services while continuing to appeal to a traditional data center market.

"Companies are starting to realize there is a lot of operational efficiency to be gained by moving what I consider their noncore business into the cloud," said Rob Dang, COO of Maron Structure. "For example, we are seeing our customers start to move to Office 365 from a public cloud perspective. They also are building their own private clouds within co-location facilities to be able to better utilize space and have the redundancy and agility they really need within their business."

Dang said his experience in real estate consulting has shown that private data centers are going by the wayside. "More often than not, given the redundancy and resiliency requirements of businesses, they are going toward the buy option, meaning going toward the public co-location facility and purchasing cages or racks and using those facilities," he said.

Security, Dang stressed, is one of his top concerns about the cloud. He recommends companies focus on noncore business and noncritical applications as a first step toward cloud technology. Dang said there are some areas the cloud is just not ready to tackle yet.

Dixon also expressed concern around cloud security. "We believe there is a very real value to cloud and cloud services," he said. "We also see, for a certain segment of the market, it may not make as much sense, especially when it comes to compliance issues. The cloud is not nearly ready to handle some of the more stringent requirements, like HIPAA."

CONCENTRATED FOCUS

Other solution providers seem to have more confidence in the cloud and are building their entire business around the technology. One solution provider new to this year's list (No. 483) is Cloudswell, a Chattanooga, Tenn.-based company formerly known as Terenine.

"We are getting out of the data center business," said Dave Carney, president of Cloudswell. "Right now we are working very hard to transition our current customer base to the cloud. Our customers will see 20 [percent] to 30 percent savings in IT costs by making the company's transition to cloud with us." Carney expects the company's transition to be complete by the end of the calendar year.

Tony Safoian, president and CEO of SADA Systems, a North Hollywood, Calif.-based solution provider and No. 500 on this year's list, reported 50 percent to 60 percent growth rates from last year, largely linked to the company's Google Enterprise cloud solution as well as Microsoft Office 365 offering. SADA Systems is new to the SP500 ranking.

Cloud-based applications such as Google Apps are rocketing in popularity and driving business for new and growing companies on the SP500. Even vendors such as Hewlett-Packard are jumping on board by bundling Google Apps with hardware. And the recent Cisco Partner Summit Conference in Boston was almost entirely geared toward encouraging partners to embrace cloud technology; Cisco executives warned that entire solution provider businesses are in danger of failing if the transition is not made.

LEAPING AHEAD

Opinions differ on where exactly cloud computing will end up in the next five years, but one thing these SP500 solution providers agree on is that cloud is moving forward quickly.

"We are in the fastest-moving part of the fastest-moving industry in America," Safoian said.

Safoian said he and his staff began looking into cloud computing in 2005. By 2007, they began offering Google Apps as a service. "At the time, most companies were still focusing on on-premise," he said. "If you're not following where the puck is going, you're pointing all your horsepower somewhere else that will not be as productive."

Dixon predicts major growth in cloud services as well as continued opportunities in the data center market. "We see double-digit spin to the cloud over the next five years; there is also going to be a lot going on in data centers and how the companies themselves will manage them," he said. "We don't see in the next five years one player being able to do it all."

Dixon is already planning for the future, evaluating how Lumenate may be able to work with customers and solution providers to package services from multiple cloud providers in a way that delivers value for all parties involved.

Even though Dang is not an advocate for an industrywide dump of traditional data center storage in favor of cloud computing, he said he sees a lot of value in the evolving technology.

"I believe a lot of the killer apps for cloud aren't even on the horizon yet," Dang said. "We are telling our customers if they are making next-generation investments into their data center, especially data networking products, they just need to be aware of what is out there. They need to know what interoperability looks like with the open-source controllers as well as the manufacturer-based controllers," he said.

PUBLISHED JUNE 24, 2013