Resellers "under threat" from cloud

Clouded judgement: The rise of cloud-based services is casting a shadow on the traditional channel model

The proliferation of cloud-based services could lead to the role of the VAR coming under threat, warned market watcher TechMarketView.

In the analyst’s latest report, The UK Software Market: Trends and Fore­casts, it predicts that by 2012 15 per cent of the entire UK software market will be cloud based.

It also forecasts that within the next 10 years, software-as-a-service will become the dominant model of delivery for all types of software.

And with many internet users accustomed to accessing web-based applicationsdirectly from vendors, VARs could come under increasing pressure to prove their worth.

Philip Carnelley, research director at TechMarketView, said: “VARs could be under threat and will be subjected to increased scrutiny from end users to emphasise the benefits and value-add they bring.”

Resellers could enhance their propositions by concentrating their value-add activities on areas known to be sources of apprehension when it comes to the cloud.

“Lots of people have concerns about the reliability and security of cloud service providers,” said Carnelley.

“Whatever resellers can do to reassure customers on these issues is a step in the right direction.”

Rob Lovell, chief executive of cloud services specialist ThinkGrid, said there is already evidence that cloud helps vendors bypass the channel. “Take Microsoft and the BPOS package – it is offered via resellers, but Microsoft bills customers directly,” he warned.

Paul Evans, managing dir­ector of online back up vendor RedStor, said that while the arrival of cloud would mean many traditional VARs would have to reinvent themselves, the role they play in the market is still valuable.

“Customers like to have some­one they know and trust to speak to, who can guide them through any problems they are having,” said Evans.

Carnelley warned that resellers could also see their margins come under attack from the growing popularity of free software applications, such as Google Docs.

“Companies are used to the price of hardware coming down and are always striving to get more for less,” he said. “It is going to be a challenge for resellers to meet these de­mands and make money.”

Clive Longbottom, service director at rival analyst firm Quocirca, said the prevalence of free applications and documents does not necessarily spell bad news for VARs.

“Open source and free applications are very good until something goes wrong, which provides resellers with IT support opportunities,” he said.
“Packaging applications together, so they offer a bespoke solution tailored to the needs of the business, is also an area that is worth resellers investigating.”