Cloud technology has now seeped into many corners of the channel and those bold enough to take a leap with their business model are seeing benefits slowly accrue, according to speakers at CRN’s recent Cloud Computing Forum.
Sara Yirrell, editor of CRN, kicked off the morning by noting that a significant proportion of users do not actually understand what cloud services are. A recent IDC survey found, in fact, that 20.5 per cent of users around the globe who were polled had not even heard of the phrase “cloud services”.
Presumably, many of these are in fact users of cloud services themselves - even if it is only a service such as Hotmail - so this would suggest that despite all the talk, education of the market is still needed.
“Cloud remains an important issue for all channel players keen to ensure their long-term profitability and sustainability,” Yirrell told CRN after the event.
“We think the speakers on the day offered some of their best tips as well as insight into their own experiences with cloud, and that this could help many VARs in these transformational times.”
Andy Burton, chairman of the Cloud Industry Forum and chief executive of cloud services provider Fasthosts, emphasised that channel players must develop a deep understanding of the value they can add. Without doing this, they risk being overlooked as critical partners in an ongoing relationship with the customer.
This is as much about focusing more intently on the actual outcomes that might be provided to the business’s customer as it is about understanding the strengths and weaknesses of the channel business, he suggested.
Focus on strengths
Moving into the app store space would not be easy, while pure brokerage involves a lot of marketing and delivering technical services will be all about stickiness. So one’s strategy depends on what one wants to deliver. Resellers need to know their market opportunity, and take steps to augment their expertise where necessary.
Initially, they should focus on their strengths, he emphasised.
“Do not see it as just a way of doing some diversification. You need to sell services to the people who already buy from you,” Burton (pictured, right) said. “The second key issue is understanding where you are in the supply chain. It’s not about technology, it is about changing business models.”
Bill Strain, director of cloud storage, email and security services provider Westcoastcloud, confirmed that regardless of specifics, VARs that want to retain their traditional business model are likely to be in trouble. Most resellers will need to transform into some kind of managed services provider at least, if they want to survive the advancing clouds.
“Although most customers and end users have not defined the cloud, I think that is changing very rapidly. Although they may not understand the definition of cloud, they certainly understand what it can deliver,” Strain told the event.
He noted that often what is being discussed simply refers to virtualisation and the act of spinning up virtual machines (VMs) to host an organisation’s IT functions via private or public cloud. It is about scaleable, on-demand managed services.
“It’s about changing the way services are delivered,” he said. “And the service-level agreements (SLAs) a cloud provider can deliver are often better than [those] the users themselves could possibly manage to deliver.”
Nigel Beighton, vice president of technology at Rackspace Hosting in the UK, appeared to agree with much of what had been said by the others. However, he hastened to emphasise that Rackspace is a hosting provider rather than a cloud services provider, and that it is the channel’s responsibility to decide how best to take advantage of the opportunities that are presented by cloud.
He added, though, that cloud storage and security certainly hold potential for many players - although he also specifically avoided commenting on how secure the cloud might actually be. Hosting companies such as Rackspace are currently locked into a kind of infrastructure arms race, and are simply focused on that, he claimed.
“We are not going to start building heavily secure, highly sophisticated clouds - that is for other people,” Beighton said. “What it means is that in the next four years or so, there will be a wholesale market coming. In three years’ time, there will be a proposition for you to resell.”
Chris Gabriel, marketing and solutions director of large SI Logicalis, spoke next - and moved quickly to confirm that making money out of cloud is likely to be a long haul for many. The fastest way to become a cloud millionaire might be to find someone who is already a billionaire and work from there, he quipped.
Furthermore, he added, the market has become rather confused with all the different definitions and hype.
Explain the value of cloud
“We all come to these presentations and the first five slides will be just definitions of cloud. I think customers are bored with it,” Gabriel said. “And part of the challenge for us all is that customers say, ‘I know what it is and I’m not excited, because email as a service et cetera is not my big problem’.”
Very few organisations need, furthermore, to do something as drastic as rent a hypervisor overnight. Few companies have such dramatic spikes in demand, he said.
Vendors might be keener than the channel or the customers. Cloud remains relevant, but it needs to be sold by explaining what important value is being delivered while avoiding cloud-washing, added Gabriel.
David McLeman, managing director of reseller Ancoris, wrapped up the event by presenting an update on the Google Apps partner’s migration to cloud, how its revenue has developed and shifted, and its successes.
“We have achieved 50 per cent growth per annum in cloud revenue growth over the past three years, and a 95 per cent renewal rate,” McLeman (pictured, left) said. “Our largest customer is eight per cent of the business, and 75 per cent of the initial contract revenue is now recurring. We have a nine per cent gross margin increase, and that is a great position in which to be.”
Providing sales people with incentives could be challenging, he admitted, but sometimes it might be worth overcompensating sales in the first year of a deal so they could see the reward.
“However, we only lost one guy. Ironically, he was one of the highest performers under the old model, but he just could not make the transition,” McLeman said.
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