What's really in the cloud for VARs?

Sam Wijeyakumar lays down a route through the clouds to increased reseller profits

Despite the meteoric rise of cloud computing, many VARs I talk to do not see it as a trend from which they can profit. With cloud software yielding relatively small margins and requiring less custom implementation, what is really in it for VARs?

Cloud's ascendancy is becoming as inevitable as death and taxes and it cannot be ignored forever. IDC claimed £9.8bn was spent on cloud technologies in 2009 in the UK and that amount will rise to £33bn by 2014.

Canny VARs are looking at their businesses with fresh eyes to devise profitable new services and benefit from cloud's more predictable, annuity-based revenue model. As part of our business mentoring services to channel partners, I have been exploring some of these new commercial opportunities and wanted to share a few observations and ideas with the wider community.

Primarily, don't wing it. VARs who are serious about redesigning their businesses to profit from cloud need to step back from the hectic pace of their daily work and engage in some serious planning with their teams.

The first and most important step is defining vertical and geographical target markets, an exercise I think many businesses carry out in too much haste.

VARs need to be realistic when choosing their target markets. Do they play to your strengths and provide enough opportunity to support sales goals in a specific time frame? For instance, if you do not think your people can realistically negotiate the public sector procurement labyrinth in their lifetimes, there is no point targeting that sector, even if theoretically the opportunity exists.

Pricing is another decision often made too quickly, with major implications for your potential to succeed. So consider bringing your accountant into the planning session to model different pricing scenarios.

There are many types of cloud partner you could become, each requiring different levels of in-house technical and business competence, levels of funding, risk and potential reward.

If you become a cloud Trusted Adviser, you simply resell cloud assets and add services on top to ensure customers achieve certain business outcomes. This model requires the least in-house technical competence but varies by the services you plan to offer. You would typically offer industry knowledge, project and customer management skills to manage project scoping, solution design and implementation support.

Cloud SIs may own some cloud assets and deliver bespoke solutions to meet desired business outcomes. This requires a high degree of technical knowledge, moderate levels of investment, and yields high profits. Success depends on having trained, experienced and talented in-house consultants who can integrate a wide range of offerings in different environments. They can migrate their clients to the cloud in stages.

For large corporate clients, project managers need to be very experienced as well as understand how to manage people and communicate effectively through organisational change.

Architecture designers may use some of their own cloud assets and build infrastructures and datacentres to host and deploy cloud offerings. This requires a very high degree of technical competence for service delivery, and moderate to high investment capital. It may yield large profit margins and customer retention may be stable, but the risks are higher. Customer service has to be top notch to ensure that loyalty and retention.

So what is the vendor's channel model, what offerings and which customers do they directly target? What are their partnering and training costs? How complete are their sales and marketing services? What do other VARs think of the vendor?

If the vendor is prepared to work with you on your business plan, they may be truly committed to your success.

After you have developed your plan, found the right partners and trained your people, you are ready to launch your cloud business. It will not be perfect from the start and you will no doubt learn the most important lessons by making the odd mistake. You should learn from these mistakes, stay close to your customers and demand your fair share of support from vendor partners.

In that scenario, you are very likely to notice that cloud revenue will start to increase and go on rising.

Sharmila (Sam) Wijeyakumar is vice president of sales and marketing at Entando