Cloud is the big 'C' word in the channel right now, posing 'C'onflict, 'C'onfusion and 'C'hallenges to the status quo. The IT industry is a fast-paced, constantly evolving beast, and yet the extraordinary speed at which cloud computing has come to dominate the landscape has caught many by surprise. On reflection, few would deny it was the Zeitgeist for 2011 and it's likely to remain a much discussed topic in 2012.
We are seeing a channel landscape where partners are reporting a number of concerns around selling cloud, the key ones I have heard cited being; "I don't want vendors to sell direct", "The margins are too low", "Where do I make service revenues?", "How do I make the transition to a different billing and commercial model?", "I want to bill my customer and not have the vendor doing it".
Despite these worries, cloud computing may actually provide more partnering opportunities than the traditional IT industry ever has. There are millions of small to medium businesses that have not been able to take advantage of core software applications due to their size, which present a fantastic sales opportunity for the channel.
Analyst house TechMarketView has recently sounded a loud and clear warning to the channel on its website: "It's completely clear to us that every software and IT services supplier must have a cloud story - now! The cloud market is moving faster than almost any other 'next big thing' we have seen". However, the current reseller landscape is one where the majority of resellers have never sold a cloud solution or have only transacted at the request of a customer.
Cannibalisation is another C word that rears its head in these discussions. Resellers are concerned about how cloud solutions may replace their existing renewal base, with smaller sales values, lower perceived margins and less lock-in for the reseller. Imagine if 20% of your renewal base churned in the next year to a new form factor - could you sustain this with your existing cost base and margins? With Forrester anticipating a 12 to 15% washout rate in the number of channel partner companies, it is time for resellers to decide whether to focus on a "survive or thrive" strategy. The Cloud Industry Forum (CIF) reported in its survey report "The Impact Upon The IT Supply Chain 2011", that channel players expect that by 2014 at least a third of their revenues will come from cloud based services.
The cloud brings some fundamental changes and challenges that resale partners need to understand and adapt to, in order to continue to succeed in the years to come. The 'head in sand' approach is no longer going to work for customers. Resellers need to self-educate using certifications such as the recently launched CompTIA cloud essentials, on a business/solution selling perspective as well as understanding these new form factors from a technical landscape.
Resellers need to start now and build attractive and profitable business revenues around cloud, asking the right questions; "Who bills the customer?", "Who renews them?", "What are the margins?", and "What won't the vendor provide?" Work with a vendor to understand what it needs of the partnership and together focus on the large growth opportunity the market is offering us all right now.
This was first published in April 2012