Potential stormy clouds ahead for channel companies

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3 June 2011

It seems everyone is talking about the cloud nowadays, even people who don’t want to talk about it. It’s the wave of the future and it’s looming large on the horizon. For some, it portends stormy weather and for others it’s a sign of new life to come in an IT landscape that is looking decidedly parched.

The channel’s role in the development of cloud computing is an interesting subject that has exercised much greater minds than mine (or possibly not). Anyway, there was an interesting addition to the topic provided by two sets of surveys recently published by The Cloud Industry Forum. The first looked at cloud adoption and trends among 450 senior IT and business decision makers. It found that just under half of them were using cloud computing in some shape or form within their organisation.

While the expectation might be that cost savings are the primary reason for making the move to the cloud, the number one reason with 53% was actually the flexibility it provided organisations and the agility to deliver new services, access technology quickly and offer solutions they did not already have. Only 16% said cost savings were the primary driver although, interestingly, 69% of those already using cloud services identified it as a driver for further cloud service adoption.

In a powerful endorsement of cloud services, 94% of those who had adopted them were satisfied with the results and 85% expected their use of cloud services to increase this year. The most popular areas for cloud services were data back-up/disaster recovery, e-mail services, data storage, collaboration, IT operations management and web hosting services. The biggest areas of concern were data security, data privacy, dependency on Internet access, confidence in the reliability of vendors and contract lock-in.

From a channel perspective, it is slightly disturbing to hear that two fifths of resellers with a formal relationship with customers are not engaging with them about the relevance of cloud services. As many as 60% of those customers said resellers had not raised the issue of cloud provisioning.

The second survey, which polled 200 people in the UK IT channel (ranging from IT consultancies to managed service providers, system integrators, VARs, distributors, large resellers, specialist resellers and IT retailers), found almost three-quarters thought the market was ready to embrace cloud services but they were evenly divided over whether it was being over-hyped. Just under a half thought cloud services were better than on-premise solutions and only 18% said they were worse.

The research showed channel companies that offered cloud services cited the ability to secure long term revenue streams from customers as the greatest tangible benefit, followed by the ability to offer an on-premise and online portfolio. Asked about obstacles to the adoption of cloud services, over 80% pointed to concerns over the immaturity of the market 79% highlighted the financial re-engineering required to move from on-premise income to include online income. Retraining staff to sell cloud based services was also a big issue for 74% of respondents. In terms of revenue gained from cloud services, the average for all groups was 18% of turnover in 2010 which is set to rise to nearly 33% this year.

As many as 63% of channel companies said they were already offering some element of cloud services, suggesting the channel has taken the cloud computing message to heart and 64% offered a mixed model of third party branded services and their own solutions. Many offered software as a service (79%), infrastructure as a service (51%) and platform as a service (47%). The top three software as a service (SaaS) offerings were back-up/disaster recovery and security, storage and business intelligence.

If you look back at the results from the customer survey, you’ll notice a slight disparity between the two in terms of the top SaaS offerings. One suggestion is that the IT channel community is evolving cloud services from “an area of competence rather than an area of market demand” and services are being offered based upon the channel’s ability to deliver rather than on market requirements. There’s a potential dark cloud here if customers choose to seek out providers that can give them what they want rather than settle for what they can get from their channel partner.

Both surveys suggest the future may well be cloudy. It’s up to channel companies to make sure that’s a good thing rather than a prophesy of bad times to come.

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