With more companies looking to shift to a cloud model, VARs and MSPs should see it as a new way of doing business that has the potential to offer your customers new economies of scale that couldn’t be achieved previously.
A lot of VARs and MSPs I’ve spoken with over the past few years see the cloud as a threat to their businesses, and some report that they’ve experienced dwindling profit margins as more of their customers’ IT hardware and applications move off premise. In 2010, Gartner’s research corroborated this reality, noting that approximately 98 percent of all cloud revenue was between SMBs and cloud providers with only 2 percent benefitting the channel.
Fortunately, that story is changing. In less than three years since Gartner’s first study, the firm is now seeing close to 20 percent of cloud revenue going through the channel. Even though that still represents a minority of cloud business, that percentage continues to grow. Additionally, the overall cloud market is exploding. This year the worldwide cloud market is expected to reach $131 million, which includes cloud advertising and cloud business process as a service. If we focus exclusively on the channel’s addressable market, which is composed of IaaS (infrastructure-as-a-service), SaaS (software-as-a-service) and PaaS (platform-as-a-service), the potential is around $35 billion in 2013, with North America making up $20 billion of that total. Within the next three years, the addressable cloud market is expected to reach $57 billion.
A Quick Cloud Check of 500+ Channel Companies
At our recent Ingram Micro Cloud Summit, we surveyed 500+ channel partners in attendance and discovered some very interesting trends:
- 86 percent of IT solutions providers offer cloud services to their end customers today, up from 76 percent in 2012
- 79 percent of attendees offer two-plus cloud solutions today, up from 70 percent in 2012
- 29 percent of attendees offer five-plus cloud solutions today
- 22 percent of attendees said their annual cloud revenue was more than $500K in 2012
- 3 percent of attendees said their annual cloud revenue was greater than $10M in 2012
What these trends tell me is that business owners are now realizing the cloud is an important part of their businesses, but the cloud is not as simple as they once might have thought. And, in the complexity of business, the channel becomes relevant. Keep this reality in mind as you look to find new ways to incorporate cloud solutions and services into your IT solutions and managed services practices.
Cloud Oversights SMBs Make
When talking to your customers and prospects, keep in mind some of the most common mistakes SMBs make when they attempt to bypass the channel and work directly with cloud providers. Here are a few:
- They may move sensitive data to a public cloud data center and inadvertently put themselves out of compliance with industry regulations in the process.
- Recovery time objective is another area small businesses overlook when they move to the cloud without the help of a VAR/MSP. As you’re well aware, having data stored securely off-site is only half the equation. If it takes several days to perform a data restore from the cloud because of inadequate bandwidth and time spent building new servers, the cost of downtime could translate to hundreds of thousands of dollars in lost revenue.
- Another key point to keep in mind is the inevitability of software problems. These can occur even if the customer’s applications are running in a top-notch cloud data center. Sometimes an operating system update can cause problems with certain business apps, which is outside the cloud provider’s area of responsibility. SMBs that use VARs/MSPs to remotely monitor and manage their apps can often have their application problems fixed before they even realize there’s a problem.
The bottom line: You shouldn’t view the cloud as a threat to your channel business. Instead, see it for what it really is—a new way of doing business that has the potential to offer your customers new economies of scale that couldn’t be achieved previously. And, if you’re willing and able to realign your value proposition, the cloud can become an ally that offers similar business benefits to you.
Renee Bergeron is Vice President, Managed Services and Cloud Computing at Ingram Micro North America. Guest blogs such as this one are published monthly, and are part of Talkin' Cloud's annual platinum sponsorship.