This is a series of posts on the opportunities brought about by advancement in cloud services and aims to summarize the main roles and value propositions channel partners can choose from.
System integrators, VAR and resellers are under pressure today from both sides of the market.
On the SUPPLIERS side (ISVs), they are experiencing more competition of over distribution by many vendors in Europe and the US. Some ISV’s are going direct to their customers via the cloud and finding a way to bypass their channel. The world is getting flatter which allows new vendors from emerging markets to sell globally.
The IT salespeople for ISVs don’t understand working in the cloud as they are too used to working with large, capital expenditure up front. Working in the cloud usually means having monthly, operational costs, or financing coming through in tranches. Making the transition to a cloud based revenue model requires serious financial re-engineering for the partners. Making the transition to a cloud based revenue model will require retraining and re-incentivising of sales teams. However, the investment in training and pushing for a change in mindset is worthwhile. A recent study from IDC called “Successful Cloud Partners” concluded in 2013 that cloud–oriented partners outperform their peers in gross profit (x1,6), in revenue per employee (x1,3) and in growth (x2,4).
On the demand side, it is envisaged that through 2014 the market outlook is better than 2013. In 2013, channel partners were facing shrinking IT budgets with very picky CFO’s requesting a payback period of less than 18 months.
According to Gartner, the TOP 5 challenges CIOs face when procuring cloud services today are:
- Management of SLA’s
- Security concerns
- Avoiding vendor Lock –in
- Funding model not ideal for procuring cloud services
- Lack of standardization and portability
Most partners are conscious about the need to transform themselves into cloud partners. All partners tell us that the major hurdle to take is the business model and not the technology. There are so many actors and roles in the cloud model to choose from, that they have difficulty to reorient their businesses.
Next: Actors in the Cloud