Ian Moyse, Sales Director at Workbooks.com, discusses the role of the channel for cloud service providers. This is the first of two articles in a series entitled ‘Can the channel come out to play?'
There is an on-going debate and discussion in articles, at events and in offices each day about the role that channels will play in the cloud computing market. Does it have a place? What is that place? What do cloud providers want and need? And is there any money in it?
Resellers can all reflect on the 'good old days' of strong margins on hardware, software and support. Days when customers couldn't go online to easily compare pricing and source alternatives or visit the local PC World or Best Buy Geek Squad find IT products with in-store support and break/fix at a level that can work for their business.
When you consider that Gartner predicts 46% of all businesses will have more than half of their infrastructure in the cloud by 2015 versus only 3% in 2011 and IDC is expecting 85% of new software firms created in 2013 will be cloud businesses, you realise this is something that you ignore at your peril.
We all have to remember that these will be the 'good old days' and will only be remembered by those who took a proactive and logical step to embrace - not be killed by - a new delivery paradigm.
Cloud is not the predicator or the death knell of the channel as many have said, but it certainly is a contributing factor. Much of the traditional IT supply will change to being supplied online via cloud or simply sold via online E-tailored channels. This will marginalise the opportunity for traditional bricks-and-mortar resellers to make the same level of margins.
In my 20+ years in the industry I have experienced much change in the IT supply channel, but change has traditionally come progressively and what we are seeing now is accelerated change, rapid disruption and a fear of the unknown. A wide range of resellers have voiced concerns with me about cloud solutions, all valid; but overcomeable if you face up to them and start working with customers, suppliers and vendors. Concerns have included, but are not limited to;
When you dig deeper though and consider the needs of the customer and the cloud vendors you can see exactly why there remains opportunity for the middle-man channel supply chain.
End customers remain in need of independent advice; a trusted advisor who can deliver more than just a switch it on cloud service. A recent Dell Survey reported that 69% of small to medium businesses bought cloud applications from a single trusted vendor. Meaning they will be looking to procure and have a single point of contact for their solutions, not a multitude of internet based new relationships to broker. This presents an opportunity to grow a customer base and create stickiness with customers as well as a strong renewing annuity base.
In surveys and at events where I have presented, both large and small, I have found the average customer lacks a true understanding of cloud, the nuances, how to get past the technical terminologies, how to compare cloud vendors, how to weigh up on network vs cloud in different scenarios and how to ensure they remain secure and choose the right solution for their business. Cloud flattens the landscape of choice and affordability; smaller businesses can now afford much of the big name brands with ease, and no big architecture deployments are needed to get live. All customers have a wealth of new innovative solutions to choose from that may offer better outcomes for their business, at more affordable costs.
We ourselves at Workbooks provide a good example of this. We are working with resellers who can resell our Software-as-a-Service (SaaS) licenses as well as their own consultancy and configuration skills to deliver customers a better solution at a more affordable price than big brand name CRM solutions. Having the opportunity to go to a customer with a solution which is often 50-70% cheaper, and still make good overall margins on the initial sale as well as strong renewal rates for years to come, is an attractive proposition for a reseller. This is especially true in a market where CRM holds the highest amount of cloud application use with an estimated 45-50%+ penetration in the market.
Channels also have the opportunity to assist with cloud sprawl; customers who are adopting multiple cloud solutions and needing help with compatibility and connection issues that arise from this. Moving forward, businesses will demand more integration between both multiple cloud platforms and on-network solutions. We are already seeing this requirement growing; providing an ideal opportunity for the third party solution provider to assist the customer in knitting together their required solutions.
Resellers have the opportunity to add value, consult, be a trusted advisor, wrap around services and certainly deliver integration and security to the customer’s mix of on network and cloud based solutions.
Tune in next Monday for part 2 of this series which explains the challenges of being a reseller.
Ian Moyse is Sales Director at Workbooks.com, Eurocloud UK Board Member & Cloud Industry Forum Governance Board Member. You can connect with Ian on LinkedIn.