IT and Business Insights for SMB Solution Providers

Cloud Computing and the Channel: Changing Perceptions and Attitudes

Cloud computing has permanently changed the IT services market, and partners need to understand where they fit and how vendor/distributor partnerships can benefit them. By Elaine J. Hom

Many channel partners take their time when deciding whether or not to offer a new technology to clients. While certain technologies may be hot topics of discussion within the IT industry, they must have proven value—and show ROI—before partners endorse them.

“When we look at [technology] initially, we’re fearful,” says Pat Taylor, executive director of NASBA, the association of channel resellers, and a former system builder. “That’s our nature.”

Cloud computing is no exception. Many channel partners have already begun selling cloud services, but it has taken a few years for the majority of them to warm up to the technology. A recent cloud computing trends study by industry association CompTIA, for example, indicates that not only will the cloud computing market sustain aggressive growth over the next few years, but the perception of cloud computing among channel pros has improved too, with 72 percent of respondents feeling more positive about the cloud than they did a year ago.

UNCERTAINTY FADES, YET MSPs LAG
According to the study, 40 percent of channel companies are both selling and using cloud offerings, compared with 15 percent last year.

“While the channel hasn’t figured out [the cloud] per se, [partners are] in a lot more confident position this year than they were a year ago when we conducted this survey,” says Carolyn April, director of industry analysis at CompTIA, in Downers Grove, Ill. “There still remains a lot of uncertainty as to what everybody’s role is going to be. Cloud isn’t just one thing—there are many entry points and ways to pursue it to become a cloud provider.”

Surprisingly, managed service providers harbor much of that uncertainty. With only one-third selling and using cloud services, according to the study, MSPs are not diving as aggressively into the technology as are some other channel partner types, despite the common perception that MSPs are in the best position to transition to the cloud because they already provide remote delivery and management of IT services in a recurring revenue model. “We may have overestimated what a simple step it might be for some of these smaller MSPs that do basic remote monitoring and management to make the transition,” says April. “They may be going through the same transition struggles [as] a traditional reseller.”

April surmises that conventional MSPs provide the same break-fix, remote monitoring, and other IT infrastructure needs previously delivered on-site, only now they offer these services off-site. In the new cloud market, services and solutions are moving farther up the IT stack, with a bigger emphasis on applications in the cloud and integration work with other cloud systems. Managing software remotely and handling change management is a new skill set for many MSPs, so they have as much catching up to do as traditional VARs.

For systems integrators, the move to the cloud has become a natural fit. These channel players have the highest incidence of selling and using the cloud, at 57 percent. This is because end-user cloud adoption and investment spur demand for integration work. “Systems integrators already derive a lot of their margins from the integration work they do in the traditional technology,” says April. “The cloud is only going to accelerate that.”

REEVALUATING PARTNERSHIPS

According to April, channel partners are going to begin reevaluating who they work with based on a vendor’s cloud and support programs, and advises vendors and distributors to get their cloud portfolios straight. With the changing compensation models, partners are going to go where the money is and who makes it easiest to get it.

“You’re going to see more partnering with the pure cloud providers,” April says. “This doesn’t necessarily mean they’ll drop their old vendors, but there will be a lot of evaluation going on. This makes it incumbent upon vendors to get their data straight.”

Avnet Inc., a Phoenix-based IT distributor that provides cloud training and enablement to its partners, chooses its cloud partnerships carefully. “We’ve been deliberate in determining what strategic-alliance partnerships are going to be most important for our partners,” says Tim FitzGerald, vice president of data center technology solutions at Avnet. “Because the channel ecosystem for cloud solutions is so fractured, we’re being disciplined in terms of the types of offerings that our partners are representing to customers. We want to ensure that they’re delivering sustainable value to their customers and diminish the risk of disintermediation down the road.”

Lauren Robinette, principal analyst at ACG Research, concurs with Avnet’s strategy. “MSPs are struggling with leadership and understanding how to deliver a successful, profitable cloud managed service offering,” she says. “A majority have found they require leadership from key vendors or partners to help them monetize the cloud and wring out profits.”


For more information on the cloud, check out the following resources:

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