IT and Business Insights for SMB Solution Providers

Cloud’s Channel Impact Questionable

Cloud computing is the much overhyped term reflecting businesses migrating their consumption of applications and IT infrastructure to services remotely delivered over the Internet. There’s no question that “the cloud” is transforming the way businesses use and pay for IT, as well as how vendors develop and sell technology. But where does the channel fit into that equation?

A new survey by IBM and MicroScope of solution providers in the British Isles asks that very question: What impact will the cloud have on reseller businesses over the next five years? Surprisingly, nearly one-third (28 percent) say little to no impact at all. A near equal number say the cloud will have a significant impact. And 16 percent don’t know.

One interpretation of these survey results is the cloud era is just beginning and it will take time for the entire industry to feel its impact. Another interpretation is vendors are overlooking their traditional go-to-market resellers in the race to the clouds.

Where do British and Irish resellers expect to make their money between now and 2016? Professional services. Solution providers across the pond are shifting their portfolio to include more professional services. Topping the lists are maintenance and implementation services (64 percent), followed by consulting services (59 percent).

Most solution providers (52 percent) expect their businesses to grow over the next five years; the majority projected between 10 and 30 percent growth during this period. The biggest growth opportunities, according to the survey, are in sustainable IT (18 percent), virtualization implementation (14 percent), professional services (14 percent), business intelligence software (11 percent) and, last in the top five, cloud computing (9 percent).

The IBM/MicroScope survey calls the foggy results on cloud computing in the channel a good reflection of how solution providers are maintaining a diverse portfolio to ensure their viability. “The reseller community is clearly delivering complete solutions and acting as a trusted advisor to customers. This is demonstrated by the high percentage of service revenues and an increase in the breadth of product portfolios,” said Jacqui Davey, IBM’s vice president of the business partner organization and midmarket UK and Ireland.

The IBM report is more bullish on the impact of sustainable IT on the reseller channel. The report says, “Resellers know something that most industry observers have failed to pick up,” regarding solution providers selling products and professional services for energy- and cost-efficient IT systems.

The report is less concerned about the lackluster representation of cloud computing in the survey results. As Davey states, “Cloud is an area all the analysts are highlighting as a very strong growth area, but even over the next five years, it is going to be less than 10 percent of IT spend, even though there will be phenomenal growth from this small base.”

Not everyone is in agreement with the IBM/MicroScope assessment. Many observers are questioning the role the channel will play in the cloud computing era. The cloud is making the sale and delivery of hosted services easier as a “self-service” offering, which means less of a need for solution providers sitting in the middle of the transaction.

Forrester Research analyst Tim Harmon recently mused in his blog about vendors passing by the resellers in their zeal to reach the clouds. He goes on to say some vendors are simply saying to partners to do more consulting and leave the cloud delivery to them.

According to a report by Forrester and Outsource Channel Executives, many solution providers are unclear about what they should be doing in the cloud and are waiting on their vendors to provide guidance and assistance in transforming their businesses.

Harmon’s observations and the questions about where the channel fits in the cloud are not new. In fact, the advent of managed services nearly 10 years ago raised many of the same questions until tools enabled midsized and small resellers to enter the market. While some say cloud computing will remain a fraction of the total IT spend over the next 10 years, the rule of large numbers applies – a fraction of a very large number (between $2.5 trillion and $2.8 trillion) is still a very large number. The question then becomes not where solution providers should play a role, but rather how they should play and what is the true opportunity.

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