The Untold Story: Solution Provider’s Cloud Computing Concerns

July 6, 2010 at 4:14 pm Leave a comment

Beth Vanni – Director, Market Intelligence

Half of the top channel enablement priorities for vendors in 2010 relate to improving their solution providers’ services capabilities. However, in our recent study conducted with Integrated mar.com entitled “Engaging the Services Partner” solution providers expressed concerns about the real services opportunity and margins represented by the cloud. In fact, many solution providers are still thinking about resale only of cloud offerings.

Infrastructure providers like Rackspace and enterprise software vendors like VMware, Oracle and Microsoft are aggressively pushing solution providers to dip their toe in cloud services by simply reselling their offerings or those of their larger service providers.

However, most solution providers are smart enough to see that there’s not a sustainable business model to be had in acting as only a sales agent for someone else’s managed or cloud service. And, the #1 cloud computing concern for 2010 expressed by our solution provider respondents is around inadequate margins for reselling cloud services or applications.

The biggest cloud services opportunity we see available in 2010 is integration of public and private cloud implementations and application integration and customization work. And, this isn’t the unique domain of the pure-play SaaS integrators like Appirio or Bluewolf. Smaller Microsoft partners are already seeing nice returns from early deployment and integration of Microsoft’s BPOS, hosted Exchange and Dynamics CRM offerings. Success here, however, does require a pretty application-centric business model and the willingness to give us some short term license sales or renewals for long-term service sales.

Despite the market buzz around IT outsourcing including cloud services and SaaS applications, cloud-based services are in the lowest existing revenue category for the majority of partners for the last 12 months. However, solution providers ranked cloud computing as their fourth highest growth (31%+) service for 2010. Only 20% indicated they were not going to invest in cloud services at all in 2010.

This high growth expectation is a surprising statistic to us for 2010, given that the #2 concern solution providers have for cloud computing is inadequate customer demand in the short term. And, right behind this is a concern that there won’t be enough services revenue in cloud services in 2010 to warrant building a new practice area. We think this is a short-term view of the market and may be a function of the size or maturity of customers serviced by our respondents. If the question were asked about customer demand or service opportunity predictions for the next 5 years, we think we would have gotten a more optimistic response.

Creating effective vendor field relationships and teaming is ranked as the biggest overall services challenge for solution providers in general. So, it didn’t surprise us that 40% of solution providers expressed concerns about encountering channel conflict with their leading vendors in delivering cloud services – namely, deciding who owns the customer and who does what in the customer management and maintenance life cycle. We still hear a lot of complaints from solution providers about field engagement issues and lack of predictability with their vendors’ professional services teams. Further 57% of vendors themselves said that only some or very few of their partners would say they had a positive experience engaging with their field teams in the past. It’s clear to us that vendors without clear partner engagement and customer segmentation models combined with an aggressive direct services effort will increasingly be challenged with partner loyalty and investment as cloud services take hold in the market.

As with any new technology innovation, there are early adopters and fast followers. But, the majority of solution providers are taking a wait and see attitude about investing heavily in 2010 in cloud services offerings. And, despite how disruptive and innovative cloud computing delivery models are, solution providers’ concerns about investing are the same concerns they’ve always had. We call them the “3 P’s” – profitability of the service, predictability of their vendors and customer pull (demand). Some things never change …..

For a copy of the Executive Brief of this research study entitled “Engaging the Services Partner,” visit the Amazon Consulting Resource Center.


Bookmark and Share

Advertisements

Entry filed under: Industry Perspective. Tags: , , , , , .

OPN Specialized: The First Step to a Value-Based Channel Program? Engagement Models Pose Biggest Challenge in the Services Market

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 27 other followers

Recent Posts

Share This Blog

Share

Categories

July 2010
M T W T F S S
« Jun   Aug »
 1234
567891011
12131415161718
19202122232425
262728293031  

%d bloggers like this: