Channeling the Cloud

Microsoft Partners Need a Strategic Plan for Moving to the Cloud

A report released in September based on a survey by CompTIA pointed out that transitioning to the cloud is not proving to be a cakewalk for all channel partners.

• By Jeffrey Schwartz
• November 16, 2011

Channel partners are often urged to start thinking about how they're going to move their businesses to the cloud, whether it's offering hosting, infrastructure services, application integration or Software as a Service (SaaS).

There's a myriad of predictions of seismic cloud computing growth such as the IDC forecast that the use of public cloud services will account for 46 percent of net new expansion in IT spending by 2015.

As for the channel, a recent survey of partners by CompTIA found that 48 percent plan to increase their cloud investments by 10 percent to 15 percent over the next year.

The prognosis for selling cloud services over the next year looks robust as well. Some 61 percent of those surveyed said they expect cloud revenues to increase, while 24 percent are forecasting they will significantly increase. The remaining 15 percent are predicting revenues will remain the same. It's worth noting that 46 percent of those surveyed already offer hosting services.

That said, a report released in September based on the survey by CompTIA pointed out that transitioning to the cloud is not proving to be a cakewalk for all channel partners. About one in three channel partners said they had either an incomplete or no roadmap for transitioning to a cloud-based business. Smaller VARs in particular, those with less than $10 million in annual revenues, admitted to winging it rather than having a strategic plan in place. According to the report, the most significant transition challenges were business-focused issues such as:

• Determining the right revenue model
• The amount of time and cost needed to invest in cloud-based training of sales and technical staff
• Choosing the right vendor partners
• Cash flow and financial considerations
• Deciding how much to invest in initial costs

There's no dominant model of cloud business among those in the channel, but rather a wide variation of services offered. Among them are cloud hosting, offering managed hosting environments, reselling SaaS offerings, reselling Infrastructure as a Service (IaaS) offerings, developing and selling cloud apps as an ISV, selling development platform capacity and selling white label solutions.

The most prevalent model offered by the channel to date is cloud hosting, according to CompTIA. On a cautionary note, the report warns that partners should be wary of the potential for hosters of datacenters to go direct to customers.

The sweet spot for the channel, according to 60 percent of the survey's respondents, are integration and deployment services and managed IT services. Nearly 80 percent of VARs surveyed said they offer cloud management and monitoring services with 11 percent saying they plan to offer them within the next 12 months.

Among the biggest challenges associated with moving to the cloud was sales compensation, the study concluded. Two-thirds of VARs and distributors said moving from lump sum commissions to compensation based on recurring revenue has had the most impact on sales organizations. To ease the transition, 60 percent of those surveyed said they opted for sales and business training as well as cloud training.