Partner vs Build: The Enterprise Cloud Services Dilemma
Cloud computing is more than just a services model. It’s changing expectations of what IT can do for midmarket and enterprise businesses. Already IT buyers are rapidly moving their cloud utilization from experimentation and rudimentary technologies, to mission-critical applications and workloads. Within the next few years, enterprises are expected to seek even more complex cloud-based automation and business productivity from their cloud providers.
Historically, systems integrators have done well for themselves in designing IT systems and infrastructures, selling and installing the underlying products, and providing ongoing professional support. The legacy IT infrastructure powering the global economy was built by systems integrators one server, one SANs appliance and one switch at a time.
New Inflection Point
Now, as the next wave of cloud computing and ITO come washing over the IT shoreline, systems integrators are faced with how they will evolve to match these new demands, dynamics and expectations.
For some, the choice is nothing more than what they’ve always done; the sale and support of infrastructure components. Others are entering the cloud services arena through a traditional approach, investing heavily in developing the infrastructure, applications and expertise capacity to deliver common and complex cloud and IT services. Still, others are choosing to forego infrastructure development and partner with infrastructure and application specialists that have the expertise and capacity to deliver IT services.
The economics of cloud computing are deceptive in both their simplicity and complexity:
- Simplicity: Companies offering cloud services will create recurring and sustained revenue streams. The model is ultimately more profitable, as the revenues will keep coming and the infrastructure scales to more users with lower costs.
- Complexity: The cost of building and maintaining cloud and service capacity is often prohibitive. Embarking on the cloud journey requires systems integrators build infrastructure and expertise in the technologies they deliver today and an array of technologies that will come. And the demand by some customers for exotic, low volume services eats into profitability.
On average, it takes nine to 12 months for a cloud computing account to become profitable because it needs to not just recoup the cost of cloud infrastructure development, but also cover the general operating costs.
Faster, More Cost-effective Time to Market
Specialist companies such as NetEnrich are giving system integrators options for quickly entering and scaling their enterprise cloud computing business by supplying the infrastructure and support expertise with lower startup costs and faster return on investment. In cloud partnerships, the model works in the favor of the system integrator, which often pays only for the service it consumes. This means development cost remain in check.
Even better, systems integrators choosing the partnership model are able to focus on signing services accounts rather than developing infrastructure. The services model is predicated on the constant addition of new accounts, and the retention and expansion of existing accounts. Without the worry of having to continually support their own infrastructures, systems integrators are free to focus all their energy on developing their sales, book of accounts and revenues.
Can systems integrators do well developing their own cloud and services capacity? Can systems integrators continue to make a good living selling hardware and software, regardless of the cloud trend? The answer to both is yes – but each of these models comes with an increasing cost and waning ROI. For system integrators in the enterprise market, partnership in cloud services with an experienced and able cloud services partner is expediting their services evolution and success.
Justin Crotty serves is senior vice president and general manager for NetEnrich Inc. He’s responsible for driving growth and scale for NetEnrich and its partners and customers. Prior to joining NetEnrich, Crotty conceived and launched the services division at Ingram Micro, where his team built and grew the first and most innovative managed and cloud services business in IT distribution. Widely recognized as an IT channel champion, Crotty has held management positions in IT sales and marketing, and began his career as an IT network engineer with IBM. Monthly guest blogs such as this one are part of Talkin’ Cloud’s annual platinum sponsorship. Read all of Crotty’s guest blogs here.