The Rise of the Public Cloud and the Future of the Channel
Amazon Web Services (AWS) generated $7.88 billion in revenue last year and is on track to hit $10 billion in 2016. Though far smaller than AWS, public cloud services such as Microsoft Azure, Google Cloud and IBM Cloud are on a fast growth curve.
Those who play in the IT channel should take note: Every time AWS wins a customer, that’s another set of servers, firewalls, network connections, software and service that someone in the traditional IT channel is unable to sell. AWS’ $10 billion in anticipated revenue means that thousands of on-premises servers and associated equipment aren’t being sold through the channel this year.
Many VARs and integrators have responded by offering private cloud solutions. This enables them to “play in the cloud” while continuing to sell hardware, software, equipment and services to customers, whether on the customer’s premises or in a co-located data center. However, this is only a half measure.
Make no mistake, cloud is dominating the IT conversation. Customers looking for a new solution often start off thinking they want to migrate 50 to 75 percent of their IT environment to the cloud. Of course, most of these companies will end up only moving 10 to 20 percent of their applications to the public cloud. A private cloud solution is exactly what these companies need, but if the VARs aren’t part of public cloud discussions at the beginning of the search, they’ll never get access to the private cloud opportunities that result.
In addition, traditional channel players sell to the IT department, while born-in-the-cloud providers are selling to the lines of business. The channel partner doesn’t even know what’s missing. The lines of business are buying services from AWS, and the traditional IT providers aren’t getting an RFP to refresh or install new hardware. If they’re not at the table with the decision maker, they don’t control their own destiny.
A way to address this challenge is by partnering with cloud service providers which can support solutions deployed to the public cloud, a private cloud or on-premises with equal facility. By working with a cloud service provider, channel partners can get a seat at the table, even if the customer isn’t looking to buy hardware. If the customer is looking for a pure services-based, cloud-based solution, the VAR will earn a referral fee or an opportunity to resell white-labeled cloud services. However, most companies discover that moving everything to the public cloud isn’t realistic, resulting in hardware and software purchases that channel partners can fulfill.
There’s talk about hybrid cloud, but large enterprise clients using a bimodal IT infrastructure have legacy systems that can’t move to the cloud as well as applications and workloads that must move to the cloud. VARs must be able to support customers’ hybrid solutions and bimodal requirements.
VARs are clearly struggling with this transition to cloud, partly because customers want both cloud and dedicated IT systems. In order to stay relevant, VARs must look beyond on-premises dedicated solutions and expand their offerings to include public cloud. This means they have to learn how to vet cloud service provider vendors, quickly onboard them, and then resell cloud solutions. Overall, the VAR community isn’t moving their businesses wholesale into cloud services because while public cloud continues gain traction within their customer base, there are still opportunities for VARs to sell their current hardware and software portfolios. However, it’s important to understand who is doing the buying and where the decision making and purchasing power is now residing.
So much of the channel fears losing control with the public cloud, but there are steps these companies can take to combat the concerns. They must be able to provide private cloud solutions, but also partner with hybrid service providers that can keep them in the deal by pivoting as customer requirements change. The move from on-premises to private to public cloud isn’t something partners can do alone. It’s a hybrid, bimodal approach, and they need the right cloud service providers as partners to do so.