Cloud computing is transforming how business is done across the UK. Moving services and processes to the cloud offers businesses benefits in areas including flexibility, efficiency, scalability, security, increased collaboration and reduced costs.
In many ways, this technology is not new. But the door to the cloud is wide open for businesses and organisations of all sizes.
Andy Nicolson, senior product manager, TelXL, explained, “The cloud services market has been around in some form since the dawn of computing. If you are of a certain age and started working in the early nineties, then you are likely to have used a terminal that linked to a mainframe. [This] defined cloud computing before the term cloud was coined.
“Now data and services are migrating swiftly to the cloud for overwhelming reasons, including cost, scalability, and ease of maintenance.”
So, where are UK businesses on their cloud adoption journeys? Nicolson explained, “UK companies currently vary wildly on where they are in their cloud adoption journey. The pandemic sped up transitions, but it was a trend that was already well underway. Most UK companies are not going to invest in on-site hardware as they now just don’t need to.
“If resellers haven’t already adopted this change then, to survive going forward, they will need to, as this transformation will increasingly dominate and guide the market.”
Nick Bannister, vice president sales for Arrow’s enterprise computing solutions business in the UK and Ireland, agreed the pandemic played a significant role.
He said, “Cloud adoption among UK businesses has come a long way over the last few years. The pandemic was a catalyst for many to move to the cloud or to accelerate their journeys. There are still a number of practical challenges that remain that are impeding progress, these include the skills gaps and often a lack of detailed cloud strategy.”
Bannister said distributors such as Arrow can help to bridge that gap. He explained, “MSPs and resellers can lean on us to provide this expertise, support, and training. We established our Arrow Authorised Partner Programme last year, to help address these gaps and to add value, allowing our channel partners to capitalise on the large breadth of vendor solutions we offer, and the service capabilities available through our highly expert teams.”
He added the ongoing full fibre rollout will help move the needle further. He explained, “With the drive to rollout full fibre across the UK, access to gigabit capable connectivity is becoming more readily available, a key enabler of digital transformation. These networks are helping channel partners to sell more cloud services which rely on a reliable, high-speed connection, allowing end-users to harness their full potential.”
How, not if
For Andy Dunn, CRO at CSI, the choice for many organisations across the UK isn’t down to cloud or no cloud, but the specifics on how the cloud is adopted. He said, “The market is unsure at the moment whether they should take a cloud first or a cloud only strategy – based on based on emerging experiences, spiralling costs, lack of control, security considerations and the economic pressures to manage costs.
“When you are on a consumable variable that’s not a comfortable place to be. We’re seeing customers breaking technology suites in live contracts to come out to an alternative model where they are fully in control of the cost and there is no variable.”
It is also worth considering how cloud adoption can vary according to business size. Paul Harrison, managing director, EMEA, Evolve IP, said, “I think it depends on the size of the business which dictates how far down the cloud journey they are. The cloud is being used to some degree by many businesses.
“If you take SMEs, there’s about 1.5m in the UK and these have enthusiastically embraced cloud technology. When you are a small business you either grow or slow. It’s impossible to stand still and the cloud can help them move forward.
“Another reason is the flexible finance where investment is based on the monthly subscription models we are all familiar with today, from Netflix to music. The cloud gives them easy scalability and a projection of scale where they can answer and reply to calls pretty much from anywhere.
“That way, they look like they are well staffed, from a standard office number which might actually be different to reality.”
Harrison pointed out how the needs of larger businesses can differ. He explained, “The mid-market and large enterprise is a little different than SMEs because their list of requirements is longer. They often need international services and just want it all from one provider – one throat to choke to deliver the whole solution.
“There’s a lot of money being spent by IT departments from companies looking at where they go next to develop their collaborative solutions.
“We see this market coming to us because we have always been here in this space, from small players to big corporations. We offer one point of contact too.”
The market could be further disrupted by ongoing challenges for all UK businesses. Matt Jones, director, Contact Systems, said, “More and more businesses are realising the full potential of the cloud, especially as they look to prepare for future challenges.
“The current economic uncertainty has also pushed more IT directors to adopt cloud services to future-proof businesses and ensure agility, as the world becomes more digitised and reliant on all operational aspects being connected and online 24/7.”
The channel ecosystem
When asked how the cloud market is changing within the channel ecosystem, Harrison, from Evolve IP, said, “From a supplier’s point of view the market is getting interesting as they want to make a good return on their investment. You can’t just give away stuff anymore. It’s not a race to the bottom. It’s about value and providing what businesses want.
“Higher up the chain there’s still a bit of evangelism and education required. Every business has a business process but that doesn’t mean it’s the right process. It’s just how they work today.
“The key is to understand how each company works and how the cloud can help them evolve to become more efficient and profitable. There can be a lot of touch points.
“A sale is not just about ‘how many do you want?’; it’s about what do you want it to do, how do you want it to operate and then how many do you want! We need to open their eyes to what can be achieved. Technology that has relevance with valuable features will win the day.”
For Iain Sinnott, head of international carrier sales, Enreach for Service Providers, there are now four types of reseller.
He said, “You can split the reseller marketplace into four: telco-first, IT-first, mobile-first, and converged players. And your appeal to vendors and larger service providers and long-term relevance will depend on which category you fit. For instance, a telco that has gone into convergence and mobile is a desirable play.
“IT-first is newer and also desirable. And a mobile-first player has a powerful position and interesting ARPU for the convergence space.
“On the other hand, staying just telco-first means being less of a necessary customer advisor in a cloud-centric future, so those players need to act now, and move into converged services if they want to remain competitive in the industry or even to be a more attractive acquisition proposition if they intend to exit.”
Bannister, from Arrow, added, “Channel businesses have evolved and those that thrive are those that have become consultants and advisors. The growing demands of the cloud market requires this specialist support.
“Their customers are looking to them for authority and expertise, and often the skills that they don’t have in-house to make the most of investments made. It presents a great opportunity to deepen and strengthen how MSPs and resellers work with their customers.”
Bannister also discussed the significance of marketplaces. He said, “Cloud marketplaces are taking a more prominent role in the channel ecosystem. Straightforward access to cloud solutions, automated billing, and provisioning removes the complexity of delivering these services.”
James Moore, vice president, EMEA, DoiT, shared his perspective as an MSP that provides intelligent technology to simplify and automate public cloud use, alongside expert consultancy and technical support.
Moore explained, “The two main hyperscalers DoiT works with lean on the channel ecosystem in different ways. I’ve worked with Google Cloud for around ten years, and it typically works with channel partners to scale. On the other hand, we see AWS beginning to change how it works with MSPs and deploying a way to amplify and leverage channel partnerships.
“Ultimately, the channel ecosystem benefits everyone – MSPs, the hyperscalers and customers. We can serve customers with greater care and attention than the hyperscalers could directly, so everybody wins.”
Dunn, from CSI, also explained the considerations CSI bears in mind as an IT managed services provider. Dunn explained, “Where deals are being done there is a very apparent level of hyper anxiety around the detail in the agreement. You’re almost negotiating simple core system MSP offerings like you’re negotiating a global outsource.
“Customers want everything documented, they want far more detail on the security offering, the responsibilities and liabilities which we’ve not seen before. And if they are selecting products that deliver a service, they want to rip the products apart and make sure they are fit for purpose.
“If we are specifying a certain level in our contract, then the customer wants to see that in our supplier contracts. There is a heightening awareness of how the contract is constructed so the channel is going to have to deliver more enhanced levels of diligence. It means more effort for MSPs which puts cost pressures on them.”
This, Dunn said, calls for continual effort to sell. He said, “Customers expect greater optimisation and faster, and you know that your revenue with that customer will decrease as you optimise. So, the pressure is on to sell more to replace the drop off. If you’re not constantly selling, your revenue is naturally going to decrease.”
When asked if any particular cloud vendors stand out as good companies to partner with, DoiT’s Moore said, “We work with both AWS and Google Cloud, which are both good cloud vendors to partner with in different ways. AWS has the market share advantage, meaning its customers are typically more established and that it takes a programmatic approach to engaging with its channel partners.
“Google’s maturity is building and it leans on its suite of products including Google Looker, ads, maps and more. Its clients are often looking for support with adopting machine learning and big data initiatives. There is tremendous value in MSPs partnering with both to provide their customers with the support that best suits their unique needs.”
For Harrison, from Evolve IP, vendors that can offer security assurances should be prioritised. He said, “As more calls go on a network, security is becoming more important. Where is it being stored, who is listening and how are payment details maintained? These are all important factors. For us, Webex and Cisco lead the way.”
In early April, Ofcom announced it is proposing to refer its probe into UK cloud services to the Competition and Markets Authority for further investigation.
Ofcom said that competitive market forces are delivering benefits to customers in the form of innovative products and discounts. However, other features of the market have given the regulator “cause for concern”, such as egress fees, technical restrictions on interoperability, and committed spend discounts.
An Ofcom spokesperson explained, “These market features can make it difficult for some existing customers to bargain for a good deal with their provider. There are indications this is already causing harm, with evidence of cloud customers facing significant price increases when they come to renew their contracts.
“We have proposed to refer the cloud infrastructure market to the CMA to carry out a market investigation. This would allow the CMA to further examine the nature and extent of barriers and consider if there are interventions that could improve how the market works for customers and ultimately UK consumers.”
There was a muted reaction from our experts when asked whether this update was significant. Harrison, from Evolve IP, said, “Pricing has been a hot topic over recent years but I think one of the most interesting challenges is the role of regulatory bodies in different countries.
“When you have the ambiguity of IP there can be more hurdles put in the way when operating internationally. Countries may want to protect their own interests.”
For Dunn, from CSI, there are simply more pressing priorities. He said, “If Ofcom want to make a point they will – and the channel will have to respond as appropriate. But right now, the channel has many other challenges to be getting on with.”
On the horizon
As we look to the future, white-labelling could come into focus. TelXL’s Nicolson said, “One area that might change is larger MSPs and resellers looking to white-label and sell under their own brand.
“Traditionally, vendors like to sell under their own brand. But if sales, support, and billing is being carried out by the MSP or reseller, they might look to build up their own brand and extend choice with a multi-vendor approach to meet all the needs of their clients.”
There is also expectation that cloud spend could come under the microscope as businesses look to control costs amidst broader adoption.
Moore, from DoiT, said, “Like the wider technology sector, the cloud channel ecosystem is battling with cost pressures as customers face funding, budget and investment constraints, as well as the tightening of technical resources. This has been a disruptive trend for a while now, and isn’t likely to change in the short term.
“The result is that customers are reviewing which cloud vendors and service providers they want to partner with going forward and evaluating all aspects of their cloud spend, including how long they’re willing to commit for. Three-year partnerships used to be common, but this is beginning to change.”