The Cloud Channel Opportunity

2 min read
Cloud computing threatens to have a big impact on the channel, with disruption to existing vendor relationships, uncertainty over customer ownership and the emergence of new cloud specialist companies. Canalys conducted an online survey of the IT channel with its Candefero community in July, to gauge its opinion of the cloud computing opportunity. The main findings of the survey, answered by 55 channel partners across EMEA, were:

56% of respondents indicated that there is currently some opportunity, but that it remains very small.

42% see the main driver of adoption as customer operational and capital cost savings.

49% believe micro businesses and SMBs will drive deployment.

Security restrictions, data control and a lack of understanding are seen as the top three issues preventing customers from moving to cloud-based services.

43% expect service providers to benefit most from adoption.

Adoption of cloud-based services is still in its infancy, with many channel partners not yet benefiting from initial customer interest. Many vendors and large channel partners are pushing cloud computing as the next major driver of IT investment. But in reality, uptake has yet to reach the level of hype and marketing noise. Some partners that invested early are seeing traction, but many have yet to make a move. Nevertheless, the channel widely believes the key benefit of adopting cloud services for customers to be cost savings, in terms of upfront capital expenditure on hardware and software. The tough economic climate impacted IT budgets, especially for SMBs. The channel expects this customer segment to be the key driver for cloud deployment. SMBs lack the financial and staff resources to buy and manage the technology needed to help grow and run their businesses efficiently. The ability to scale on demand also plays a key role, since software licences and dedicated hardware are no longer needed. This, combined with the pay-as-you-go model, work to make ongoing cost management easier, which is an attractive proposition. It also allows business functions to be moved segment by segment without large disruptions to operations.

The main barrier to adoption of cloud-based services identified in the survey was that customers are still reluctant to make the move as data stored in the cloud has no guarantee of being secure. Though some responsibility falls on vendors, most lies with the businesses themselves. Fears over breaching data protection laws are also high as businesses have no guarantee of where data sits, who has access to it and where it goes once contracts end. Other factors holding back adoption include the fear of being locked into long-term contracts and latency issues due to bandwidth. Resistance from customer IT departments is also seen as a major barrier and will continue if they see a move to the cloud as losing control over their IT infrastructure rather than freeing up resources for other activities and projects. Though general understanding of cloud computing has come a long way over the past few years, customers are still not fully informed on the benefits and challenges, how public and private cloud infrastructures work, and what transition processes are best suited to their businesses. Vendors and channel partners must ensure these are fully explained, with plenty of case studies across every vertical industry and size of business, to address these issues.

The key challenge for many channel partners is to find their role in cloud-based services. Specialist, SMB and corporate resellers make up the traditional channel for IT procurement by many businesses, but most see service providers and systems integrators as the ones that will benefit most from cloud adoption. Service providers already have billing relationships with many SMBs and large enterprises through telephony and broadband subscriptions. Upgrading them to IT services is seen as a logical step, but in reality many service providers have struggled to scale skills and support for large volumes of customers. Systems integrators are already well positioned between customers and their infrastructure. They also have the data centre investment and necessary understanding of a wide range of services to integrate hybrid CPE and cloud infrastructures for large enterprises. But most of the rest of the channel has yet to decide on cloud computing strategies. The three broad options available include investing in data centre facilities and service propositions, using co-location data centres as a basis for services, or becoming resellers (or agents) for third-party cloud services. Developing professional services around all three will also be important.