Report: Solution Providers Need to Invest in Advanced Cloud Services

Yes, the channel has embraced the cloud, but now it’s time to move beyond entry-level offerings and focus on strategic initiatives.

By Damon Poeter

Only 4 percent of solution providers offer no cloud computing products or services.

It’s a remarkable number, because it means 96 percent of the channel offers some form of cloud computing. But that doesn’t mean cloud computing has reached critical mass in the channel.

According to State of the U.S. Cloud Channel study, a new research report conducted by The 2112 Group in collaboration with Ingram Micro Cloud and Microsoft, the average solution provider earns 11 to 15 percent of its gross revenue from cloud products and services – less than what’s earned through either hardware or software sales. And most cloud revenue comes from what many would consider entry-level cloud services.

The three most common cloud offerings in the U.S. channel are productivity applications (such as Microsoft Office 365), backup and disaster recovery, and endpoint security (mostly hosted antivirus applications).

Opportunity in the cloud is no different than it is with any other business venture. Success lies in the balance between supply and demand. The more solution providers are selling a cloud service, the less market value – or, in the case of the channel, return on cloud investment – it has.

Where the channel does have plenty of opportunity in cloud computing is with more advanced and specialized services. These include file synchronization, hosted virtual desktops (VDI), hosted/managed mobile device management (MDM), collaboration tools and systems, enterprise software such as hosted ERP, advanced security applications such as security information and event management (SIEM), platforms as a service (PaaS), and business administration systems such as human resource software.

Those are areas of promising recurring revenue, where solution providers can and should invest if they hope to keep pace with – or outperform – an IT market that’s on track to see more than 40 percent of solution provider revenue tied to cloud products and services by 2022. In other words, in just five years’ time, and probably sooner than that, the bulk of solution providers will get their largest single chunk of revenue from their cloud portfolios.

But getting there ahead of the competition will require considerably more investment and planning. Currently, only 43 percent of solution providers have a strategic plan for developing their cloud practices, and only 30 percent have a sales plan or goal for increasing cloud revenue. What’s more, only 27 percent of solution providers have business plans that define the functions, roles, and responsibilities of personnel working in their cloud operations.

To achieve greater success in the cloud, solution providers will need to begin executing more consistently in strategic areas like business planning, sales planning, marketing, and account relationship management. They’ll also need to do a better job of leveraging available resources. The cloud isn’t going away anytime soon; what might be vanishing are solution providers that fail to seize the right cloud opportunities.

Find out where your company stands in the cloud computing channel with the 2112 Group Cloud Altimeter, a free tool provided by 2112, Ingram Micro Cloud, and Microsoft. The Cloud Altimeter provides you with detailed data on your company’s cloud readiness when compared to similar solution providers in your region and across the United States. Try the Cloud Altimeter today:

Damon Poeter is a Senior Analyst at The 2112 Group. Follow him on social media channels: Twitter | LinkedIn.