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Sep 07

2017

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Report: Solution Providers Need to Invest in Advanced Cloud Services

This post was originally published on The 2112 Group blog on August 15, 2017, by Damon Poeter.

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

It’s a remarkable number, because it means 96% 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 US 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% 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 US 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% 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% of solution providers have a strategic plan for developing their cloud practices, and only 30% have a sales plan or goal for increasing cloud revenue. What’s more, only 27% 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. For more information or to try the Cloud Altimeter tool today, visit http://www.ingrammicrocloud.com/microsoft/.

Guest Author

DAMON POETER
Senior Analyst, The 2112 Group

Damon Poeter Damon Poeter has a decade of experience analyzing, scrutinizing and reporting on the inner workings of tech business and culture, primarily with CRN (‘The Channel Company’) and PCMag.com, with an emphasis on channel business analysis and semiconductor industry news.

Prior to his specialization in IT business affairs, Damon honed his newsgathering talents with daily newspapers and online media operations ranging from the Bangkok Post, The Nation, Japan Times, The San Francisco Chronicle and Buzzfeed, and contributing to radio ventures such as Air America and NPR, while also pioneering the development of industry-targeted B2B media ventures like GemKey and Instore in the gem and jewelry industry.