Attention solution providers: don’t get lost in the cloud

cloud2A little while back I attended the Cloud Partners conference in Chicago. One of most striking things I heard was in a keynote session delivered by Tiffani Bova from Gartner. She stated that cloud adoption slowed down! And this was not because of lack of end-user demand. Instead, it was due to solution providers (SPs) not transforming their business fast enough to fit the cloud era and unlock its market potential.

It’s a shame, really – considering the revenues they can generate from cloud. A recent study by AMI_Partners showed that SPs with moderate to low growth rate in the U.S. obtain only a third of their revenues from cloud. At the same time, SPs with a high growth rate enjoy half of their revenues from cloud.

Moreover, the average revenue-per-employee of cloud-transformed SPs is over twice as high compared to those hesitant to embrace it. IBM’s latest cloud study “Under cloud cover: How leaders are accelerating competitive differentiation” shows similar findings. SPs with a high degree of cloud adoption enhance their competitive position. They nearly double revenue growth and seriously increase gross profit growth (close to 2.5 times higher), when compared to SPs that maintain a defensive strategy towards cloud computing. SPs are also reported to have substantially higher customer satisfaction levels since they began offering cloud solutions.

Redirect your effort and investment to where money flows
So how can a company weather this cloud-storm? One way is by transforming your organization to leverage cloud. Ironically, this sometimes poses problems for solution providers that are technical in nature. This becomes evident in how providers try to remove the barriers associated with cloud adoption. For example, some try to build their own data center facilities to address their customers’ cloud and hosting demands. But how effective are these costly initiatives in generating a high return on investment?

One of Tiffani Bova’s messages was that solution providers should focus on activities that generate money for them. Let’s take the “build-your-own-data center” example. You might have the technical expertise to build and maintain such a facility, but buying power is a key component if you want to offer your services at a competitive price – especially in the increasingly competitive hosting market. However, the upfront investment to build a data center already puts significant pressure on your financial state. You may find the article “The Pros and Cons of Operating Your Own Data Center” on ChannelproSMB interesting reading material.

Transformation is preceded by information
No matter how you go forward when transforming your business– your company will need a heavy dose of change management to adjust its business models, organizational structures, competencies, processes, compensation models, cash flow management, and more. But that’s something to take care of once you already found the right direction. First you need a starting point to determine the best strategy for cloud adoption.

There are many places where you can find useful information. One of my personal favorites is Channel Corp Intelligence. Their papers and articles, such as “Channel Transformation… 50 key cloud channel strategy questions”, can help identify key cloud channel development hurdles that need to be tackled before you can start taking advantage of the market potential. Another source you may find helpful is the CSPcommunity. It brings industry experts and service providers together, serving as a platform to share best practices.

By solving a customer’s challenges directly and adding value through the solutions you provide, you increase a customer’s lifetime value. This helps create a stronger financial basis, positions you as a reliable business partner, and creates laser focus on your customer’s needs. It helps to offset your competition and lets you continue doing exactly what you excel in.

So why wait for the transformation? Adopt cloud and be at an advantage.

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