Reseller News Distributor Roundtable - Can the channel make serious cash from the Cloud?

Reseller News Distributor Roundtable - Can the channel make serious cash from the Cloud?

The inaugural Reseller News Distributor Roundtable debates whether the channel, in an apparent new age of IT, can make serious cash from the Cloud.

Just a few years ago, Cloud was all about reducing costs whereas now, according to industry feedback, it is considered to be a strategic business enabler.

“The majority of new revenue for resellers is not Cloud revenue but driven by the cloud and that can’t be ignored,” Verykios adds. “And because of this, what we are seeing is a spike in something completely different.

“If we for example finalised a million dollar sale, 2 percent of the sale is Cloud revenue, the rest is either on-premise or hosted in a data centre.

“But crucially, without that 2 per cent the other 98 per cent wouldn’t have happened. We are seeing a spike in that kind of transaction and it is our current customer base.”

The customer trend in New Zealand for Datacom, observes Hardie, is that customers are not moving to the cloud immediately, rather they are “dipping their toe in the water”, usually through a hybrid model.

“We are not seeing a wholesale move into Cloud,” he adds. “We are seeing organisations moving their core financial systems and dumping them into public Cloud but it comes back to what I said at the start, if you go back to what the customer wants it does vary.”

A key question Lamont believes resellers should consider asking when approaching customers is; “How many applications and models do you actually want to manage in the Cloud?”

“And that’s where some of the value of aggregating the different vendors into a single billing model is going to be key,” he claims.

“Because if you’re a CIO trying to cost centre manage how many different applications you have running up there then good luck as it’s going to be a nightmare.”

Unless born in the cloud, Parker agrees, acknowledging that the Cloud “isn’t the answer to everything, it never has been and it’s about having that sensible hybrid conversation.”

Circling back to who is in control of IT spend, Parker says organisations have system legacies scattered across the business leading to chaos in the ranks and a desire for the IT department to “please return and help us.”

“But it’ll be a new CIO,” he warns, “it won’t be the CIO who was employed five years ago just to get the cost down to drive service levels up.

“The outgoing CIO is being asked to be innovative when their whole skill set is about keeping costs down, SLA up. But now the game has changed and the role will be reversed.”

At Datacom, widely recognised as a blossoming Kiwi IT company, Hardie says the business structure involves two groups, one focused on product, the other on Cloud.

“These two groups within the company are effectively competing with each other but the product group is absolutely successfully and has just outdone their budgets and recorded a perfectly good year, which shows people are still buying infrastructure,” he explains.

Cost of Cloud?

But as Cloud computing gets more competitive, will market leaders and newcomers continue to push pricing downward?

While cloud providers have incrementally cut prices for some time, the mounting price war among leading providers of public Cloud services looks set to take on a whole new meaning in 2015 and beyond, leading the channel to question; how low can you go?

“Is it a race to the bottom?” Lamont speculates.

“There is a ground zero cost,” responds Grauman, alluding to the role of market leaders Amazon, Microsoft and Google.

“If you look at Amazon, they have got a book store, a Kindle store, a content delivery network and AWS all running off the same compute block so they can make a blended margin across all of those business lines. The result is that they can make smaller margina across more business lines.

“But when you get a single function organisation such as Rackspace, where they have one product in infrastructure-as-a-service, they have to make all of their margin out of just that.

“So do I think there is a race to the bottom? No. It can get cheaper but absolutely there has to be a ground zero.”

To read Part One of the inaugural Reseller News Distributor Roundtable, Defining Cloud, click here or to read Part Three check back to Reseller News next week for more details.

This roundtable was sponsored by Distribution Central, Rhipe and Westcon. Photographs by Jason Creaghan.

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