– Sudhir Narasimhan
For a few years now, we have been hearing about how cloud services are the next big thing that enterprise VARs and solution providers should benefit from. While the enterprise market for public cloud services is gradually growing, the channel side of the cloud story has not been all that interesting. According to a few enterprise VARs I spoke to, most of the public cloud vendors out there do not have a value proposition strong enough for the channel to actively sell their services.
At this point in time most large vendors of public cloud services including Amazon AWS and Google do not seem to be focusing on the channels at all. Their objective today seems to be to gain acceptance among enterprises and increase market share. Their approach so far has been to go to enterprises directly and barring Microsoft none of them seem to have a well thought out channel strategy. Consequently, what we are witnessing in the market place is a price war. Pretty similar to the one we saw in the mobile service provider space a few years ago, where the emphasis was on customer acquisition rather than on average revenue per user.
While they should have seen some merit in this approach, I learn that it has not yet delivered the desired results to the vendors either from a top line or from a bottom line perspective. Apparently Amazon AWS is losing a few hundred millions of dollars on its cloud business every quarter as it continues to spruce up capacity while marketing its services. The user acceptance of the public cloud has also been rather slow as enterprises are still wary moving their applications off their premises due to concerns related to security and support.
Does all this mean that public cloud services will continue to remain non viable from a channel perspective? I don’t think so.
It is true that most leading public cloud players have deep pockets and the ability to absorb losses and aim for long term returns. However, even when they are looking at long term returns they will have to significantly scale up their business at some point in time. In such a circumstance their current approach will not be feasible and they will have to come up with a channel strategy that can help them get the volumes. A good channel strategy will mean they will not be able to operate at current price points, as channel partners need to be adequately incentivized.
My own guess is that the year 2015 will gradually see most cloud players gravitating towards the channel and hopefully the vendors will end up experiencing some decent topline growth. I know many of you have considered giving cloud services a shot and some of you are even bundling them with your solutions. What’s your take on cloud services? Please do share.
(The author is a consulting editor with Trivone Digital services and is reachable in sudhir.narasimhan@trivone.com)