Cloud Brings More Revenue For The Channel: Study

Revenue For The Channel:

The more solution providers focus on cloud solutions, the faster they can expect to grow and the more margin they can expect to make, according to a new study by value-added technology distributor, Westcon-Comstor. The value-added distributor’s ‘Voice of the Customer’ survey also reveals the most popular attributes of successful cloud solution providers (CSPs), where opportunities lie and how value-added resellers (VARs) can more easily transition to a CSP model. Key findings include:

• As end-user demand for cloud increases, partners need to invest in cloud to avoid falling behind the competition
• Solution providers selling cloud grow faster than those not selling cloud — with those selling a lot of cloud growing even faster
• Many channel partners struggle to find the expertise necessary to transform their business to cloud

Maintaining Status Quo Won’t Work for VARs

While solution providers investing in cloud are finding success, many channel partners have not fully embraced selling cloud solutions, according to the survey. Almost 60% of partners said they do not yet have a cloud-focused sales compensation plan, 44% do not offer cloud solution bundles and 22% report no revenue from recurring cloud services. Nearly half of channel partners indicate that they are implementing plans to substantially increase cloud sales in the next one to two years, suggesting that many see the value in moving to cloud, but currently lack the resources and capabilities to capitalize on the opportunity.

More Cloud Solutions Means More Revenue
Cloud sales have a demonstrable, positive impact on a channel partner’s business, according to the survey. Among respondents that derive 40% or more of their overall sales from cloud, 77% reported an overall increase in revenue. Meanwhile, only 59% of those that sell no cloud reported an overall increase in revenue. One factor in successful cloud practices might be increased input from lines of business (LOBs) into the end users’ IT purchase decision-making. LOB buyers are involved in about 80% of IT investment decisions now, according to IDC. Channel partners that understand specific business challenges and how to address those issues with cloud-based solutions may be making more inroads. According to the survey, lower IT management costs (69%) and improved IT agility (56%) are the primary drivers for end customers moving to cloud.
“With lines of business more directly involved in the purchase of technology today, it makes perfect sense that solution providers look to solve business problems by leveraging new cloud-based solutions,” said Pam Miller, director of infrastructure channels research for IDC’s Channels & Alliances group. “As cloud competition increases, both solution providers and vendors look to distribution to add value by enabling partners, building complete solutions and ultimately helping the channel deliver increased productivity and value in a more cost-effective manner.”

Solution Providers Need Help Transforming Their Business
Most channel partners are just beginning to reshape their business to take advantage of cloud opportunities. Overall, 60% of respondents indicated that they are only at the beginning phases of cloud transformation. Looking deeper, the survey reveals managed service providers (MSPs) are more likely to have invested in cloud capabilities, and are more likely to report that 40% or more of their revenue is derived from cloud. On the other hand, traditional VARs are most likely to indicate that cloud is not a part of their business and to report no revenue from cloud. Systems integrators and telecommunications providers typically fell between MSPs and VARs regarding their cloud investments.

“As the cloud market continues to develop and mature, channel partners need to make sure their offerings do the same,” said Joan Spindel, chief go-to-market strategist for Westcon-Comstor and author of the study. “To best facilitate their success in this regard, Westcon-Comstor provides a wide variety of programs, experienced and knowledgeable cloud resources, and innovative tools to guide the way.”

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