Define Your Cloud Business Model
Business transformation is required for resellers to be successful in the Cloud. However, fear not: this transformation process is more of an evolution than a revolution for your business. The philosophy and approach endorsed by the Channel Transformation Alliance is that Cloud Computing should be added to your current business, rather than completely replacing your existing IT resale and services business. In addition, the Channel Transformation Alliance predicts that the “Hybrid Cloud” will ultimately be the most widely accepted cloud computing model for the business community, and as such, we recommend the “Hybrid Reseller Model” as the right business model for the IT solution provider community.
Certainly there will be an emergence of “Pure Cloud” resellers and integrators. Those companies will only sell and provides services for cloud computing technologies; they will not sell and support traditional on-premise technologies such as datacenter hardware, networking equipment, desktops and peripherals, and servers. However, the Channel Transformation Alliance predicts that the greater majority of IT resellers in the channel will continue to sell and provide services for both on-premise technologies and cloud-based solutions. These resellers will be able to offer choices to their end-customers and design on-premise, cloud, or hybrid solutions which best meet the needs and budget of the customer.
The “Hybrid Reseller Model” is one in which a reseller maintains a healthy balance of Product Sales, Professional Services, and Recurring Services. Go-to-market activities, resources, and revenues within the “Hybrid Reseller Model” are balanced in a way which maximizes the resellers’ ability to meet customer needs, optimizes the business from a financial standpoint, and minimizes the threat of displacement from competitors. The reseller continues to provide products and services from both on-premise technologies and cloud-based solutions, in both a “one-time” revenue model and a monthly recurring revenue model.
In order to determine how to best adopt the Cloud into your practice, you first need to evaluate your current business model. Are you primarily a product-centric, time and materials, professional services or managed services organization today?
If the majority of your revenue is derived from transactional product sales, then your predominant business model is product-centric. If the majority of your revenue is derived from delivering transactional time and materials services focused on technical outcomes, then your predominant business model is time and materials.
If the majority of your revenue is derived from transactional professional services deliverables focused on project outcomes, then your predominant business model is professional services. And if the majority of your revenue is derived from managed services focused on business outcomes as a Trusted Advisor, then your predominant business model is managed services.
Your current predominant business model will dictate the ease with which you will be able to adopt or build a specific Cloud business model or practice within your organization. Cloud business models to choose from include:
As a Cloud Broker, you own no Cloud assets and resell Cloud services and solutions focused on customer’s business outcomes. As a Cloud Broker you will not build your own datacenter, create your own “cloud,” and will not invest capital in software platforms and tools. As a Cloud Broker you will understand the needs of the end-user and will be able to propose the right Cloud solution to the customer.
This model provides a low barrier to entry based upon the investment capital required to adopt it, and yields healthy to high profit margins.
Cloud Service Provider
As a Cloud Service Provider you may own some; or all, of the Cloud assets and provide platforms, services ahd solutions focused on customers’ business outcomes. As a Cloud Service Provider you will design, implement, integrate, and customize Cloud Solutions for your customers with highly trained and certified in-house engineering staff.
This model provides a moderate to considerable barrier to entry based upon the investment capital required to adopt it, and yields healthy to high profit margins.
Once you have determined your entry point to the Cloud as a Broker or Service Provider, you can begin your transformation. Over time, as you grow your Cloud practice and strengthen your marketing, sales and implementation capabilities and improve your financial profile, you can evolve your practice in a systematic manner to realize greater capabilities, capacities, revenues and profits.