The opportunities and threats of cloud

With one month down the horizon is coming more sharply into focus and it’s possible to look at the year ahead and identify the opportunities and the threats.  Where will the main opportunities for channel businesses arise and what will the main threats be? Are there any business or external concerns that could affect performance across the year?

Cloud is expected to be a dominant technology this year - and that presents an opportunity and threat to the channel. Simon Hill, head of UKI alliances and channels at Oracle, believes the shift to public cloud “offers a big opportunity across applications, platform and infrastructure as a service, which will be default technology within all customer organisations within 10 years”. He thinks channel partners can grasp that opportunity “with new and enhanced service-led solution models that provide customer user case success and flexibility”.

Nick Miles, EMEA director of field alliances at Okta, argues the move to cloud will present an opportunity (and challenge) for channel organisations “in rethinking their business models for the SaaS world. All resellers need to evolve to complement and better serve the many vendors and customers that have already made this shift. If they don’t, they will lose to the newer, faster-growing channel players that started with a focus on SaaS”.

He stresses that resellers are well-positioned to build longer term relationships with customers “because of the service they provide”. They have an advantage over vendors because “they deeply understand their customers’ businesses, challenges and pain points — and the VARs that seek to solve those problems with SaaS-based solutions will succeed this year”.

Dave Hazard, vice president for channel & sales operations at Fujitsu EMEA, claims channel partners will play an important role guiding customers through technological change and acting as trusted advisors. “Channel partners must be prepared to move from selling equipment to acting as partners in co-creation. Many channel partners will choose to specialise in a particular area, be that IoT, security or cloud, to ensure they can provide the consultancy their customers need,” he adds.

But cloud also presents a threat. Rob Wiles, channel sales director at Unify UK and Ireland, believes it could be “the biggest threat to the channel. The large impact it has on traditional revenue models could be damaging to many businesses in the sector. Alongside this is the fact that new entrants to the market can have a sizeable effect on channel businesses. For example, the increased attention Facebook is giving to the enterprise market could spell hard times for many organisations”.

Diego Segre, vice president, business partners IBM Europe, agrees that “the shift of the value equation in the cloud world will have a significant impact on the channel in 2018. Business partners are still valuable, but the value has to be delivered in new ways. It is not any more about reselling, adding value through implementation services, but through becoming service providers, embedding technology into the services they deliver to their customers”.

And James Pittick, director of B2B Indirect Sales at Canon UK, notes that the ongoing shift from Capex to Opex means it “will be important for partners to look to additional and new business models, including recurring revenue or offering more services in the cloud. All this disruption means the relationship between vendor and partner needs to be stronger than ever to truly thrive. Partners will be more selective with their choice of vendors in order to ensure they are delivering the best solutions to their customers, requiring vendors to demonstrate a comprehensive understanding of changing demands”.

Phil Brown, commercial and sales director at Exertis, warns that while there is a lot of opportunity, “it’s important not to take your eyes off your traditional business areas and to continue to offer the specialist expertise in each of the technology areas you play in. The challenge is to diversify in the right areas and ensure that you remain relevant to your customers.”

Richard Roberts, Mitel EMEA vice president channels, accepts that the transition to selling cloud services “will come with its challenges, but the rewards are definitely worth it”. Yes, relationships will be harder won and take a lot more nurturing, “but once the channel partner is under the skin of a business and has developed a true understanding of its culture, business ambitions and vision, the relationship will be a lot more valuable, with a lot more longevity”. 

Janette Martin, managing director of strategic partnerships and alliances at Advanced, acknowledges partners that do not adapt their business models “to embrace cloud technology” will “lose traction, customers and revenue”. But there’s also the issue of vendors trying to promote “cloud-based” products that aren’t true cloud solutions which “risks creating confusion for customers”.

The vendors they work with for on-premise software aren’t necessarily “the right choice for cloud solutions”. Resellers need to find vendors that “deliver true cloud solutions along with the right training, support and marketing so products can be sold and supported effectively. It’s time for vendors to step up to their responsibilities to ensure their channel resellers have the right, fit-for-purpose support they need”.

In terms of external factors, Brexit is still the biggest concern. Miles at Okta says “it will continue to be front of mind”. The confusion around Brexit is affecting businesses, resellers and customers. “The longer the situation continues, the harder it will be for organisations to plan for the future”.

Asif Muhammad, senior director of strategy at Nlyte, agrees Brexit “poses the biggest external concern to channel performance this year as it will impact the scale at which technological investments can grow. Only after Brexit negations have reached some sort of stability will resellers be able to plan for the future”.

Wiles at Unify says “the biggest concern will be the fact that the UK market is set to decline in size and value. With Brexit on the horizon and a deep uncertainty across the business landscape, there is a strong chance that companies will not be spending”.

Dominik Birgelen, CEO of oneclick, predicts “financial and political uncertainties surrounding Brexit could also affect performance across the next year. This is already starting to have an impact within the IT channel, with IT spend falling by 3.1% in 2017”. He adds that the implementation of GDPR and the increasing focus on tackling cyber security “could also continue to prove a headache, with businesses needing to ensure they are compliant before implementation”.

Kevin Linsell, CTO at Timico, expects the combination of Brexit and GDPR will make it hard going for businesses in the UK.  “Businesses only have a certain capacity to deal with ‘new stuff’ and ‘change’,” he argues. “Brexit and GDPR could be such a distraction that they impact the performance of UK businesses.”