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Playing in the Cloud: Channel Momentum Picks Up

Channel firms deciding on a cloud play need to answer a few critical questions: Can I make money doing this, what type of cloud business works best for me, and who are my customers? This basic “economics of the cloud” discussion has been front-and-center in the channel for the better part of the last three to five years, complicated by the wide variety of cloud business model options and potential revenue structures to explore as well as differing customer needs.

And yet, as found in CompTIA’s 4th Annual Trends in Cloud Computing research study, solution providers have been moving more decisively into the cloud. Nearly 6 in 10 said they proactively pursued multiple cloud business models in an attempt to quickly and comprehensively enter the cloud market, with medium and larger firms more likely to have gone this route than the smallest channel player. Half of channel firms today describe their cloud business as “mature,” while another 4 in 10 claim to have reached at least a degree of cloud services’ maturity alongside their more established lines of business. By contrast, just 13% said their current cloud business is not mature at all today.

With the adoption rate climbing, more channel companies today have a clearer picture on the numbers. They have assembled quantifiable tracking metrics on revenue and profit margin, which can serve as a guidepost for channel companies moving more slowly into cloud.

Some details: Roughly 6 in 10 channel firms that described the state of their cloud business as mature and strategic said that cloud-based profit margins are generally higher than their margins on their other lines of business. These metrics compare against just 2 in 10 firms with “non-mature” cloud practices that said cloud profits were higher than profits from existing offerings.

The decision to place an emphasis on cloud and other types of services by solution providers could prove a particularly smart one. Because while customers might be more reticent to shell out capital on products, as some tech manufacturers are seeing, they still need IT services, whether it is managed, professional or cloud. Case in point: Two thirds (63%) of channel firms in the study characterize customer demand for cloud-based IT solutions and services as either very high or high, with another 3 in 10 describing demand as somewhat high. Just 9% said demand for these solutions was low.

CompTIA’s 4th Annual Trends in Cloud Computing study is based on an online survey conducted in July 2013 of 501 technology or business professionals (end users) in the U.S. and 400 IT channel companies. The complete report is available at no cost to CompTIA members who can access the file at www.CompTIA.org or by contacting research@comptia.org.