Cloud Connect: Cloud is Damaging to the SMB Channel
It has recently been suggested by research experts at consulting management firm McKinsey & Company that a move towards cloud computing will force the small to medium-sized business channel to change its model or terminate itself in the process.
A principal at McKinsey & Company, Kara Sprague, stated that a survey will be launched by the research house in an attempt to derive further information on the effect of cloud computing on SMB customers. Sprague also noted that the results from last year’s statistics had dire warnings for channel partners.
Sprague noted: “Hardware OEMs are increasingly turning to service partners to access the customers, at the same time that independent software vendors are using the SaaS model to go to the customer directly. This is bad news for VARs, integrators and distributors, many of whom are trying to either become cloud service providers themselves or move into a cloud brokerage model.”
Apparently, on-premises applications sales to SMBs ran to 80 percent of revenue in the past, via the channel. However, in circumstances where the applications are distributed via the cloud, the channel only accounts for 5 to 15 percent of revenue.
Sprague added: “Yes, resellers continue to function as trusted advisors. But service providers are now providing that same caliber of advice.”
Furthermore, Sprague noted that beneficial changes to the business model were dampened by undercapitalization merged with the need to build effective ways to make the move. Mostly, it appears that SMB-focused partners are skilled technologists, but are not entirely clear on how to move from the traditional resale to the adoption of annuitized revenue streams that bring key developments to sales and operational processes and strategies.
Sprague, commenting at UBM’s Cloud Connect conference in Santa Clara, California, said: “They're definitely trying to move toward the cloud, but they're moving much too slowly. They will either need to make that transition more quickly, or their businesses will not survive.” (CY) Link