WILL THE CLOUDS RAIN?

Today, the concept of
cloud computing has emerged as a phenomenon that is stirring up
interests and investments from all the factions of the IT industry.
The reason being, that adoption of cloud computing can provide
organizations an opportunity to transform their business models and
gain a competitive advantage in the marketplace. Organizations would
also be able to concentrate on their core competencies while leaving
the task of running IT infrastructure to the cloud service providers.

Gartner predicts that by
2012, 20% of the businesses across the globe will own no IT assets.
The Sand Hill Group foresees IT budgets being reallocated from 80%
maintenance to 80% innovation. Besides, Microsoft reports that 70% of
its staff is working on cloud computing. On the revenue side,
research firm Global Industry Analysts expects cloud services to
generate $222.5 bn over the next 5 years. Such potentials make cloud
computing an exceptional opportunity for solution providers (SPs). It
is because SPs can make more money, be more relevant, and add more
value to end users with cloud computing, than with any other
traditional on-premise IT solution. “Cloud has enabled new business
scenarios and new means to deliver IT services. Solution providers
can definitely make more money, given that cloud has become a way to
deliver IT services. And obviously to make money, SPs need to be
relevant for end users,” said Vineet Arora, MD, Aditi Technologies.

WHERE THE OPPORTUNITIES
LIE

Besides changing the
business ecosystem, cloud computing has brought a plethora of
opportunities for SPs in the country. In
fact, it has given a new dimension of doing business and providing
services to customers, which would directly or indirectly lead to new
opportunities.

QuantM Net Technologies
sees opportunities in the cloud in various ways like through
consulting, implementation or
traditional reselling. The company is taking different tracks to get
into the cloud, ie partnering with TCS cloud offering with referrals
that can drive 5% to 10% commission; reselling where the cloud
provider (TCS) bills the customers, which pays about 10% to 20%
margin based on revenue and QuantM manages the relationship while the
cloud provider bills; and reselling where QuantM bills the customers,
where it gets roughly 15% to 30% margin and discounts on services.
Pawan Khurana, CEO, QuantM Net Technologies believes that for SPs,
cloud provides new and high-margin capabilities. “Cloud is a
complete self-service thing and that is where Sps come into picture.
Providing solutions instead of products to get enterprises into the
cloud and making them ready to reap the benefits,” he said. It is
also believed that spending on the cloud will rise as enterprises
upgrade their network to cut costs and boost performance. Solution
providers can see opportunities here as well. Said Khurana,
“Connectivity/network is a logical part of cloud solution, as it
can bundle networking, hosting and VPN services with cloud computing.
It is another cloud computing channel. While many are not yet making
significant money selling bandwidth or connectivity, those who don't
have multiple connectivity offerings on their roadmap are definitely
losing business.”

“Since our experience is
in end to end infrastructure solutions, we see an opportunity to
apply the same in cloud infrastructure as well, ie from networking to
computing, to storage and end user experiences,” added Ganesh
Mahabala, senior VP, Valuepoint Systems.

MORE AS A CSP

The IT solution providers
also foresee a bigger opportunity in being a cloud solution provider
(CSP) than a VAR or SI. Looking
at this opportunity, SPs feel that this wave will help them migrate
from VAR and SI status to the next stage of cloud solution providers.
However, this needs a true experience of being a VAR their customers.
Allied Digital sees a bigger opportunity in being a cloud solution
provider as compared to being a VAR or SI. “Since in VAR or SI
business we provide hardware and implementation services, there is no
recurring revenue in this model. However, in case of cloud computing,
it is a pay-per-use model and gives us regular annuity revenue. In
addition, it gives revenue for not only hardware, software, security,
monitoring, management but also for associated services. Hence the
quantum of revenue is much higher,” said Sanjiv Patki, global
VP-managed services, Allied Digital. Kailash Jayaswal,
VP-technology, Choice Solutions, further asserted, “SPs will get
revenue for a longer period from the end client as well as backend
fees from cloud providers. SPs will gain more, over a longer period
of time.”

S Sriram, CEO of iValue
InfoSolutions, believes that since cloud computing is going to expand
in the market, it will open up opportunities across the
ecosystem-from vendors to distributors to solution providers. The
key is to understand the customer's business and IT challenges and
offer a right mix of cloud/on-site solution along with remote
infrastructure management, which is scalable and flexible. Players
like iValue, play a vital role in aggregating relevant onpremise and
cloud solutions to business across sizes and verticals for service
providers to take advantage. Suresh Ramani, CEO of Tech Gyan,
however, begs to differ here. According to him, there is nothing like
a cloud solution provider. He looks at cloud services primarily as
another delivery mechanism by which he can deliver his services. For
example, while offering his unified communication solutions to
customers, he tells them that they can avail this service either as
an on-premise solution or as an on-the-cloud solution.

GENERATING REVENUE

It is being touted, that
with the introduction of cloud computing, a large chunk of the
revenue would go to the solutions providers. Here, we will take a
look at the ways in which SPs can generate more and more revenue by
foraying into the cloud space. Most of the SPs believe that customers
will be ready to shell out money
to make the right choice of the solution to this new wave of
computing and IT infrastructure solution and services. SPs can
generate revenue by providing assessment services, design services,
architecture solution services, implementation and migration
services, cloud management and monitoring
services among others. “Any cloud service provider can make more
money with cloud computing, keeping in mind the nature of the service
being provided. Since it is a service model, the YoY income is
assured. It is not a design, sell, implement and forget kind of
thing. Cloud burst is another area where money can be made.
Additionally, cloud-based monitoring and management services are
avenues of making more money. Security would be the next big wave so
far as cloud computing is concerned,” said Patki of Allied Digital.

“SPs will certainly
benefit in a big way since the customer will need them in all 4
stages- xploratory deployment, strategic consolidation, process
improvement and virtual life cycle management, and transition to
private cloud from public cloud. At every stage, the enterprise will
need a hand holding from an SP, hence SPs will play a critical role
in forming a long term strategy and a path for the enterprises.
Looking at these factors, choosing a correct solution provider will
be very critical for an enterprise,” pointed out Kirit Joshi,
senior VP, Sai InfoSystem India. Moreover, SMBs and enterprises will
need help and consulting to start taking advantage of the cloud. The
issues are around security of data in the cloud, compliance with
government regulations, performance and exposure to malware. SPs need
to get domain expertise on cloud providers, applications, threats,
and other areas. This will enable them to help SMBs. The revenue
would come from consulting services on cloud applications and
security.

According to Jayaswal, SPs
like them can do several things to generate revenue from the cloud.
They need to partner with cloud providers like Google, Zoho,
Microsoft and Amazon. Besides, they need to understand the services,
customize it for SMBs and offer configuration and ongoing management
services. Several customers will use private and hybrid clouds. SPs
need to help enterprises with a roadmap to move to private and hybrid
clouds. SPs also must help implement and manage private clouds.

PUBLIC vs PRIVATE CLOUD

One debate that is rocking
the cloud computing industry is, which cloud will generate the most
revenue for SPs; public cloud or private cloud? Basically, there is
money to be made in both public and private clouds, depending on the
business model they have in place to support it. For SPs, however,
private clouds could drive more revenue than their public brethren,
but some predict public clouds will be more ubiquitous in the future.
This creates an interesting dilemma for SPs in terms of where do they
focus their attention to generate the most revenue.

While some SPs are of the
view that they can make money by selling private clouds through
discovery, assessments, software and hardware sales, implementation
and the support that follows. Hooking clients into the public cloud,
however, may not drive as much up-front revenue. On the other hand,
some feel that public clouds enable them to sell migration services
and professional services to drive revenue.

Private cloud is more
lucrative due to the need for IT hardware infrastructure, data center
and private cloud software. Like a traditional IT environment, it
requires significant upfront expenses and ongoing AMC. This makes for
a high short-term benefit for SPs. On the other hand, the public
cloud offers revenue to the cloud provider. The cost has a fixed and
a variable component. The latter increases with the use of more
storage, compute processing and bandwidth (providers charge for the
actual utilization per month). This increases the fee for the cloud
provider. “Public cloud services have less margin but a higher
volume. Private clouds on the other hand have a lower volume but a
higher margin. We believe public clouds will provide more revenue.
This is primarily due to the large market that is possible for public
clouds, in turn due to its convenience and ease of use. The second
attraction is the absence of upfront capital expenses to the end
customer,” opined Jayaswal.

Seconding his thoughts on
the same, Mahabala said, that cloud solution providers today have the
option to partner with public cloud providers as well. And if
creativity and inventions are brought in, these SPs can help
customers to tap on to public cloud at much higher volumes and can
become a true partner to customers.

On the contrary, Joshi is
of the view that in the initial phase of exploration, public cloud
will generate more revenue. However, for an SP with adequate
expertise, private cloud will bring more rewarding opportunities in
the long term, since the overall project cost, duration of
engagement, as well as required expertise, etc will be on the higher
side. Echoing his views in support of private cloud, Ramani added
that the bigger SPs will garner more revenue from private cloud where
as the smaller Sps will get most of their revenues from the public
cloud. This is because, setting private cloud is more like doing an
end to end infrastructure project with all the related issues and
skill sets being required.

However, as there are
strong cases for selling both into private and public cloud
environments, some Sps and industry watchers suggest that hybrid
clouds, that combine elements of both the public and private arenas
will offer the biggest opportunities. Through hybrid offerings, SPs
and vendors can enable integration between public providers like
Amazon's Elastic Cloud (EC2) or Google with on-premise private cloud
infrastructures. Moreover, expertise in both these areas will help
SPs improve their bottomlines. “We think the decision between
private and public cloud should not be linked with how much money a
solution provider can make. Private and public cloud decision is
dependent on the need of business process, operations, strategies and
focus areas. Both the private and public model has 2 different
business models for solution providers. There will be a need for both
public and private cloud. Successful delivery of services and
solutions will definitely need to have a right business and
operations model in place,” said Arora of Aditi Technologies.