The other day, I was talking to my colleague, Richard Whitehead, about how partners should integrate the cloud delivery model into their current offerings. He threw out a simplified analogy of a local bank, which I paraphrase here:

Several years ago, the key to a bank’s profitability with its customers was a checking/savings account. The bank went out of its way to establish and maintain accounts with local customers and businesses. This account is similar to the physical infrastructure and personal relationship solution providers have with their customers.

Then, the banks started offering overdraft protection on those accounts. This was a way for the customer to have a line of credit just when they needed it – and it was a profitable business offering for the bank. This is analogous to the flexibility provided by a virtualized infrastructure that a solution provider may provide its customers.

Subsequently, the banks started offering their customers additional credit by providing credit cards. The bank didn’t create its own credit card brand, but used existing infrastructure, processes, and branding established by large credit card companies (Visa, MasterCard, etc) and became a sales and billing arm for those large companies. This is similar to what is currently available in the cloud computing model for solution providers.

You should note that the banks never stopped pushing to acquire and maintain accounts, because that is where they have great value. However, they make their most profitable money by leveraging their account relationship with their customers and providing additional products and services to those customers. These additional products and services are very profitable, simply because they don’t have to pay for the infrastructure or maintenance of those products themselves – it is done by another company.

To push the analogy a bit, in the banking industry, there are very few credit card companies (Visa, MasterCard, Discover, American Express, Diners Club) and no new ones have sprung up for years. Conversely, hundreds of new banks, each founded on a base of local accounts and value-added services, are started each year in the US (according to the FDIC).

I believe that today’s solution provider market is similar. There is limited opportunity to start a cloud provider business – this will dominated by a few, large companies.  There are, however, tremendous opportunities for solution providers to help existing and new customers integrate new cloud-based products and services into their existing IT infrastructure.

How do you help your customers integrate cloud services into their existing infrastructure?

I recently participated in a virtual event hosted by Everything Channel: "Cloud Computing Is All the Rage: How Solution Providers Can Get Into the Game and Grow Their Business". The event featured great speakers and leading technology vendors sharing a lot of interesting information, but I couldn't help noticing that the conversation centered on how to move services to the cloud and the benefits for the enterprise, but hardly any information relevant to the channel and their role in the process.

For example, Andrew Hickey of Everything Channel presented "10 Cloud Computing Best Practices", a "how-to" guide to setting up cloud services. His presentation was rich with information and included excellent recommendations for both the enterprise and for technology vendors, but nothing about the channel. Another presentation, "Next Generation IT: Cloud Computing for the Enterprise" by Pete Koliopoulos of EMC, focused on the VCE coalition by VMware, Cisco and EMC. Koliopoulos' presentation included a lot of useful and relevant information but again the focus was not the channel. One of his slides even mentioned a 'select' group of partners that are enabled to work with the joint offering these companies have developed. From a channel perspective, the questions that come to mind are: who is in this 'select' group and what will happen with the rest of the partners?

It shouldn't surprise us then that the channel still perceives cloud computing as a perfect storm looming over their heads. However, this is not the first time that the channel's role in the value chain is questioned and experience has shown that technology vendors do not have the capacity to reach the enterprise without a solid channel program.

It makes sense that we are paying more attention now to technical and business aspects of service offering for the cloud; it is part of the learning curve that all of us are going through. It is important, however, to bring the channel into the conversation now, the main challenge we face is getting partners to buy the cloud concept and get their input.

Technical issues and contract negotiations can all be resolved, but getting buy-in from partners is critical to make cloud computing a reality. We may have the technology and the moment may be right for the enterprise, but it is the channel that will determine when and how this will happen.

What are your expectations for cloud computing for the enterprise? Do you think the channel is ready to move forward?

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Mixed IT environments are a reality for all organizations, which means our customers depend on our ecosystem of partners to reduce cost, complexity and risk.  A great example of our partnership in action is highlighted in this SAP Insider article:

Let’s say an employee is changing roles from an accounting clerk to an accounting manager. For her new role, the accounting manager must have access to a new set of resources. For this, her organization needs to provide and track access, and instantly identify and provide alerts about any policy violations, such as gaining access to both the accounts payable and receivable systems. Properly setting up the accounting manager requires a strategic layering of technology, such as SAP BusinessObjects Access Control and the Novell Compliance Management Platform extension for SAP environments. This pairing helps companies ensure that business policies will be consistently enforced and monitored across SAP and non-SAP applications throughout the organization.

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