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Can Partners Make Money from the Cloud?<br />Joel Martin<br />Research Director<br />jmartin@infotech.com<br />

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Research Objectives<br />Background and Methodology <br />Synopsis<br />Findings<br />Addressing the challenges and opportunities for cloud computing<br />Keys to shaping/Evolving your business<br />Risks to delaying cloud-based initiatives<br />Key Recommendations<br />Table of Contents<br />

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In April 2011, Info-Tech Research Group executed a survey of 285 North American technology channel partners that revealed their interest and ability to make money off cloud-based solutions and services. <br />Given the large amount of application, management, services and consulting revenue IT partners generate for vendors and recent announcements from leading vendors Info-Tech’s research is aimed at advancing the discussion around the role the partner channel (ISVs, SIs, Resellers, and MSPs) will play in private, hybrid and public could-based offerings. <br />This report will help technology vendors and their partners in understanding the implications for their business, vendor preference, and implication by partner size and type. <br />Research Objectives<br />

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Background and Methodology<br />278 web- and phone-based survey conducted during April 2011 by Info-Tech Research Group to a panel of North American IT partners. Our research endeavours to understand the monetization of cloud initiatives, collect insight into vendor preference, and determine how (and if) business models were being changed to reflect a changing IT ecosystem. <br />Company Type<br />N=278 North American partners<br />56% of respondents were partner executives<br />26% of respondents are responsible for technical/product services for clients<br />Partner revenue size distributed:<br /><$10 M: 23%<br />$10-49M: 23%<br />$50-199M: 31%<br />$200-499M: 23%<br />N=278<br />

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The cloud is a growing part of most partners business. <br />68% of respondents see the cloud as key to growing their business.<br />82% respond profits come from complementing on-premise offerings with cloud-based offerings. <br />41% of partners currently offer a cloud-based solution.<br />Customer demand is shaping partner needs from the vendors they represent<br />73% say overall cost savings and increased access to solutions are the greatest customer benefits.<br />81% prefer to partner with an existing vendor, yet 63% see an opportunity for new partnerships. <br />Vendors need to help partner re-train their staff to become more business savvy. <br />Synopsis<br />

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Addressing the challenges and opportunities for cloud computing<br />

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Partners Deal with Vendors They Trust<br />N=188 In your opinion, which of the following vendors is most able to support your cloud initiatives?<br />Partners and end-users want to leverage existing technologies and skills. <br />Cloud-based platform offerings are driving adoption for Microsoft, Google and Amazon’s solutions.<br />Cloud-based vendors are growing in relevance to partners. <br />

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Vendor Preference for the Cloud<br />Products architected for both on-premise and cloud are sought after. <br />Vendors must clearly articulate their cloud strategy and where their channel fits. <br />Partner will create their own revenue streams if given the right tools and support. <br />N=188 What is the number one reason you believe (your preferred vendor) is best able to support your cloud initiatives? <br />

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Outlining the 5 Cloud Challenges and Opportunities<br />Challenge<br />Opportunity<br />Channel generates less revenue than on-premise solutions for customizations and maintenance. <br />Subscription revenue model hits cash flow.<br />Channel less involved in maintenance of solutions as software located off premise. <br />New skill requirements for technical and sales teams<br />Address security and resiliency concerns. <br />Replace maintenance work with business + IT optimization, workload management and data integration.<br />Long-term cash flow and shortened sales cycles.<br />Create functional, vertical and horizontal product extensions.<br />Hire new skills for dedicated cloud business unit. <br />Vendor’s address security and stability centrally. <br />1. Revenue model<br />2. Cash flow<br />3. Creating value for the customer<br />4. Modernizing skills<br />5. Delivery & Growth<br />

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New Partner Business Models<br />It is crucial to remain engaged in the billing and transaction exchanges.<br />Act on behalf of vendor not just as a ‘tax collector’.<br />Being engaged allows the partner to hone tactical business and industry expertise needed by customers. <br />N=188 What billing model(s) would you use to offer cloud services? (Select all that apply)<br />

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Partners Make Money on Services<br />Partners still make the most revenue on services.<br />Augmenting on-premise with cloud solutions drives cash flow. <br />Only reselling software as a subscription license generates less revenue as there are less attached solutions (e.g. hardware and services).<br />N=188 What is the status of your cloud business?<br />

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Value Creation for Customers<br />Partners who can help with business efficiency will prosper. <br />Declining IT budgets but increased needs means you must articulate cost savings. <br />Scalability and optimized configuration for both the customer and partner is important. <br />N=188 Which of the following elements do you consider to be part of the value proposition for your customers in purchasing cloud-based products/services?<br />

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New Technical Skills for Cloud Offerings<br />Data integration skills are paramount.<br />Managing policies across platforms and devices create new service revenues. <br />Integration and migration of old and new, IT and LOB to new cloud platforms. <br />N=188 What type of new technical skills do/will you need to develop to offer cloud solutions?<br />

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New Sales Skills for Cloud Offerings<br />Partner sales teams must talk in the language of the business not IT. <br />Partners must help show how the CIO and their team remains relevant. <br />Sales teams must articulate time to value gains for the customer while limiting their own time spent. <br />N=188 What type of new sales skills do/will you need to develop to sell cloud solutions?<br />

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Strategies for Growth<br />Complementing existing technologies with cloud-based shows immediate ROI. <br />Value is generated as partners build on cloud platforms (e.g. Azure) to augment existing IT with new features.<br />Replacing legacy systems with cloud systems reduces costs and overhead for customers. <br />N=188 What is/would be your company's role as a cloud solution provider? <br />

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Shaping a new business<br />

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Executives Driving Cloud Initiatives<br />Partners see cloud as part of their future:<br />82% say their cloud offering will complement existing on-premise solutions. <br />81% build on existing partnerships to develop their cloud offerings.<br />70% say their cloud offering reflects the need of their customers to extend business process solutions.<br />30% of partners not delivering cloud solutions will be doing so in the near future.<br />Partner with no plans will find themselves at a competitive disadvantage. <br />Current Status of Cloud Adoption<br />N=278 What is the current status of your business in offering cloud solutions?<br />

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Drivers to Adopt Cloud Solutions Offerings<br />Partners have a better understanding of where they can make money. <br />70% of partners indicate that their customer’s biggest benefit comes from broadened access to technologies.<br />32% say cloud customers are extremely satisfied with results. <br />Media hype is being replaced by vendor and user reality. <br />N=188: What is driving your business to consider a cloud based solution?<br />

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Choosing a Cloud Strategy<br />Majority choose to partner with vendors they already know. <br />Gaps are being filled with new partnerships, especially in the platform and infrastructure cloud offerings. <br />Developing own offering is smallest in initial strategy, but shows highest profits. <br />N=188: What partnering strategy will your business choose? <br />

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Can partners afford not to offer cloud solutions?<br />

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Partner Business Drivers<br />Business growth attributed to cloud is measurable. <br />Customers will spend on cloud more readily than on-premise solutions. <br />Vendors focused on centralizing many new offerings based on cloud – partners must adopt. <br />Other partners are poaching clients by leading with on-demand solutions. <br />N=188 What are the drivers for your business to sell cloud products/services? <br />

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Cloud Revenue Growth Projections<br />Subscription business needs numbers.<br />Adding cloud offerings and customers is a sprint race to profitability.<br />Developing and selling own solution offering on cloud platforms by year 3 crucial. <br />Cloud Revenue Contribution<br />N=105 What % of your business is coming from the cloud<br />

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Key Recommendations<br />Recognize the future for your business will be impacted by how you generate revenues from the cloud.<br />Stay relevant to your existing vendors by building on their new platforms.<br />Measure and control time spent on sales engagements. <br />Seek new partnerships to augment, not replace, existing ones. <br />Carve out a sub business unit with a cloud mandate that can sprint ahead of the competition. <br />

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About Info-Tech Research GroupA Trusted Source of Quality IT Research<br />End-User Practice<br /><ul><li>A global leader in providing practical IT research and advice that makes a clearand direct impact

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Serving more than 21,000 IT & business decision-makers, across all industries and sizesof organization

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The number one provider of IT research and advice for:

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Small and mid-market enterprises

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Broader public sector

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Technology leaders in larger organizations</li></ul>Vendor & Ecosystem Practice<br />Syndicated and custom research based on more than 20,000 surveys and interviews conducted on a North American and Global basis<br />Buyer and Ecosystem behavior<br />Demand generation and lead nurturing programs<br />Licensed content<br />Custom campaigns<br />

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The Info-Tech Influence… on the Industry <br />Info-Tech Research Group analysts on broadcast media<br />Media outlets like these are turning to Info-Tech for insight:<br />Info-Tech Research Group analysts in the trade pubs<br />Quotes, comments, and interviews in publications including:<br />Info-Tech Research Group analysts in the dailies<br />Quotes, comments, and interviews in dailies including:<br />In 2010, Info-Tech Research Group is the 10th largest IT research firm in the world, and the biggest based out of Canada. Outsell rates us as a leading force in the IT Market Research landscape in 2010.<br />Outsell’s Market Intelligence Service: Market Analysis - Market Research and IT & Telecom Research, Reports & Services: 2010 Market Forecast and Trends.<br />