Cloud computing pushes vendors to seek new roles in IT value chain

By Bernard Golden, CIO |  Cloud Computing

A richer ecosystem. As noted, cloud vendors can't afford to devote a lot of money to the sales process; crucially, a set of services that used to be provided by the vendor and absorbed as part of the cost of sales can no longer be subsidized by the provider.

From a user perspective, those services will be provided by online sites that offer product or service descriptions and assessments, consultants that provide technical integration and partner providers that offer complementary functionality. (As a customer, you can expect this richer functionality ecosystem to impose additional integration complexity and cost).

A different ecosystem. The current ecosystem will be disrupted, though. Both hardware and software vendors have built up elaborate partner programs to leverage systems integrators (SIs) and value-added resellers (VARs) as channels to bring products to customers.

SIs and VARs are both challenged by cloud computing and need to find new business models to meet the changing market. The vast majority have prospered by taking a cut (margin or points) from the sale of the vendor's products to customers that the vendor cannot or will not directly sell to. There's a lot less margin when the sale is a much smaller subscription; consequently, SIs and VARs find their revenue source under attack.

The natural response is to turn to services or consulting to replace the lost revenues, but those require different skills than selling standardized hardware devices. It's safe to say that "the channel" will undergo significant change over the next few years as the move to cloud computing plays out.

Cloud Computing Gives Hardware Vendors Lemons, Can They Make Lemonade?

Software vendors have been strongly affected by the rise of cloud computing; many see customers adopting SaaS offerings in place of established packaged software offerings. Their current customers or prospects find the pay-as-you-go model more congenial to their wallets.

Just as important, perhaps, is the ease of adoption. Instead of the lengthy, complex and difficult installation and configuration process associated with on-premises packaged software, SaaS offerings allow quick access via a browser, with all the backend headache left to the vendor.

However, of all the affected parties, perhaps the hardest hit are the hardware vendors, who find many of their customers reducing their hardware budgets in favor of SaaS and IaaS cloud offerings. It's no secret that a number of major hardware vendors are suffering poor financial results as they go through this market downsizing event.


Originally published on CIO |  Click here to read the original story.
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