Cloud computing: Threat or opportunity?

The channel can benefit from cloud computing if solution providers can turn virtual technologies into physical profits.

Many solution providers have heard the phrase cloud computing thrown around as if it were the end-all, be-all future of information technology. But cloud computing can mean many different things to different people, and the channel is no exception. For many system integrators and VARs, cloud computing seems to be more of a threat than an opportunity.

The perceived threat comes from the idea that a customer's computing resources can be converted into a virtual offering, where applications are hosted and storage is sold based upon need and capacity. What's more, that virtual offering can be located in a data center hundreds or thousands of miles away, far from the reach of the local solution provider.

That creates a major dilemma for most small integrators and VARs: How can you compete with something that is not quite tangible and requires minimal up-front expense? The answer comes from demystifying the IT entity called the "cloud."

To fully understand how cloud computing can affect IT buying decisions means, you have to take a closer look at how cloud technologies affect customer business processes. First off, cloud computing is a catch-all term that can cover many technologies -- such as managed service providers, application service providers, hosted servers, hosted storage technology, hosted security solutions and other services and technologies. A typical business can combine a few of those services to build a complete hosted solution that eliminates most of the traditional networking hardware found in a business.

That may sound like a major negative to a system integrator trying to make a living off hardware sales. But today's system integrators make most of their profits from integration services and not off hardware margins. Although the cloud may eliminate or curtail the sale of hardware, it does still require integration chores, as well as training, support and maintenance -- all of which can be translated into profitable revenue streams. It comes down to a shift in focus, providing services to customers and defining those services as packages that are purchased over time.

Solution providers looking to profit from cloud services will have to make several decisions before venturing down the path of cloud computing. Those decisions include:

  • what services to offer
  • how to offer those services
  • what to charge for those services
  • how to bill for those services
  • how to support those services

Some solution providers may choose to blaze a new trail and build their own data centers to offer specialized services. Others may want to create hosted applications and act as an application service provider, or ASP, for customers needing customized or vertical-market applications. Another opportunity comes in the form of hosted file servers, where the traditional onsite file server is replaced with a hosted file server and kept in a data center. Each of those approaches come with their own challenges as well as varying levels of profitability.

A Deeper Dive

Solution providers have several options for hopping on the cloud computing bandwagon. The hard part is deciding where to begin. For many, following the path of a managed service provider, or MSP, may prove to be the best starting point.

Interestingly, with managed services, a solution provider can become both a customer of cloud services and a purveyor of cloud services. The typical MSP solution consists of a channel partner providing system management services to an end customer. But, to make that happen, the channel partner must leverage an existing managed services platform, set up management applications on endpoints at the customer's site and then access a portal to support the customer via the management platform.

Ideally, the provider of the management platform will charge the solution provider for each device monitored, and the solution provider will add margins to those charges and then bill the customer accordingly. By becoming an MSP, a solution provider is still providing services to its customers without having to create a management platform from scratch to make it happen.

Another path into building cloud services comes from the ASP model. Solution providers looking to transform into an application service provider can either develop a custom application and deliver it via the cloud -- often referred to as Software as a Service -- or partner with another existing ASP to deliver an off-the-shelf solution.

Of course, those developing custom applications and delivering access to the application via the cloud will have more of a captive audience, especially when it comes to vertical-market solutions. But developing the hosting mechanism, application delivery mechanism and the application itself can be a daunting and expensive endeavor.

Another option is for a solution provider to sign on as a partner for an established application -- such as SalesForce or WebEx -- and resell those services. Perhaps the biggest potential for ASPs comes in the form of hosted email systems, which incorporate archiving, indexing and searching. The need for those capabilities is driven by compliance and discovery, both of which are legal requirements for many businesses.

For solution providers that support smaller businesses, hosted file servers may make the most sense. That model consists of delivering a virtual file server via the cloud, which incorporates file sharing, collaboration, remote access and many other traditional services that would normally be present on a local file server.

The hosted file server model brings several opportunities with it -- solution providers can leverage virtualization technology, quickly build a small data center and deliver a hosted file server completely on their own. The virtual servers can run Linux to help keep costs even lower. What's more, solution providers can bundle in additional options, such as backup, continuity services and security.

For most solution providers, cloud computing spells opportunity -- it all comes down to adapting the technology to meet customer needs and building business practices around the cloud so that it can deliver profits while increasing service opportunities. Cloud computing exemplifies that, sometimes, change is good.

Potential growth areas for cloud solution providers

With the growth in available bandwidth, the rapidly falling prices of PCs and the mobilization of the workforce, cloud computing now makes more sense than ever before. The following new services have come about that may be a good fit for mobile workers as well as the channel.

  • Security as a Service: Many security applications have been moved into the cloud, with the latest being security suites. Some notable vendors are offering hosted security solutions for desktops and servers -- the desktop solutions work with a host system to deliver anti-malware, firewall, antiphishing and several other security capabilities -- fully integrated with the desktop. The advantages offered by hosted security include up-to-date protection -- no signature updates needed -- deep packet inspection taking place at the host and comprehensive reporting.
  • Elastic Clouds: Companies such as Amazon are now offering services where virtual servers can be rented to run customer applications. The idea is that a customer can instantly scale as needed, have complete control over a virtual instance of a server OS and pay based upon demand. At the same time, a method like Amazon's EC2 is a way for customers to leverage cloud computing. That service can also be used by solution providers to build out virtual data centers, which then can be provisioned to create cloud services to customers. In other words, services such as EC2 can be used to create an instant cloud-related business.
  • Virtual Desktop Infrastructures: Many businesses are looking to desktop virtualization as a method to centralize and control PC desktops. A VDI works by delivering a virtual PC down to a client device or end point. Users then have full access to that virtual PC either as a remote client or using synchronization technology. VDI is poised to become a cloud computing service, where custom virtual PCs can be created and then delivered down to an endpoint. Customers pay for access to that virtual PC, which is also constantly backed up and part of a business continuity solution.

Those are just a few examples of emerging technologies that are delivered via the cloud and that could prove to be very channel friendly if managed and delivered properly. Solution providers may want to explore those technologies and others to find a ground floor opportunity that they can transform into a new business opportunity.

About the author
Frank J. Ohlhorst is an award-winning technology journalist and systems professional specializing in testing, deploying and analyzing products and services. He writes for several technology publications. His website can be found at

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