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Tips for VARs competing with cloud service providers

VARs who are looking for an edge when vying for customers with cloud service providers can check out these cloud market tips, starting with acknowledging that cloud computing is here to stay.

Companies such as Dropbox, Moazy and Google Apps enjoyed great opportunities from cloud based services in 2010. In 2011, it seems we will see greater adoption and opportunities in the channel in the cloud space. Most value added resellers (VARs) understand that they’re in competition with the many cloud computing providers that market and sell directly to customers. Your potential customers will be encouraged by the cloud providers seeking a quick sale to “cut out the middle man.” So where are the business opportunities for VARs?

There are three specific tactics VARs should take when trying to gain margin from the cloud: Identify appropriate channels understand the cloud market place (both real and perceived) and watch competitors’ movement in the cloud space.

Choosing appropriate channels
Although this may seem obvious, I watched many VARs miss cloud opportunities last year for not having appropriate distribution channels and business relationships in place for them to resell cloud products or services.

In two specific examples, VARs focused on hardware and software sales instead of taking advantage of product and migration services.

In both cases, the customers had just moved their email to Google Apps because mailbox volume hardware maintenance made email cumbersome and expensive The customer not only bought the services from Google, they also purchased several months of professional services. These professional services brought in twice as much revenue as the hardware support would have. These services included assisting with putting a retention policy in place to delete old email and migrating the remaining email to Google.

Although I’m not saying the vendor should have been a Google Apps partner (which is becoming an attractive option for some VARs), but they should have had some cloud or traditional hosting available to meet the customer’s desire to not host their own email.

By having this channel in place prior to a customer request for the service, you’re acknowledging the market to your potential customers. Most customers will understand that you‘re still adjusting and adapting to the market, but just showing that you have a grasp on the tech trends will assure the customer that you can help them. Of course, you also bring safety and experience with existing platforms, so that should the cloud technology not work, you can quickly provide other options.

If you need assistance in defining your market and products with supply channels, candid conversations with existing customers can help quite a bit. Make this a listening session and not a sales pitch. If you start pitching your solutions under the guise of developing your channels, then your future requests to talk business development will land on deaf ears.

Regardless of the path you take in identify your channels, the major point is to acknowledge the market space and let customers know you are in the cloud space.

Understanding the cloud space
Solution providers can differentiate themselves by establishing a good understanding of the cloud space, its major players, the technology involved, what is simply rebranded hosting and what is changing computing.

For example, building out a Web mail- based server and offering it to your customers can easily be branded cloud computing. But this offering does not compare well to current generation cloud email, which offers syncing to device sync capabilities, calendar and contacts integration, virus checks and gigabytes of email storage space.

Hosted applications, cloud storage and backup, cloud security and compliance and cloud availability will be hot topics in 2011. VARs need to secure even finer niches within these cloud spaces. If you have a mid-sized team of consultants that can travel the US, then the tougher the niche the better. Being able to perform large site migrations of email to a cloud mail provider over a weekend, for example, would create a great niche for a VAR. (There are still companies that use this model supporting Berkeley Internet Name Domain (BIND) for Domain Name Server.)

This niche will create opportunity in both business won, and business lost. Even if a customer decides on an alternative, then they will most likely pass on your company information to their peers.

The cloud computing market is still young enough for you to define your own niche markets, and I generally define these as two types: Heavy lifting, and cumbersome. The customer will generally be focused on the heavy lifting items of an actual conversion process. For example, many companies are considering moving tiered storage to cloud storage. A lower tiered storage needs to be accessible by the business; however, the amount of time it takes for the business to retrieve the data is a secondary factor. But, the cumbersome piece from an infrastructure standpoint is to get the data there, manage the “rotation” of data onto the cloud and expire unneeded data. The VAR niche for this portion may be within the Ubuntu/Eucalyptus space at the infrastructure level, and in custom scripting for data management.

The cumbersome piece of migrating to cloud storage is availability. Another VAR might focus on selling products and services for cloud storage availability. An ideal niche is one where the customer doesn’t recognize the challenge until it’s pointed out.

The value of your channel competitors
You can also find new business opportunities by keeping a close eye on your competition, especially those who made it through the downturns of the ‘90s and last decade. Competitors that adapt to the market define themselves and the markets they influence. If you operate in friendly and spirited local markets, sponsoring some of the same local trade events can create market dialogue. Also, look for competitors that are leaving markets because they could become your new partners and a relationship could be mutually beneficial. If a competitor is moving into supplying only cloud-based applications, then they may be an ideal partner if you’re focusing on cloud-based systems and storage.

By identifying appropriate channels, understanding the cloud market space and watching the competitive environment, you can both secure your niche market and succeed in 2011 in the cloud space.

About the author
Ronald McCarty is a freelance writer, information technology consultant, and the owner of Your Net Guard LLC, an IT consulting company located in Dallas, Texas. He has written for numerous publications and websites including TechTarget, CMP, Cisco Press, and New Riders. Ron is also the author of Ubuntu Linux System Administration.

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