Service Providers Should Seize Cloud Opportunity Now
Further Findings Of The Report
(Page 2 of 2)
By 2015, registered IT and application partners -- such as one-tier agents, two-tier agents, system integrators (SIs), dealers and direct market resellers (DMRs) -- will account for 39% of end-user-generated revenue in this market. IT and application vendors will generate 36% of the revenue, either through web-based sales or dedicated account representatives. Fixed and mobile telecoms operators, and cable TV operators, will take a 23% share, and managed service providers (MSPs) will account for the remaining 2% of enterprise cloud-based services revenue.
IT and application partners have a great opportunity, but ties to their legacy businesses could derail their aspirations in the cloud services market. Failure to access the potential of these services will doom these partners to stagnant or declining revenue streams over the next five to seven years. Recent equity analyst reports cite risks as a result of SIs' unwillingness to deal with cloud opportunities and threats.
More SMB Insights
- The top 10 secrets to using data mining to succeed at CRM Discover proven strategies and best practices
- More than "Just CRM" : 4 Keys to Optimizing Long-Term Loyalty and Revenue
- Best Practices: 5 Security Tools Every Small Business Must Have
- SaaS 2011: Adoption Soars, Yet Deployment Concerns Linger
Service providers must embrace cloud services and bundle them into their enterprise and small or medium-sized enterprise (SME) solutions. The business model behind cloud services is similar to the business model behind established communications network services. A service provider amortizes its upfront data-center-related capital investment over a period of months and years, coinciding with the monthly fees charged to end-user enterprises for the use of the infrastructure. For a service provider, this model of business should be very comfortable. Less comfortable is the unregulated nature of the business - there is no guaranteed return on investment - and the non-telecoms-centric services they will be required to market and sell.
Large enterprises will continue to adopt incremental pieces of cloud services to complement existing on-premises solutions. One of the benefits of cloud services is the ability to trial the solution with minimal up-front investment. This lowers the barriers to entry and gives enterprises new technology options.
SMEs have been the beneficiary of some high-quality cloud services from NetSuite and salesforce.com for a few years. Cloud services have several attributes that make them strong additions to SMEs' technology landscapes, including:
- minimal upfront costs
- minimal implementation and IT support requirements
- the removal of networked applications environments
- simple user interfaces
- scalable solutions.
As a result, SMEs will account for about 40% of cloud services revenue worldwide, and about 65% of the employees that use such services.
While we believe that cloud services have high potential - we forecast that revenue will treble over a five-year period - we do not believe that enterprises will retire vast quantities of legacy solutions just so they can 'go cloud'. Instead, they will pick and choose cloud solutions for incremental technology projects. SMEs will be more likely candidates for mass migration to cloud services, although CSPs and vendors often do a poor job of crafting solutions that are appropriate for SMEs at a reasonable price.
Analysys Mason's Enterprise program will continue to research cloud services this year. This research will include a series of reports and viewpoint articles on particular applications, infrastructure solutions, vendor and CSP successes and failures, and cloud scorecards for review by our clients and the SME market in general.
Steve Hilton is the lead analyst for Analysys Mason's Enterprise program, which explores the needs of the enterprise, small enterprise, and SOHO ecosystems.
Once your agency has completed the business case for deploying a private cloud, how do you actually move ahead with your data center transformation? In this InformationWeek Government Webcast, we'll explore steps to get you there. It happens Aug. 11. Register now.