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The Cloud's Untapped Vein of Gold

By Jeffrey M. Kaplan
Oct 11, 2013 5:00 AM PT

Although the cloud marketplace is growing rapidly, the current rate of growth will continue only if a broader set of strong channel companies emerge to extend the reach of today's cloud leaders into new industries and geographies.

The Cloud's Untapped Vein of Gold

I've been suggesting for years that building more channels to market for cloud vendors is essential to the growth of the industry. This issue came to the forefront again recently when I spoke to two groups of employees of the provincial government of British Columbia in Victoria and a group of entrepreneurs at an incubator in Vancouver.

I was asked by members of both audiences why they couldn't find local cloud providers that could deliver a new generation of services to meet their rapidly evolving needs.

Prism, Patriot Act Obstacles

Both the government employees and entrepreneurs were interested in taking advantage of cloud services, but they were hesitant to obtain cloud services from U.S.-based service providers south of the border because of privacy concerns exacerbated by the NSA Prism scandal, as well as stringent restrictions imposed by the U.S. Patriot Act.

The Canadians aren't alone in their reluctance to capitalize on cloud services due to these concerns. Various European countries are also refraining from using U.S.-based services because of Patriot Act fears.

While a growing number of Europe-based companies have emerged to fill the void, the same isn't true in Canada. As a result, growing interest in cloud alternatives within Canada is being ignored because cloud vendors have not been able to foster a set of channel partners within the country to offer indigenous services that can meet their unique needs.

This is a classic channel opportunity waiting to be addressed -- and it isn't the only opportunity to bring cloud services to a specific nation or geographic region. Nearly every international market lacks sufficient local cloud channel partners.

Global Shortage

Central and South America, Australia and New Zealand, and other parts of the PacRim, as well as the Middle East, Africa and Europe, are prime territories for cloud growth that need more local channel partners to plant the flag for the leading cloud vendors.

Of course, the cloud channel opportunity isn't just about extending the reach of today's cloud services into new geographies. There is also plenty of opportunity for channel companies to exert their industry expertise in specific vertical markets and show healthcare providers, financial institutions, retail companies, manufacturers and others how to employ cloud solutions to address their escalating challenges and meet their corporate objectives.

Hard Work, Plentiful Rewards

Building a successful channel company in the cloud marketplace isn't easy. It requires a more agile business model because of the dynamic nature of cloud services. The subscription pricing approach at the center of cloud services demands a leaner operating style because channel companies can't rely on upfront systems and software license revenues.

Cloud vendors and their channel partners also must devise new account coordination methodologies to ensure customer satisfaction and encourage upsell/cross-sale opportunities, which are critical to long-term profitability.

There are plenty of challenges associated with creating a successful channel business in the cloud marketplace, as my recent travels to Canada clearly illustrated, but there is also a growing number of exciting channel opportunities waiting to be attacked.

Jeff Kaplan is the managing director of THINKstrategies and founder of the Cloud Computing Showplace. He is also the host of the third annual Cloud Channel Summit to be held on Monday, Nov. 4, at the Computer History Museum in Mountain View, Calif. He can be reached at jkaplan@thinkstrategies.com.

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