Techaisle Blog

In a genuine sense, the discussion of “the cloud” is similar in scope to the discussion of “IT.” In both cases, use is a given, but the scope and impact of that use are critical to the operational effectiveness and competitiveness.

In today’s world, there is little distinction between “business infrastructure” and “digital business infrastructure;” in recent SMB survey research, Techaisle found that executives from nearly all upper midmarket firms (1000-4999 employees) agree that we have reached a “post-digital” state where all business strategy discussions include digital considerations.

Cloud is the linchpin for these strategies. A Techaisle survey of more than 2,000 firms, segmented into small business (1-99 employees), core midmarket (100-999), and upper midmarket (1000-4999), found that across this broad spectrum, SMBs universally see cloud as a way to reduce IT and operational costs, increase operational agility, and support improved business processes that drive increased efficiency and profitability.

Cloud in an SMB Business Context

For more than a decade, the cloud has been touted as a means of enabling SMBs to capture IT benefits that were previously the sole province of large enterprises: the ability to achieve both IT cost-efficiency and the competitive edge arising from ubiquitous automation that accelerates processes and unlocks the potential of new relationships, offerings, and markets. Today, SMBs and midmarket firms are seeking a zero-friction future: a state in which businesses can seamlessly deploy and integrate capabilities across multiple business areas, creating fluid systems linking core functions to new approaches to engagement, insight, and innovation.

Since 2014, the path forward has proved to be more fractious than the vision. In most SMBs, the cloud itself advanced in fits and starts, with early attempts at hosted private cloud and use of public cloud to support business-critical workloads snagging on unclear platform standards, a lack of experienced talent, economic worries, and a delivery horizon which remained stubbornly beyond practical experience. But in time, knowledge and improved technologies have addressed the rough edges.

Cloud is increasingly able to deliver real benefits to SMBs: it is both a priority and a current reality, providing business infrastructure that connects strategy and execution, responding to changing business requirements, changing customer and supplier expectations, volatile competitive pressures, and new opportunities for automation of both systems and system-dependent processes and workflows.

Six truths about cloud in the SMB

The aviation phrase “all thrust, no vector” is sometimes used to describe individuals or initiatives that exhibit a great deal of energy (such as the power required for a plane to achieve liftoff) but no clear sense of direction. It is an apt description of the current state of the IT channel.

• The IT channel is facing several challenges, including the need to deliver more business value, the shift to as-a-Service contracts, and the need for new skills.
• There is no clear consensus on the best way to address these challenges.
• Channel partners are struggling to find a balance between investing in new initiatives and maintaining their existing operations.

Consider the critical business issues identified by survey respondents in Techaisle’s survey as a starting point. Ten issues (from a list of 19 options) were identified as important by more than one-quarter of respondents, but not one was identified as important by more than half. Respondents are trying to reduce volatility in their businesses by managing uncertainty, reducing churn, and focusing on customer retention – and/or they are attempting to drive growth by improving speed to market, focusing on new markets, and increasing the number of offerings sold to each customer – and/or they are looking to shore up core operations through improving sales and marketing effectiveness, attracting and retaining employees, and increasing engagement with vendor partners.

Techaisle’s landmark survey of 2,115 channel partners, representing a cross-section of the partner community, indicates that while pressure for change is mounting, partners have not yet coalesced around a path forward. The Techaisle channel survey shows that the partner community members are searching for a roadmap to success. That roadmap will vary across partner models, as will the opportunities and requirements for suppliers. In this time of transition, effective channel collaboration will determine growth and viability for both individual channel businesses and their vendor suppliers.

The early years of this decade have been challenging for individuals and businesses in all sectors. In some cases, the pandemic – or, more recently, rising interest rates and declining consumer confidence – have caused tremendous upheaval, with suppliers finding that traditional definitions of the market, sales motions, and fulfillment no longer applied.

The current decade has brought an even thornier set of challenges to the IT channel. In addition to the macro conditions that apply to all businesses, and against a backdrop of changing business models, shrinking product margins, and the need to build profitable services practices, channel members need strategies to cope with:

• A shift in core customers – from technologists to an organization-wide mix of personas, including businesspeople who define technology in terms of business rather than IT functionality.

• A shift in buying and selling models – from fee-for-product/service to approaches that involve outcome-based evaluation and contracting or shared risk agreements that tie payments to achieving defined business goals.

• A shift in solution composition – from monolithic systems to modular stacks that address target functionality via APIs – as well as a corresponding change in the underlying business approach, from “design once, deploy many” to a need for individualized solutions tailored to a fluid set of customer needs.

These conditions have combined to place the channel under tremendous stress. Channel members have explored different business models, different product mixes – accompanied by demands for new skills and service capabilities – and other marketing, selling, and partner relationship configurations.

Both channel businesses and their vendor suppliers are vested in understanding how solution portfolios are changing and how the channel and vendor communities can best work together to bring solutions to market. These are complex questions, but their answers are at the heart of a wide range of sales, marketing, and executive imperatives. This study provides valuable input to those discussions.

Aligning to Changing Solution Portfolios

The starting point for an analysis of alignment to changing solution portfolios is the portfolios themselves – what is the channel selling, and how fast is revenue associated with these offerings expected to grow? Data shows that more than 80% of partner firms are selling cloud and/or collaboration, and more than 60% sell customer experience, employee experience, or analytics solutions. From a growth perspective, 80% or more of channel members anticipate growth in cloud and 5G, and 70% or more expect growth in collaboration, analytics, SD-WAN, virtualization, and/or SD-WAN.

According to a series of surveys by Techaisle, cloud cost optimization (CCO) has recently become the top priority for SMBs and midmarket organizations. In 2023-24, cloud cost optimization has moved from being the 2nd priority in 2021-2022 to the 1st. Techaisle survey found that 59% of SMBs and 55% of upper midmarket firms are now focusing on optimizing their cloud costs, making it the top consulting services priority for 100% of firms surveyed. As the adoption of cloud services continues to grow, so do the accompanying costs, which can quickly spiral out of control if left unmanaged. This challenges organizations of all sizes to optimize their cloud costs. Cloud economics and cost optimization consulting are not only challenging for SMB and midmarket firms but also for channel partners. According to a parallel survey by Techaisle, 49% of channel partners have seen an increase in demand for cloud cost optimization consulting. As a result, 72% of partners are planning to offer these services to their customers.

Cloud cost optimization has become crucial for SMBs and midmarket firms to effectively manage their expenses, improve resource utilization, and keep costs within budget. By implementing strategic approaches to cost optimization, businesses are challenged to balance the value of their cloud investments with the need to control expenditure.

KEY CONSIDERATIONS FOR CCO

In 2014, 80% of these firms viewed the cloud as a solution for increasing revenue, while only 20% used it to reduce costs. In 2023, the data flipped. The appeal of the cloud lies in its flexibility, adaptability, and ability to provide resources on demand. However, SMBs and Midmarket firms often end up paying for more resources than they use, leading to unexpectedly high cloud bills impacting their financial stability and hindering growth and investment.