Techaisle Analyst Insights

In today’s SMB market, it is critical for vendors to build detailed understanding of the small and midmarket segments, and to align resources and strategies with requirements as SMBs move from initial experimentation with sophisticated solutions towards mass-market adoption.

In its latest study, Techaisle analyzes 1,116 survey responses to provide the insight needed to build and execute on cloud solution strategies for the small and midmarket customer segments. Techaisle’s deep understanding of SMB IT and business requirements enables vendors to understand the ‘why’ and ‘when’ of solution adoption, current and planned approaches to solution use, the benefits that drive user investments, and key issues in aligning with buyers and building and intercepting demand.

Highlights of findings presented in the report include:

This is a two-part blog article. The first part dealt with “SMB IT channel reaching an inflection point”. Second part, below is on “New wave of SMB channel conflict in building a cloud practice”.

Turning a supertanker

Building an effective cloud practice within a channel business is a complex undertaking. Using an old metaphor, it has been compared to “turning a supertanker.” This is an inapt comparison, and not just because the vast majority of channel businesses are far smaller than a large ocean vessel. The real problem with the comparison is that turning a supertanker refers to an exercise whose success rests on an anticipation of future change. Certainly, this is part of the problem for the channel – what is the best time to invest in ramping up cloud practice resources? – but the issue has a much greater scope.

A successful cloud business practice requires new management metrics, new financial models, new sales processes (and generally, compensation models), new vendor relationships, new marketing activities, new consulting capabilities and new technical support capabilities. To use a nautical analogy, creating a cloud practice within an existing channel business is like building a second boat within your ship, sailing it off in a different direction, and maintaining alignment between the two courses in order to maximize synergies and benefits and reduce expensive discontinuities.

Abundantly Complex

If this sounds difficult and complex, well…it is. However, there is abundant reason to believe that the exercise is necessary for future viability and success. Roughly 80% of channel firms either offer some type of cloud solution today or are planning to offer cloud solutions; of these, more than 60% expect cloud revenue increases in in next one year (Techaisle’s SMB Channel Partner Trends study). This is not a single-year issue, though: the business impact of cloud within the channel is expected to continue to increase over time. Techaisle expects that over the next several years, the position of the generalist channel firm – the “one stop shop for solutions” – will become untenable, squeezed by market forces requiring higher degrees of specialization. Some channel firms will specialize in cloud, while others will link cloud with one or two other specialties, such as mobility, virtualization and converged infrastructure, and/or managed services. But very few channel businesses will remain viable without having a credible cloud business practice.

What are the obstacles to channel members achieving scale for their cloud businesses? Techaisle’s SMB Channel Partner Trends research and accompanying research The State of the US SMB Cloud Channel shows that increasingly, Walt Kelly’s famous line (from the Pogo comic strip) “we have met the enemy, and he is us” describes the most pernicious challenges associated with development of a cloud business.

Techaisle’s research explored data on 10 cloud sales challenges faced by SMB channel partners in selling cloud to SMBs. Four of the top five – “lack of in-house expertise”, “do not have financial resources,” “lack of knowledge about cloud computing” and “do not know how to implement [cloud solutions]” refer to internal issues, and two others, “do not understand the [cloud] business model” and “offering cloud-based services will necessitate elimination of jobs at our company,” also reference internal issues or concerns.

Interestingly, external barriers to developing SMB cloud business practices seem to be diminishing in importance.

Best positioned cloud infrastructure supplier
In Techaisle’s recent SMB Cloud Computing adoption survey, respondents were asked “which of the following do you think is best positioned to deliver cloud infrastructure solutions”. IBM was rated as being “best positioned to deliver cloud infrastructure solutions” by 24% of small businesses, and 23% of midmarket firms. Microsoft is similarly entrenched, seen as best-positioned by 21% of companies with 1-99 employees and 33% of midsized enterprises. Given that Cisco is stronger in larger accounts than in the small business market it is the third-ranked cloud infrastructure vendor in the small business segment, cited by 19% of small accounts, but just 11% of midmarket companies. Clearly, Cisco’s brand equity is helping to support its position in a market where it has sparse actual presence. AWS is viewed as best-positioned by 10% of both small and mid-sized firms, putting it slightly ahead of Dell in both markets. Perhaps as a consequence of its high-end cloud product line, HP is not viewed as a leading cloud infrastructure vendor in the small business segment but is still the third-most prominent brand in the midmarket.

Who is ‘top of mind’ for converged infrastructure?