Cloud Services—What’s Selling, Who’s Buying

Even in a slow economy, the IT industry is bullish on all things cloud. Estimates from various analyst firms peg the worldwide market for cloud services in 2010 at around $20 billion, with double-digit growth forecasted. With that kind of money, channel partners that do not already offer cloud services, or are not yet contemplating doing so, are missing a potentially lucrative opportunity.

But where is the best place to make a foray into cloud services? Taking a cue from your customers by assessing their prevailing needs is a good place to start, yet many customers may not be aware of cloud services and their potential for transforming their (and your own) business. In addition, some industries may have characteristics such as regulatory requirements that make cloud services an easier sell. Targeting these industries with cloud services could be a good strategy toward establishing a beachhead in the market.

By definition, cloud services are those computing services that can be delivered via the Internet rather than through the traditional on-premise model. To be considered a true cloud service, offerings are available in a mulitenancy model in which customers use the same version of software; in effect, one channel partner offers a standard service to many customers that access the service online and pay a recurring subscription fee in the process. In the cloud services world, it is the provider that owns the software and associated hardware on which that software runs.

There are three broad categories of cloud services: software as a service (SaaS), which delivers application functionality; infrastructure as a service (IaaS), which delivers functionality such as storage management, backup, archiving, and computing resources; and platform as a service (PaaS), providing environments in the cloud to develop and test applications.

Popular SaaS services include business applications such as email, productivity applications (word processing, spreadsheets, and the like), Web conferencing, CRM, accounting, and ERP. Amazon Web Services and Rackspace currently dominate the market for IaaS. Vendors such as NetSuite and Salesforce.com offer PaaS environments for customizing applications. More recently, Microsoft entered the market with its Windows Azure platform.

CANDIDATES FOR THE CLOUD
Among SMBs, there are no particular verticals “that present bigger opportunities than others for cloud services,” says Todd Fitzwater, a principal of Demand Solutions Group, a provider of on-demand services in Los Gatos, Calif. That said, however, some industries with data storage and privacy regulations such as financial services and healthcare are receptive to cloud-based solutions for storage and security that enable them to cost-effectively meet compliance requirements.

At this point in the cloud services market, company size is still the main criteria for identifying the best prospects. Those SMBs with limited budgets and IT staff are prime candidates for cloud services. Typically, these companies don’t have substantial existing investments in IT systems, nor do they have the capital to acquire on-premise solutions. For many such organizations, cloud services represent a greenfield opportunity to acquire functionality they never could have afforded previously. To other SMBs, cloud services represent a relatively straightforward way to upgrade current capabilities.