Solution Providers Reap Rewards Of 'Six Pillars Of The Cloud'

Solution providers that have aggressively adopted one of the six pillars of cloud business models are happier and so are their customers.

That was the takeaway from a panel of six top solution providers at the XChange Solution Provider conference hosted by The Channel Company CEO Robert Faletra, aimed at driving home the power of the six primary cloud business models identified by The Channel Company.

[Related: XChange Solution Provider 2014 Coverage ]

Faletra said the six firmly established business models -- cloud consultant, cloud builder, cloud service provider, cloud agent, cloud broker and cloud application provider -- are a sign that the "revolutionary" disruption that hit the channel years ago with the onset of cloud computing has settled into an "evolutionary" period.

"The revolutionary part of the cloud with a lot of confusion with partners not knowing what the right model was is largely behind us for the majority of the channel," he said.

Faletra said the six new standard pillars as established by The Channel Company mark a coming of age of sorts for well-defined and established channel cloud business models. "This is where we are going," he said. "This is where the model is."

The six pillars, Faletra said, are the cloud consultant, whose primary role is architecting a cloud solution; the cloud builder, which builds cloud infrastructure; the cloud service provider, which hosts and manages cloud services; cloud agents, which act as sales influencers to get customers to adopt specific cloud solutions; cloud brokers, which aggregate cloud services and bundle them up for customers; and cloud application providers, which develop and sell applications in the cloud.

Alex Brown, CEO of 10th Magnitude, a four-year-old Chicago-based cloud application provider that also does some cloud brokering business, said he made a conscious decision to get out of the old VAR business model because he wanted to get off the never-ending "treadmill" of constantly selling projects to move into a robust recurring revenue business. "We knew the world was changing and we knew we needed to help add value to our customers," he said. "I was frankly looking for a new model having been in the business for 25 years."

Brown said the custom-cloud-application-development-business decision has paid off in happier customers and a stronger business. "We can build up recurring revenue without needing to add more people to sell more hours to continue to grow the top line," he said. "We are very happy."

Brown said it is simply a "great time" to launch a solution provider business given the shift to the cloud. "Anytime there is confusion in the marketplace, we ought to be making money," he said. "There is a lot of confusion. The models are not settled. There is a lot of white space still out there."

NEXT: A Business Model That Leads To Higher Customer Satisfaction

Jason Lambiris, CEO of Apex Digital Solutions, a cloud broker based in Sterling Heights, Mich., said his move into the cloud away from a traditional managed service provider business model has led to improved customer satisfaction and better business fundamentals. "What we were getting tired of was figuring out the travel, logistics and rolling trucks, especially working across states. It just became an easier model for us to be able to support, and led to better customer satisfaction."

TekLinks, a Birmingham, Ala., cloud agent, which ranked No. 189 on CRN's SP500 list with $93 million in annual sales, moved into the cloud business model aggressively when it saw profit margins eroding in the old VAR model, said TekLinks Vice President of Managed and Cloud Services David Powell. TekLinks initially built its own data center for cloud services, but is now looking at "how we can resell and take someone else's stuff" to customers in order to deliver "more custom solutions tailored to customers," said Powell.

"It's a great place to be," said Powell of the company's shift to a cloud agent model. "We have really found that it is a sticky model. It is one consistent with where we excelled in the past with the VAR business. You are orchestrating a solution, but the delivery mechanism is different."

David Geevaratne, president of New Signature, a Washington, D.C., cloud consultant, said the conscious decision to move to the cloud has resulted in economic and technical "business benefits" for customers and his company. He said the cloud consultant model has allowed his company to deliver "better service to our customers" without relying on high-priced engineers. "Ultimately, the customer and their customers got better service through these [cloud] services," he said.

GreenPages Technology Solutions, a Kittery, Maine-headquartered national cloud builder power and one of VMware's top partners, made a conscious decision to drive a managed services transformation to support public and private clouds, said GreenPages Vice President of Marketing and Operations Glen Jodoin. "We spent about three years redesigning our managed services and building an offering, and then released it last year," he said. That has paid off in more satisfied customers and a stronger business for GreenPages, said Jodoin.

Sam Coyl, president and CEO of Netrepid, a cloud service provider in Harrisburg, Pa., said his company moved to the cloud to pull the conversation from technology to how he could help his customers provide "faster, better, stronger" business outcomes without "having the infrastructure discussion."

"We don't talk about what the hardware is or whether or not we have the licensing," he said. "We talk about how we are going to solve their problems and how we are going to make their business more effective."

PUBLISHED MARCH 4, 2014