2012 Predictions: Enterprise Software

2012: The year of treading carefully

The last 12 months has seen an explosion of cloud based software and services. Everything seems to have an ‘AAS’ now with Gartner recently adding Recovery-as-a-Service to the growing lexicon. The specialist and broadline distributors are finally getting the message. 2012 will see the likes of ComputerLinks, Magirus and Ingram offer service aggregation and delivery via the channel.

However, the industry is at a point, especially with Software-as-a-Service where deep customisation and integration is still not an easy task. The first generation cookie cutter approach to anything-from-a-cloud will be sorely tested in 2012.

Analyst firm Gartner points at Cloud Services Brokerage (CSB) as a possible benefit and in its view, as the market for cloud services brokerage will continue to expand and help to make governance in the cloud the most common way of consuming governance functionality.

Even with Amazon’s flagship cloud having a few hiccups over 2011, it seems the market is not spooked. Multiple surveys show adoption still rising and when factoring in things like Google docs and other “light” collaboration tools, magic numbers like 80 percent plus adoption are bandied about to suggest that all is well.

However, when you ask about mission critical transactional systems, highly sensitive workflows or proprietary systems, the cloud adoption numbers drop dramatically and often into the low double digits.

It’s clear that the every channel partner needs to have a credible cloud story but at present it is incredibly difficult to differentiate. For 2012, good old fashioned customer service and deep technical knowledge of how all the cloudy bits fit together for ERP, CRM, Disaster Recovery and other typically on premise software will be the difference between success and failure.

Although a contentious point, some would argue that cloud by its very nature will cause consolidation across distribution and ultimately the channel. Today, a small less than 20 person VAR / IT maintenance firm can happily manage 100 SME customers in a non-cloud centric world.

But in theory, as SMEs take services from the cloud instead of on-premise hardware and software, that same VAR / IT firm will be able to manage 10 times the number of clients using remote multi-tenant support tools without much headcount increase.

The painful reality that will become clear over 2012 is that the efficiencies and cost savings that cloud offers will result in a smaller IT channel then is currently needed to maintain lots of on-premise equipment and systems. The channel can't expect customers to making saving on one hand yet still pay VAR the same wage – it’s a fantasy to believe otherwise.

Kevin Bland, channel director UK, Ireland and South Africa at Citrix sums it up rather nicely: “Those resellers that haven’t yet started responding to the explosion of cloud offerings will also start to feel their customers slipping away from them. The SMB marketing is establishing itself as the hot space for cloud services since it enables decisions to be made quickly and the cost efficiencies of renting services over building and supporting IT are obvious. As a result, those SMB resellers who haven’t started building or buying cloud offerings will particularly struggle.”

In his view, throughout 2012, we will continue to see a trend in the channel market where specialist resellers are acquired by generalists looking to maximise market trends. Large organisations that are used to building solution stacks for customers will acquire small to mid-sized resellers who have successfully specialised in markets such as desktop virtualisation.

Bland is brave for stating the nagging doubt that much of the channel has about cloud. Like the big push towards services in the early 2000s that made the tin sellers switch or get out, cloud is a potentially much bigger broom. In the near term, there is probably going to be a migration boom as the channel helps customers into the brave new cloud world. However, the longer term prospects suggest a leaner channel will start to emerge from this point onwards.