The Evolution of the UK Channel (Full Research)

EVOLUTION OF THE UK
CHANNEL

March 2012

THE EVOLUTION OF THE UK CHANNEL

SUMMARY

1. Introduction 3
1.1 Overview 4
1.2 Research Methodology 4
1.3 NetMediaEurope (publisher of Channelbiz.co.uk) 6

2. Key Queries 7
2.1 How does the IT procurement evolve with the adoption of cloud
computing? 8
2.2 Is there a connexion between IT procurement and social media? 8
2.3 Are new channel competitors dangerous for legacy players? 9
2.4 What is the channel’s perception with regards the cloud? 9
2.5 What does the channel still expect from vendors and distributors?
10

3. Mid-term Trends and Challenges 11
3.1 Strategic consolidation will take place in the channel 13
3.2 Traditional and non-traditional channel players evolve
furthermore to meet market’s needs 13
3.3 Non-traditional channel players become key drivers 13
3.4 E-tailers emerge in the cloud business 14
3.5 Pure resellers grow into VARs or… 14
3.6 VARs become technology enablers or… 15

4. An End-users Perspective 16
4.1 Vendors Selection Sources 17
4.2 Vendors Selection via Social Media 18
4.3 Mid-term Trends regarding the use of Social Media for Business
Purposes 19
4.4 The IT Procurement Process 20
4.5 The IT Products Procurement Channel 21
4.6 The IT Software Services Procurement Channel 22
4.7 SaaS Adoption Rates 23
4.8 IaaS Adoption Rates 24

©Copyright - NetMediaEurope 1
All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.


5. A Channel Perspective 25
5.1 Mid-term Business Challenges 26
5.2 Mid-term Business Drivers 27
5.3 Collaboration with Vendors 28
5.4 Perception of the Cloud Computing 29
5.5 Top Cloud Opportunities 30
5.6 Top Cloud Threats 31
5.7 What to Expect from Vendors and Distributors with Regards the
Cloud 32
5.8 Cloud Channel Players 33

LIST OF CHARTS AND TABLES
Table 1 : Global and specific challenges for the channel players .................................12
Chart 2 : Main sources for vendors’ shortlist creation ................................................17
Chart 3 : Social media categories used for IT procurement ........................................18
Chart 4 : Use of Social media for business purposes .................................................19
Chart 5 : The IT procurement process .....................................................................20
Chart 6 : The IT Products procurement channel ........................................................21
Chart 7 : The IT software related services procurement channel .................................22
Chart 8 : SaaS Adoption Rates ...............................................................................23
Chart 9 : IaaS Adoption Rates ................................................................................24
Chart 10 : Mid-term business challenges .................................................................26
Chart 11 : Mid-term business drivers ......................................................................27
Chart 12 : Collaboration with vendors .....................................................................28
Chart 13 : Perception of the Cloud ..........................................................................29
Chart 14 : Top cloud opportunities ..........................................................................30
Chart 15 : Top cloud threats ..................................................................................31
Chart 16 : What to expect from vendors and distributors with regards the cloud ..........32
Chart 17 : Cloud channel players ............................................................................33



1. Introduction



1.1 Overview
All the current theories and market signals point unanimously out that the cloud is one of
the factors to completely shake up the market behaviour and totally transform the IT
industry. The cloud adoption is going mainstream as it is about to tackle the core of the
organisations. Its adoption has reached a considerable enough proportion so that it
cannot be ignored anymore by any of the ecosystem players.

Additionally, the IT procurement process is also evolving, driven by the rise of social
media and a channel mutation towards E-markets. The current transition period is more
than favourable to conduct a research and get to know how these trends impact both the
entire channel ecosystem.

1.2 Research Methodology
Our research was performed in three phases:
 a quantitative survey addressed to the channel
 a quantitative survey addressed to the IT decision makers
 an interview set of some key market players, all channel levels

Sample structure

Coverage Channel End-users

Country UK UK

Number of interviews 80 100

CEO, MD, GM,
Contacts CIO, CTO, IT DM
Business DM

VARs, Pure resellers,
Managed service
Company profiles All sectors
providers, System
integrators, Hosters…

Company size All All



Sample structure
(Channel)

Company size Main business model

Sample structure
(End-users)

Company size Business area

All results were carefully collected in order to obtain a comprehensive vision of the big
picture within the UK channel ecosystem. We have interrogated 80 major channel
players, 100 ITDMs and completed them with around 20 highly qualified interviews
performed on major IT players (vendors, distributors, VARs, integrators, service
providers, end-users). All samples have been proven to be consistent in terms of
information content.

Different analytical perspectives are combined in our approach to highlight the main
categories of this study, as well as the most important variations to be noticed on a short
or medium term basis. We have put the entire ecosystem under spotlight in order to give
a broader perspective to our analysis.



1.3 NetMediaEurope (publisher of Channelbiz.co.uk)
NetMediaEurope is the publisher of TechWeekEurope.co.uk and ChannelBiz.co.uk and
represents one of the top IT B to B websites in the UK. The group also publishes IT
specialized websites in France, Germany, Italy and Spain and totalizes approximately 14
million unique visitors per month.

In addition to selling advertising, NetMediaEurope offers a wide range of solutions in the
areas of lead generation, project detection, events and bespoke marketing solutions.

Finally, NetMediaEurope has a research pole dedicated to the IT area. In 2011, this
department has conducted surveys on over 5,000 business and IT decision makers in
Europe.

NetMediaEurope has currently one hundred employees and collaborators.



2. Key Queries



2.1 How does the IT procurement evolve with the adoption of
cloud computing?
Our results are set to confirm that positive growth in terms of cloud adoption will
cause important changes in the IT procurement process, as demand and supply go
hand in hand to meet the market’s needs.

In the newcomers’ category, E-tailers gain eight points on a mid-term basis (up to 43%)
with their involvement in the B to B IT products procurement process. E-tailers have
managed to penetrate the B to B business with the rise of consumerisation and because
of their historical stock manipulation related capacities. However, Amazon has started to
perform well in the cloud area too, because of its IaaS and PaaS specific offerings.

At the same time, resellers and VARs are being relegated towards more traditional
products and solutions. Their contribution becomes less important in the current market
context. Nonetheless, the traditional software services procurement process points to an
increasing orientation towards VARs and resellers. Dynamics show a progressive
involvement of these channel players in the procurement process on a mid-term basis, as
opposed to vendors. VARs have historically gained expertise in project management,
training, software customization and data conversion. But the challenge is to come in the
SaaS era, where less technical and more vertical business expertise is required on the
market.

2.2 Is there a connexion between IT procurement and social
media?
According to our findings, only 14% of ITDMs use social media for vendor
shortlisting. That means that social media is not perceived as a direct sales or
purchase influencer, at least not consciously.

Social media is used on a large scale by all decision makers, to indirectly guide their
purchases or for other decision making. Indeed, only 18% of ITDMs don’t use social
media as a source of information for IT procurement. Among these non-users, half
plan to use social media within the next three years. As for those using it, more than two
thirds think they will increasingly use social media on a mid-term basis.

But the use of social media does not have to be reduced to the likes of Facebook
and LinkedIn, as social media is way more than that. IT blogs, forums and other IT
community websites are used on a large scale when it comes to profiling IT vendors (half
of ITDMs said they use it). This points to an assumption that opinions are strongly
shared among the IT leaders community and they can easily influence each other in
their purchase decision. Therefore, a relevant influencer sales or purchase strategy does
not have to be limited to the likes of LinkedIn and Co, as social media is way more than
that.



2.3 Are new channel competitors dangerous for legacy players?
New channel players such as managed service providers and application hosters
are already two steps ahead of traditional players. 60% of the channel perceives
them as being more suitable to selling cloud services. This comes as no surprise, as they
have already adopted a recurring revenue service oriented market model and the cloud is
only a natural development of their skills.

The second tier channel is very diverse these days. New entrants and traditional
players cohabit today within dual strategic market behaviour. Our study shows that
some of the traditional players can more easily adapt to the SaaS, IaaS or PaaS than the
others. A change in the business model towards the cloud also implies major investments
in infrastructure that not everyone can afford. Small players for example would have to
create alliances with bigger players such as VARs, integrators, vendors or distributors in
order to add their own value-added to SaaS solutions.

Value added business in the cloud era is a key differentiator for today’s traditional
market players. System integrators, managed service providers, hosters and software
developers are already two steps ahead of the traditional market players in terms of
cloud adoption. Moreover, their competencies are vital to the channel ecosystem. The
cloud players’ hierarchy proves that the cloud market is mainly fed by infrastructure
consumers and IT service providers.

2.4 What is the channel’s perception towards the cloud?
Channel players are unanimous about the importance of their competitiveness in the
channel. 72% consider it one of the top mid-term business challenges, together with
developing new skills (42%) and controlling costs (40%).

Cloud computing is a good alternative to the companies’ liquidities as spending is
staggered on a monthly basis and you pay what you have consumed (or “pay as you
go”). A lot of small businesses which could not afford complex infrastructure or software
due to pricing now can use the cloud as a good occasion to access what was inaccessible
until now. They can be now at the same technological level with their bigger fellows.

There is an overall positive approach towards the cloud and its direct impact on the
channel business model (as two thirds of the channel perceives it as an opportunity).
Second tier channel players tend to develop close relationships with cloud technology
partners, as part of their perpetual search for new revenue opportunities. But not all
channel players are impacted by the evolution in the cloud. Those pure resellers are a
rare species set either to disappear, or to radically change their market model.

Depending on the cloud offerings and usage, the cloud market model could represent a
more convenient alternative for the client, but at the same time it can become laborious
for the channel. But what is more interesting is that both “pros and cons” are more
business and profit oriented rather than technology oriented. Our research also
reveals that recurring revenue (with 47% of positive responses) and additional revenue
(with 34% of positive responses) are two of the top cloud opportunities. Moreover, this
more affordable (at first sight) financing model leads to greater business stability and



longer engagements. Thus, smaller budget businesses can make use of more
complex solutions and further optimize their IT processes.

Offering a large palette of solutions implies making good use of third parties’ knowledge.
And most of all, having its own infrastructure, to be able to host applications or handle
managed services is a big plus. When it comes to cloud players perceiving cloud
computing as a threat, their two main reasons are related to high infrastructure costs
(45%) and competition from managed service providers and application hosters (36%).

New partnership alternatives arise from this necessity to reselling cloud solutions within
the channel and thus benefit from the specialists’ expertise. They are set to compete and
endanger the position of those not being able to handle managed services, applications,
hosted servers, storage security related specific solutions; thus the necessity of making
use of third parties’ knowledge in order to offer a larger palette of solutions. And most of
all, those third parties are able to offer an infrastructure that goes with it. Almost half of
the channel players consider high infrastructure costs as the main danger regarding
cloud adoption.

Cloud related revenues are a double edged sword. Even if the main reason of the
second tier is profit oriented, the cloud is not synonymous with higher margins, as our
study shows that only 8% perceive a direct connection between cloud and high margins).
This is one of the channel “cons” regarding cloud solutions. A huge margin shrink when
totally switching to a cloud business model does not represent an incentive for a reseller,
on the contrary.

2.5 What does the channel still expect from vendors and
distributors?
Marketing cooperation (61%), sales leads (48%) and more training on solutions (45%)
top the list of channel expectations. The value added cloud strategy is based on mutual
business satisfaction. Deeper cooperation between vendors and the channel players
leads to better opportunities for both sides, as well as better market performances. The
effect is meant to be a synergistic one in terms of business.

Second tier channel players also expect training from vendors for their value added
solutions. Thus they can better help customers getting the most of their IT allocated
budgets whilst channel partners provide their experience and a real value add to the
ecosystem, with or without third parties’ contributions. They remain a valuable source to
educate and guide end-users in their cloud adoption. Solution robustness and vendor’s
reputation are also important for their market relationship.

Vendors and distributors are permanently challenged by the health of their second tier
community, as deeper partnering always gets better results. And in a cloud based
market model, a long lasting market relationship is essential to permanently improve the
cloud offerings. Both vendors and distributors are challenged to align their business to
(at least) a hybrid market model and stay relevant to the market’s needs. Second tier
expectations are rather similar from vendors as well as distributors, and slightly more
important when it comes to vendors. Facilitating providers understand how to align their
service offerings, skills and prices allows partners to better promote cloud based
solutions. In-depth training, partner programs and new accreditations are set to further
incite selling cloud solutions.



3. Mid-term Trends and Challenges



This table illustrates in a synthetic manner the main challenges channel players will have
to deal with in the near future in order to stay competitive and improve their business
efficiency.

The changing economic landscape and the explosion of cloud adoption are pushing
players to reorient their business, gain extra skills and take over all the cloud
business that is possible to take.

Table 1 : Global and specific challenges for the channel players

Global challenges Specific challenges

Succeed in building relevant influencer For Manufacturers
strategies in correlation with the  Rationalization of IT spending via
increased role of social media virtualization and cloud
within the IT procurement process  Reorientation of the offer due to an
increasing demand from the untraditional
channel (SaaS / IaaS providers) and a
decreasing demand from end-users as they
tend to further outsource their
infrastructure

For software vendors
Invest in a reliable and secure infrastructure
(on premises or in partnership)

Acquire deeper expertise by creating For Distributors
a brand new market strategy involving Find new sources of revenues to counteract
business decision makers and not only the increase of dematerialization
ITDMs (due to the rise of cloud
computing)

For VARs and Resellers
Many of them still lack cloud related skills;
They have to hire cloud specialists and invest
in certification

Move from traditional billing to a pay For Pure Resellers
as you go financial model (related to They are endangered by their shrinking
cloud computing) margins and the lack of value added business



3.1 Strategic consolidation will take place in the channel
Further mergers and acquisitions will take place at all channel levels in order to further
evolve towards the cloud. Vendors are being challenged to answer to an increasing
demand to rationalize spending into virtualization. Furthermore, they are determined to
innovate towards the cloud to raise their business value in this area. They ally with cloud
providers, well placed to complete their cloud skills. IBM is completing its 70 companies
acquisitions with cloud based software DemandTec and cloud and on-premise analytics
software leading company Emptoris as we speak, in a permanent search to reinforce its
positioning as a global value added solution provider.

The channel is following the same trend. Large managed service providers and
system integrators will also further consolidate. The likes of Eurodata Systems (a
well-known systems integrator) have joined forces with the Trinity Group, an IT services
company to develop additional value added cloud related skills.

Distributors are also part of the phenomenon as they want to add further value to their
business. The rise of dematerialization pushes them further towards alternative revenue
sources. Ingram’s acquisition of Computacenter Distribution (CCD), a managed service
provider and system integrator, is a good example and allows them to deliver on-premise
virtualization and cloud based solutions.

3.2 Traditional and non-traditional channel players evolve
furthermore to meet market’s needs
Our study reveals that a great majority (72%) of the second tier channel players are
challenged by their market competitiveness. The objective has always been the same:
being able to answer the market’s needs is more than ever important whilst the market
is being directed towards bespoke solutions. This new market model adoption is
giving birth to a transition phase into a hybrid strategy, where traditional and non-
traditional companies coexist.

A broader list of channel partners will make an appearance as the cloud computing
market place continues to grow. At the same time, vendors are struggling to develop
even more advanced partnership programs to attract them towards mutual market
benefits.

3.3 Non-traditional channel players become key drivers
The likes of application hosters and managed service providers gain weight in the
channel, as they are the most suitable and well placed in providing the most appropriate
cloud solutions. In parallel, other business models will have their word to say in the cloud
business.

As for system integrators, they are also well placed thanks to their skills in
development and integration, and their capacity to invest in a cloud infrastructure. They
have the possibility to offer a wide range of cloud services, including private IaaS and
SaaS. They can also become key partners for software vendors in need of a proper
infrastructure allowing them to facilitate providing their own SaaS solutions.



Telecom carriers will certainly have their word to say in today’s cloud business,
meaning extra services will be added to their B to B network services. That means
offering packaged solutions together with private networks, security, data storage and
other telecom services. And most importantly, telecom players can also rely on the
infrastructure that goes with it.

Converged IP solution providers offer more and more unified communications as a
service via software licences, communication IP-PBX solutions, virtual PBXs, database
servers for VPBXs, etc. Collaboration (42%), video (19%) and voice applications (13%)
are very common in a SaaS version as well.

3.4 E-tailers emerge in the cloud business
The multichannel vendors’ market strategy is no longer a secret method used in
order to reach the customer by all means. The new marketing approaches are doubled by
an omnichannel market presence. The democratization of IT products and solutions has
allowed some atypical cloud players such as E-tailers to emerge in the middle of a
price war; their model tends to evolve with the cloud adoption, but can they handle it
entirely by themselves? How far can they go?

Large e-tailers such as Amazon have started providing a public cloud infrastructure
which could be used as a springboard by smaller software vendors willing to resell their
SaaS solutions (white labelled or not).

3.5 Pure resellers grow into VARs or…
Pure resellers are set to lose their market positioning as cloud accelerates its market
diffusion. Their lack of infrastructure and skills will lead them to revise their market
model, while those remaining strongly products oriented are set to disappear at the same
time with constantly shrinking margins. Additionally, further consolidation is expected in
the market, mainly for financial reasons. Though their margins are decreasing, alliances
and partnerships could offer new opportunities and strengthen their financial health.

Some of the resellers will switch their business models to become VARs, meaning
trusted advisors in their attempt to relate themselves to the current market model. Thus,
they will adapt their process, in order to save some of their shrinking margins and to
offer tailored services and solutions.

Nevertheless, the channel remains a major influencer of the market trend. Resellers
maintain close relationships with the market as their main role is to try to propose the
most suitable product or solution for the client. And there is still a real necessity for
infrastructure, all you have to do is look around and try to take into account the low
adoption rate when it comes to the virtualization of workstations.

At this stage, their role is more a consultative one, to make sure that the end-user has
what he needs, contact the good partner to provide it and that it makes good use of it.
And in this hybrid position, they will still get somehow incentivized. But for how long?
And what will happen to resellers that continue to ignore the rise of cloud adoption and
continue to stay traditional?



3.6 VARs become technology enablers or…
Traditional VARs are also threatened by the rise of the new channel players as value
added services are the main market differentiators. They have various market
choices between creating alliances with stronger VARs, playing an intermediary role
between vendors and integrators (as they are still in good position to know everything
about the market behaviour), further specialize in offering value added and managed
services or changing their business model. Or why not become brokers, meaning that
they are able to find the appropriate cloud bundle compatible to customer needs?

VARs can be easily switched to a managed services business model. It is the closest to
their business model, allowing them at the same time a cost effective service delivery
model.

VARs will also continue to play for now as intermediaries between vendors and SMBs, it’s
more difficult to be directly handled by the vendor. They are also well positioned to take
the pulse of the market, as they have a good relationship with the entire ecosystem.
This proves that even though not all VARs engage with technology, they can be still
useful in building channel relationships, as they are well placed to know clients’ needs;
they could become the future technology enablers.

In parallel we see a financing model switch and VARs are waiting to see what vendors
can offer to compensate this new financing model. That means that less upfront costs for
resellers could incite them to invest into new cloud technologies. But not all VARs are
financially ready to invest in the cloud.



4. An End-user Perspective



4.1 Vendors Selection Sources
The two main sources for creating a vendors’ shortlist tailored to ITDM’s requirements
are their own websites and participation in different events, seminars or shows. Vendors
appear to be the most trustworthy information sources for buyers, especially in terms of
pricing and technical specifications. 59% of ITDMs declare they frequent vendors’
websites. At the same time, vendors strongly communicate via social media and
encourage IT leaders to participate to their marketing and communication strategy.

Not far away, IT media are also widely used for the same purpose, while direct
networking with resellers yields mixed results. This is no surprise, as the relationship
with resellers is a pre-established one and mostly nurtured by the reseller.

It may come as a surprise, but social media is not perceived as a direct source for
building the vendor shortlist, at least not consciously. Indeed, it is more perceived as a
modern marketing or a networking tool rather than a sales one. But sales and marketing
are strongly related.

Chart 2 : Main sources for vendors’ shortlist creation
“How do you gather information to create your shortlist
of vendors for IT procurement? ”
(Multiple choice)



4.2 Vendors Selection via Social Media
Even if social media is not perceived as a direct influencer of the IT procurement process,
it indirectly guides decision making. To the direct correlation between sales and
marketing, we can add the fact that a great majority (82%) of ITDMs use social media as
a source of information for IT technologies.

IT blogs, forums and community websites are used on a large scale when it comes to
profiling IT vendors. Opinions are strongly shared within the IT leaders’ community and
blogs reflect their practical experiences, both positive and negative. Communication,
collaboration and experience sharing are useful for the business development process.

While LinkedIn is well positioned with regards the use of social media tools, Facebook
appears to be used by one out of ten ITDMs for this very purpose.
Twitter and Google+ are linking dedicated vendor microsites and represent an increasing
hub; they occupy an equal position in prioritizing IT vendors. All this is done via visual,
shared tools and additional optimized features.

Chart 3 : Social media categories used for IT procurement
“What social media do you currently use for IT procurement?”
(Multiple choice)



4.3 Mid-term Trends regarding the use of Social Media for
Business Purposes
Our mid-term trend results point out that social media will be intensively used as a B2B
tool for the years to come, as it becomes a consistent source of information for the entire
ecosystem; cloud and mobility strongly encourage this trend.

Social media remains a consistent source of information regarding the latest IT
technologies and trends, as all IT main players are more actively present on the social
networks. This rise of social media also contributes to rewriting the new marketing
strategy rules for both the vendors and end-users.

Among the current social media non-users, half of them plan to use it within the next 3
years. Nonetheless, one out of five ITDMs are still reticent about the use of social media
for business purposes.

Chart 4 : Use of Social media for business purposes
“Do you think you will increasingly use social media for IT procurement
within the next 3 years?”
(Unique choice)



4.4 The IT Procurement Process
A great majority of ITDMs tend to increasingly make use of the channel to model
specifications, create a vendors’ shortlist or choose a solution.

IT Consultants start weighing heavily in the channel, as they are related to complex IT
projects. Medium sized companies are more synonymous with “wise investments”,
specific to limited budgets, but also to an optimal evaluation and an efficient solution.

Pure resellers still have weight in the channel, they are related to traditional and basic IT
purchases. Managed service providers come third on our top partners list, whether it
comes to common IT support, SaaS or other forms of managed services.

Chart 5 : The IT procurement process
“For your forthcoming IT projects, which of the following categories of partners do you
plan to increasingly use in next 3 years to …?”
(Multiple choice)



4.5 The IT Products Procurement Channel
The IT procurement model is visibly going through some changes on a mid-term basis.

The direct channel remains a main source of IT products purchase, even if on a mid-term
basis it tends to be partially replaced by alternative sources (it loses 3 points and this
trend is about to pursue).

Whilst pure resellers constantly lose their privileged position, alternative channels such
as E-markets and hosting providers gain additional points on the scale of IT products
distribution process, a sign of a clear change in the B2B consumption behaviour. Online
shopping becomes popular among IT leaders as at the same time there is a trend to
democratisation of some IT product categories.

Chart 6 : The IT Products procurement channel
“How do you usually acquire your IT products?”
(Multiple choice)



4.6 The IT Software Services Procurement Channel
The software related solutions dynamics also indicate a switch from the classic purchase
behaviour to a value added based model. On a mid-term basis, consultancies and VARs
are further involved in the acquisition process, opposed to vendors.

The indirect distribution model together with the multichannel approach prevails on a
mid-term basis.

Overall, more than 90% of the UK organisations acquire software solutions rather than
pure software (no services involved).

Chart 7 : The IT software related services procurement channel
“How do you usually acquire your IT software services?”
(Multiple choice)



4.7 SaaS Adoption Rates
According to our findings, 39% of British organisations are currently using SaaS and
another 13% plan to do the same within the next twelve months. Still, half of the
organisations are uncertain as 48% still don’t use them or plan to use them on a mid-
term basis only. Physical backup is still important to them. But, on a more optimistic
note, SaaS is way more popular than was the case three years ago.

Services companies, consultancies and integrators nowadays play a more important role
in the channel ecosystem. But this whole new crop of channel players in the likes of
hosters and managed service providers is privileged in today’s market approach. The
cloud is a volume business, with less upfront gains, more mid-term oriented profit and
nimble players were aware and therefore rapidly embraced the recurring revenue
financing model.

The vendor is still an integral part of the SaaS ecosystem as its marketing and branding
are still direct influencers of the purchase process. Secondly, we see a current M&A trend
among system integrators and vendors/ VADs.

Chart 8 : SaaS Adoption Rates
“Do you currently use SaaS solutions?” “Who did you solicit first to enquire
(Unique choice) about SaaS?”
(Multiple choice)



4.8 IaaS Adoption Rates
Less popular than SaaS, IaaS is adopted in average by one out of five organisations.

The same fears related to data security and lack of standards keep companies away from
IaaS adoption. Also, switching from internal built infrastructure to IaaS takes time. On
the other hand, IaaS could lead into changing behaviour regarding server and storage
purchase, as end-users will increasingly tend to outsource their infrastructure while
embracing the cloud.

On a mid-term basis, one out of three companies will have adopted “one step further as
a service” IaaS, against one out of two in the case of SaaS.

Chart 9 : IaaS Adoption Rates
“Do you currently use IaaS solutions?” SaaS vs. IaaS adoption rates
(Unique choice)



5. A Channel Perspective



5.1 Mid-term Business Challenges
Staying competitive and well prepared in order to meet customers’ needs is the main
mid-term challenge for the channel players.

Embracing current business trends is synonymous with developing skills and related
expertise in order to provide custom-made services and solutions.

Certifications do not seem to be a core issue for the channel businesses; they are not
particularly aware or directly concerned about certifications, nor of the challenge that a
recurring model could represent for their business.

Chart 10 : Mid-term business challenges
“What are the key challenges for your business within the next 3 years?”
(Multiple choice)



5.2 Mid-term Business Drivers
As expected, mobile technologies and cloud adoption in a mobility environment appear
on top of the mid-term business drivers; channel partners should further embrace these
trends.

Managed services providers also gain weight, being closely related to the cloud; cloud
computing and services related expertise offer altogether an ability to deploy complex
and scalable cloud solutions.

In a perfect coherence with the channel reasoning, channel players do not consider non
remunerated solutions (open source) as a trend.

Chart 11 : Mid-term business drivers
“What are the key drivers for your business within the next 3 years?”
(Multiple choice)



5.3 Collaboration with Vendors
Enhanced marketing collaboration leads to an increase in terms of channel visibility.
Second tier players want to benefit from the vendors’ communication plans and of their
market presence, as well as their direct marketing strategy via sales leads. The latter is a
very common strategy in order to boost immediate sales and identify immediate business
opportunities via qualified prospects. An identified target audience is definitely more
handy to reach, and less expensive.

Channel training helps customers getting the most of their IT allocated budgets whilst
channel partners provide their experience and a real value added to the ecosystem, with
or without third parties contribution.

Reducing channel conflicts is also an issue for one out of three channel players. Managing
a complex ecosystem is not an easy task and can be sometimes a delicate matter for the
business. This is mainly due to a highly competitive business environment, as well as the
vendors’ multichannel distribution approach.

Chart 12 : Collaboration with vendors
“What do you expect from vendors?”
(Multiple choice)



5.4 Perception of the Cloud Computing
There is an overall positive approach towards the cloud and its direct impact on the
channel business model.

The second tier channel players tend to develop close relationships with cloud technology
partners, as part of their perpetual search of new revenue opportunities.

One fourth of the channel is currently not impacted by the cloud. Most of them are of
course VARs and resellers.

Chart 13 : Perception of the Cloud
“How do you perceive cloud computing with regards your business?”
(Unique choice)



5.5 Top Cloud Opportunities
The main cloud opportunities are visibly profit oriented.

New partners arise from the necessity to resell cloud solutions within the channel in order
to benefit from the specialists expertise.

On the other hand, the cloud is not synonymous with higher margins. This is one of the
channel “cons” regarding cloud solutions. A huge margin slip when switching to a cloud
business model does not represent an incentive for a reseller, on the contrary.

Chart 14 : Top cloud opportunities
“Why do you perceive the cloud as an opportunity?”
(Multiple choice)



5.6 Top Cloud Threats
By enabling end-users to offload infrastructure and maintenance, the cloud passes it on
to the channel ecosystem.

Only a very few channel players can handle managed services, applications, hosted
servers, storage security related specific solutions; thus the necessity of making use of
third parties knowledge in order to offer a larger palette of cloud solutions. Additionally, a
subsequent amount of services tend to be performed remotely.

Depending on the cloud offering and usage, the pay-as-you go model can be a more
convenient option for the client, but at the same time can become somewhat complicated
for the channel. The financial transition to the “pay as you go” model is rather difficult at
first in terms of immediate gains, as it replaces upfront financing with a model closer to
the leasing financial model.

Chart 15 : Top cloud threats
“Why do you perceive the cloud as a threat?”
(Multiple choice)



5.7 What to Expect from Vendors and Distributors with Regards
the Cloud
Expectations are rather similar from vendors as well as distributors, slightly more
important when it comes to vendors.

Facilitating providers understand how to align their service offerings, skills and prices and
allows partners to better promote cloud based solutions. Partner programmes and new
accreditations are also set to affect selling cloud solutions.

For now, access to infrastructure is of less than average an expectation related to
proprietary cloud offerings. But it could rapidly interest the nimblest channel players, as
it could help them to avoid high investment related expenses.

Chart 16 : What to expect from vendors and distributors with regards the cloud
“What do you expect from vendors and distributors to provide you
for your business transition to a cloud service provider model?”
(Multiple choice)



5.8 Cloud Channel Players
Increased cloud adoption makes traditional players and new niche ones coexist in this
new form of cloud related channel ecosystem. The transition phase to a cloud based
market model is apparent and leads to a change in the power balance within the channel.

The cloud players’ hierarchy proves that the market is fed by infrastructure consumers
and IT services providers. The most suitable partners for reselling cloud services are the
hosters and managed service providers. Their competencies are vital within the cloud
ecosystem. They are followed by what we additionally call the cloud solutions builders,
for their cloud infrastructure, competencies, and improved services but also to reduce
internal end-users costs.

The multichannel strategy is doubled by an omni-channel model and geographic
boundaries no longer exist within the cloud model. Value added demand leaves room to
nimble, highly skilled cloud actors able to answer the clients’ needs.

Chart 17 : Cloud channel players
“What channel players are more suitable for selling cloud services?”
(Multiple choice)


The Evolution of the UK Channel (Full Research)

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