Original URL: http://www.theregister.co.uk/2011/02/16/cloud_will_shrink_channel/

Cloud to 'shrink channel'

The guy on the horse is called Famine

By Richard Chirgwin

Posted in Financial News, 16th February 2011 20:17 GMT

The cloud-computing boom is bad news for channel organisations, according to analyst firm Frost & Sullivan.

At a media trends briefing in Sydney yesterday, analyst Arun Chandrasekaran said cloud computing squeezed resellers from both ends: software vendors offering SaaS were cutting into boxed application sales, while the concentration of compute power into the cloud was cutting out the local hardware channel.

“The problem the [software] vendors have is that they already have a channel. That channel sells services – they don’t want their vendors to sell services.”

He also highlighted the likely loss of maintenance revenue, which can make up 50 per cent of the IT budget in a large organisation, as a danger to the channel.

With their logistical role (forgive the pun) under a cloud, channel organisations will have little choice but to save what they can and run like hell learn to pitch their service offerings more widely and aggressively.

The loss of revenue is most likely to bite as cloud services take hold among SMEs, Chandrasekaran said. “For enterprises, systems integrators can do the value add work of integration and security,” the analyst said. SMEs, on the other hand, are more likely to buy and use cloud services “as is”, with less integration. ®