Writing the obituary for the software upgrade cycle

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This article appeared in the February 2016 issue of CRN magazine.

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Writing the obituary for the software upgrade cycle

One of the hot topics in the channel is the speed and size of the change to cloud computing. BetterCloud, an IT management tool for Office 365 and Google Apps, has released a 73-slide report that shows the move to cloud is happening far faster than some would like.

Yes, the report is self-serving to a degree given the company behind it, but it’s still worth a read. It pulls together stats from several research firms to paint a convincing picture of the pace of change. For example, forecasts for the number of companies running totally in the cloud double in the next five years (source, Trends in Cloud IT). The number of SMEs running 100 percent in the cloud (the American version of SME, 1-1,000 employees) will jump from 14 percent in 2015 to 51 percent by 2020 and 71 percent by 2025.

Mid-market operators (1,000 to 5,000 staff) going all-cloud will jump from 6 percent in 2015 to 32 percent in 2020 and 63 percent by 2025. Currently, no enterprises (5,000 staff and up) run only cloud software, but this will jump to 21 percent by 2020 and 51 percent by 2025.

Now, no IT analyst ever had to explain why their forecasts were wrong (they’re too busy making their next round of predictions), so it’s wise to take these stats with a grain of salt. It would be wrong to dismiss them entirely.

Part of the reason for such bullishness is the shift in demographics. By 2020 millennials, most of whom would identify as “digital natives”, will make up 50 percent of the global workforce. Digital natives have different  expectations about how they should work and enjoy testing new technology to see if it makes their lives better. BetterCloud says millennials will demand a “modern workplace” it defines as “a professional environment where individuals are enabled and encouraged to use the latest technology to stay engaged and productive”.

You can see how an organisation mostly made up of people born in the past three decades would prefer to play with a new browser-based data visualisation tool than wait for an Oracle or SAP upgrade. 

The report’s greatest revelation for the channel is the movement from homogenous environments based on technology suites with one main vendor to heterogenous or best-of-breed environments. Enterprise IT departments tend to have stuck to marquee brands to streamline solutions and deployment. This may no longer fly at the mid and enterprise level. 

Where does this trend leave resellers? Can they still prosper by backing a single vendor? It’s not enough to set up a product, give the IT team a crash course in using it and walk away. 

The company featured in this issue’s profile, BizTech Enterprises, won an award from Adobe last year for selling the most licences of its digital marketing software. BizTech boss Michael Patishman talks about the painful process of transitioning from an IT-focused reseller to a holistic business consultancy. BizTech can have detailed discussions with the CMO as well as the CIO and IT manager, and be held accountable by executives of all stripes for the business impact of its software deployments. 

It’s a tough choice resellers face. Do you follow BizTech’s example by doubling down on your vendor and deepening your business strategy skills to engage the whole enterprise? This involves hiring specialists to build a very capable – and very expensive – bench. Or do you go for breadth in one or two verticals and understand the full suite of cloud apps, from multiple vendors, that epitomises best practice? This is also far from easy because the innovation wheel, spinning ever faster, is throwing out more and more niche vendors.

This all adds up to a higher cost of sales for resellers. If you weren’t close to your numbers before, now you have no choice. Cash flow will become even more critical. 

Hopefully you’re already moving down one path. With Australia’s skew towards SME (let’s cap that local definition at 200 staff), we are already much further into the cloud than the US. The pure services game won’t always be this tough. The wheel will turn. Until then, stay close to your customers and hang on.  

Sholto Macpherson is a journalist and commentator who covers emerging technology in cloud.

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