Last week, 3 major IT suppliers — Intel, Microsoft and Alphabet (parent company of Google) — reported quarterly financial results that showed strong growth in cloud computing. And a fourth, Amazon, is expected to report similarly strong cloud results later this week.
Great for them. But what does the growth of the cloud mean for solution providers, resellers and others in the IT channel?
David Yockelson, a research VP at Gartner, is among those raising the alarm. He wonders if the cloud isn’t making much of what the channel offers redundant and even obsolete.
But first, how strong was that cloud growth at the big suppliers? Pretty strong.
Intel last week reported that its Data Center Group, which includes platforms for the cloud, had full-year revenue of $17.2 billion, an increase of 8 percent. That growth rate was slightly higher than Intel’s overall revenue for the full year, which increased over the previous year by 7 percent.
Similarly, Microsoft, which last week reported financial results for its second quarter, cited “cloud strength” as it reported net income of $5.2 billion on revenue of $24.1 billion.
Microsoft’s Intelligent Cloud business alone brought in quarterly revenue of $6.9 billion, an 8 percent increase over the year-earlier period. Within that business, Azure revenue nearly doubled year-on-year, growing by 93 percent as Azure compute usage more than doubled.
Microsoft’s cloud-based Office 365 service is doing well, too. O365 now has 24.9 million consumer subscribers, which pushed up consumer revenue in the quarter by 22 percent. Commercial revenue of Office 365 in Q2 increased by an even higher 47 percent, Microsoft said.
Alphabet, Google’s parent company, last week released its Q4 results. Quarterly revenue, it said, were up 22 percent over the previous year, reaching about $26 billion. But the “Google other revenue” category, which includes cloud computing, rose more than 60 percent to $3.4 billion.
Alphabet’s net income for the quarter, $5.33 billion, reportedly disappointed some market watchers. But other industry watchers didn’t seem to mind, saying this is evidence that Alphabet is spending big-time to keep pace with other cloud suppliers such as Amazon.
Speaking of Amazon, the company will release its Q4 and full-year financial results this Thursday, Feb. 2, after market close. Market watchers, investors — and solution providers — will be watching closely to see how its AWS cloud business does.
The cloud challenge
All that cloud success brings us back to Gartner’s Yockelson. Last December, he wrote a blog post that asked: The future of sales…without sellers? And last week, Yockelson followed up with a post entitled Cloud Marketplaces: Death Knell for Resellers?
The Gartner VP wonders if resellers — more specifically, channel partners that sell software products to customers the big vendors can’t or don’t want to reach — could become obsolete due to the extreme ease of buying via the cloud.
Sure, the channel offers support that buyers can’t always get from the cloud. But Yockelson wonders how long that advantage will hold. He writes: “Buyers, who today still want certain levels of treatment and still must be marketed to, will be increasingly less concerned with hand-holding as buying power extends more broadly to lines of business and ‘citizen IT’ folks within.”
His advice? Don’t just resell. As the cloud makes buying nearly frictionless, not even managed service providers (MSPs) will likely be safe. Instead, he advises, add services as fast as you can. “If you’re a reseller,” Yockelson writes, “the time to find value to add is NOW.”
With big cloud suppliers showing such robust growth, that sounds like good advice.