By: Lawrence M. Walsh

The channel and IT community is awash in cloud hype, and it’s not unjustified. Cloud computing is exploding from a data center experiment that produced incremental revenue to full lines of business generating billions of dollars in sales for vendors and solution providers alike.

How big will cloud computing be? According to Gartner, total sales generated by cloud computing will top $160 billion annually by 2015. And that has every vendor and solution provider chasing the new pot of gold in technology.

But is “the cloud” the only opportunity in technology? According to Edison Peres, senior vice president of worldwide channels at Cisco, the answer is no.

At the recent Cisco Partner Summit in New Orleans, Peres uttered a prophetic statement to partners in attendance: “If all you see on the horizon is cloud, your focus is much too narrow. The cloud is part of a broad set of opportunities before us.”

Peres’ job at Cisco is to look beyond just the hot trend and promote the entire product portfolio. Cisco is betting heavily on cloud computing, but it’s also looking to retain leadership in core routing and switching and continue development of its video, unified communications, collaboration and telephony product lines. So anyone would be justified in being skeptical of his sincerity.

But he’s right. The cloud is just one of many IT options, and the cloud will not obliterate the need for many of the technology products currently sold and supported by the channel. Despite the astronomical projections for cloud growth, the relative amount of cloud sales will be low compared to on-premise infrastructure.

Consider this: IBM CEO Sam Palmisano recently said that Big Blue’s cloud revenue will top $7 billion in the next five years. It’s an impressive number, but it's less than 10 percent of IBM’s total revenue. And Symantec CEO Enrique Salem has repeatedly said cloud computing will account for no more than 10 to 15 percent of the security and storage software vendor’s revenue.

“Many people believe relevancy as a partner is diminishing because the cloud will take it over; the opportunity is going down. I don’t believe that. Cisco does not believe that. Yes, we need to evolve and we’re at an inflection point where we need to think differently. At the end of the day, there are certain values that you [solution providers] bring to the market,” he told Cisco partners during his keynote.

Those competencies include technology selection and integration services, multivendor management experience, vertical solution development, managed services and professional services. Do these skills and services evaporate in the cloud? No, because the cloud is dependent on the migration of data from on-premise applications and equipment that channels the cloud.

Forrester Research analyst Tim Harmond recently predicted that as much as 15 percent of the channel would fail due to their inability to adapt to the cloud computing era. He isn’t wrong, either, but there’s an equal chance that solution providers will fail because they gave up profitable lines of business to needlessly chase clouds.

Consider the channel revenue trends, as tracked by The 2112 Group and CoreConnex in the IT Channel Barometer report. Product sales soared nearly 325 percent in the middle of the year as solution providers capitalized on pent-up demand for new networking and endpoint equipment. Professional services— inclusive of consultative and architecture services---jumped more than 100 percent as businesses sought guidance on upgrading their IT capabilities.

Did the cloud drive that growth? Probably some of it, but there remains a healthy need for on-premise and endpoint technologies that aren’t serviceable through the cloud.

There’s a rising din in the industry that cloud computing is not just overused, but bastardized. “The Cloud,” no matter how it’s defined, is simply a delivery mechanism and technology/business model that’s applicable to myriad products.

As Peres said, solution providers need to choose their role in cloud computing. Again, he’s right, but he could've gone further: Solution providers need to define their current business model as well as their desired future state (in other words, goals). From there, they can determine what products and services, sales and revenue models, and investments and actions they’ll need to make to reach those goals.

The cloud may definitely be in the future of many solution providers, but so is the development and construction of data centers, unified communications systems, mobility networks, business intelligence applications, embedded and dedicated devices for verticals, telephony and endpoints. The warning for solution providers: you’ll miss other opportunities if all you chase are clouds.

About the Author

Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships. He’s also editor-in-chief of Channelnomics and the executive director of the Channel Vanguard Council. You can follow him on Facebook and Twitter at @lmwalsh2112 or @channelnomics.