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Should IT Companies Fear the Cloud?

During my work coaching IT companies, the most common question that has come up during conversation this year is “What should I do about The Cloud?”

In recent years, the vast majority of smaller IT companies have made a living out of solution sales. They work specifying and quoting clients for in-situ based server solutions such as Microsoft Small Business Server. This sort of sale typically makes 15-20% mark-up on the server hardware re-sale, plus a nice 2-3 days worth of labour for installation services. Then there is on-going revenue from managing, monitoring and supporting the installed solution.

This model has worked for a number of years, but now a threat to that model has come along – “The Cloud”.

How is the Cloud a Game Changer?

With Cloud services such as Microsoft Office 365 or Google Apps, for the many businesses that IT companies serve, there is no longer a requirement to install a server on-site. So the 15-20% hardware sales mark-up vanishes.

And Microsoft Office 365 and Google Apps don’t require a huge amount of setting up or initial configuration, so the 2-3 days worth of labour for installation services shrinks considerably.

They also have 1st Line Support provided by Microsoft and Google as part of the monthly fee the client pays, as well as looking after product updates, maintenance and patching. So the IT companies revenue from management, monitoring and support vanishes.

All in all, “The Cloud” might seem like a bad thing for IT companies.

How Will Your IT Company Handle The Cloud?

So what can these IT companies do? Give up, shut up shop and tell their staff to go and get a job elsewhere?

Well, that’s certainly one option. For the more technically minded business owners, “The Cloud” certainly means there will be a lot more Datacentre jobs out there. If your idea of fun is managing complex Microsoft Exchange infrastructures, then “The Cloud” offers you a lot of employment opportunities.

But IT companies who aren’t ready to go down that route need to start thinking a little less about Technology and a little more about Business.

The most successful IT companies have been doing this for years. They don’t talk in terms of SBS, SQL and Exchange – they listen to what their clients want to achieve within their business, and help provide the solution in terms that business owners understand.

“The Cloud” doesn’t change that. By being aware of the capabilities of Cloud Solutions, IT Companies can help their clients find the best solution for their needs.

Listen to Your Clients

Interestingly though, by really listening to the clients needs and by being fully aware of the shortcomings of Cloud solutions, it often transpires that a Cloud solution may not be the best fit for the client. The client may have a Line of Business application that is not Cloud-ready. Security concerns may make a Cloud solution unacceptable to a client. A client’s need for bespoke customisation may preclude use of a cookie-cutter Cloud solution.

The key here for IT companies is not to go into an engagement with a client having pre-conceived notions that the client will need in-situ or Cloud. Instead be aware of the solutions available, listen to what the clients requirements are, and then, *without bias*, talk about the pro’s and con’s of both in-situ, Cloud and Hybrid solutions (such as Microsoft Small Business Server Essentials) and help the client come to their own conclusions.

The danger for IT companies that are very comfortable selling on-site servers, hardware and licenses is that they’ll try to steer the client towards that traditional type of solution. If the client then decides that they do want a Cloud solution, by not giving them a Cloud option the IT company could end up losing the business to another provider who understands this market and is willing to openly talk about those types of offerings.

How to Make Money With The Cloud

But if after all this a client decides they do want a Cloud solution – how can the IT company make any money from the engagement?

Make money with the cloudThe answer is to look for value-adds. The money that the client is saving by choosing a Cloud solution over an on-site solution is now free for projects such as cutting-edge SharePoint customisation, innovative Voice-over-IP deployments, highly visible Social Media marketing projects, and much more. Put yourself in the business owners shoes – by making large savings on the necessary IT infrastructure, she’ll be much more likely to consider projects that will then provide genuine business benefits.

On a recurring revenue basis, don’t think for a minute that the client won’t still need help with their local PC’s, Antivirus, applications, support and Consulting or indeed management of their relationship with Microsoft, Google or another Cloud provider. They’ll still prefer to turn to you for advice and guidance than talk to a Call Centre. Providing a Managed Service for these requirements doesn’t look too different to the way Managed Services are provided nowadays.

A Bright, Cloudy Future

The bottom line is – as an IT provider you can accept that the world is changing and you can change with

A bright cloudy future.

it, becoming knowledgeable on the pro’s and con’s of Cloud solutions, taking a more Consultative selling approach and offering your clients un-biased options.

Or you can continue to do what you’ve always done and hope that is enough.

I wouldn’t bank on your competitors doing the same though.


Richard Tubb is an IT Business Consultant who works with ambitious IT companies who want to grow their businesses in a scalable and sustainable way. You can e-mail him at [email protected] or connect with him via Twitter and LinkedIn.

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