Capitalizing as Cloud Storage Climbs

Cloud storage continues its ascent despite being a nascent market with a sea of small players. A new report suggests that, despite the rise in cloud storage services, there’s little revenue to be generated from pure-play cloud storage solutions. What should channel partners look for in building powerful storage options with room for value-add?

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The facts are in. According to a new iSuppli market research report, the evidence for the rapid expansion of cloud storage is plain: The cloud storage world has grown to 500 million personal subscriptions – a sizable jump from the 300 million recorded last year.

That growth trend isn't slowing down, either. iSuppli believes cloud subscriptions will hit 625 million in 2013, representing a 25 percent increase just inside a year. Based on this, iSuppli sees "uninterrupted double-digit growth [that will] follow until at least 2017."

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Apple Inc., Inc., Google Inc. and Microsoft Corp. are all mentioned as "titan" players for incorporating storage and services, but "pure-play" storage outfits like Dropbox Inc., Carbonite Inc. and EMC Corp.'s Mozy have also been highlighted as equally legitimate players.

But there is a caveat. Despite the seemingly limitless growth, there isn't limitless revenue. iSuppli believes that "providing cloud services is not profitable as a standalone service [as it challenges] companies to identify value-added services that could generate revenue.”

Any astute channel partner already knows this. iSuppli's report is targeted at mobile network operators clamoring to adopt new cloud services for their portfolio. But the fruits of the report still represent pertinent advice for channel partners.

Due to the still-maturing storage marketplace, solution providers should be mindful when building storage alliances. Critical attributes to consider include the following:

  • Longevity: It's critical cloud solution providers team with a vendor that has legs. It's easy to pick a major vendor like Amazon or Google and assume their services will both grow and expand over time; their relative size offers them that advantage. However, right-sizing a solution for both the customer and the solution provider's portfolio will require a close examination of the support relationship a vendor can provide. In addition, consider the wider implications of interoperability. Microsoft's Windows Azure platform can provide a foundation for a variety of services that already interconnect with other Microsoft technologies. Understanding customer needs can help pick the right cloud, too.
  • Compliance: Partners approaching sensitive vertical markets may want pick a larger provider like Amazon or Rackspace Inc., which can provide specialization for industry compliance from health care to the government. Data compliance also begets security needs, so aligning with more powerful providers can help meet no-compromise service-level agreements and strict customer demands.
  • Room for value-add: Outside the enterprise, there's more flexibility in the variety of backup and storage solutions that can be delivered to the SMB. For example, Mozy and Carbonite offer partner and affiliate programs, allowing a solution provider to quickly add cloud storage services. There's also room for  value-added attachments because these platforms are relatively automated. Partners can create more customized services, even though they may be less complex solutions. Consultative services wrought from the initial implementation of the service can also help the provider grow into larger storage platforms, too.

iSuppli also recommends solution providers offer white-labeled services to build brand loyalty, rather than advertise the product behind the product. In reality, this should be left to the discretion of the solution provider. If it seems advantageous to lead with a particular brand in the region, this could help build a channel partner's reputation and attract key customers. However, if a solution provider is attempting to enter the market with white-labeled services, it's possible customers may be less likely to select that service.

In reality, channel partners dedicated to storage can evolve a simple cloud storage service into a full platform, providing services that are germane to specialized industries. This begets stickiness, entanglement and customer loyalty.

Cloud storage is still evolving, especially as the technology behind it becomes more sophisticated. Because that experience is shared by both the vendor and the channel partner, it marks an unusual time when partners and vendors can build key relationships that capitalize on the growing momentum of the space.

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