When it comes to conquering the cloud market, defining your business model should be done carefully and from the beginning of your journey. Being a “cloud provider” or “cloud service provider” (CSP) can take on different meanings, and it is imperative to master the category you fit in.
So, how would you define your business? Are you an SI, ISV, MSP, VAR or reseller? If you’re familiar with none of these acronyms, it is definitely high time you get used to them. In this article, we will help you identify these different types of cloud providers.
Cloud Provider Type #1: The Systems Integrator or SI
As the name may suggest, this is a company that specializes in bringing different software systems, databases, and applications into a single, functional cloud platform, ensuring all components work together properly.
Usually, a systems integrator will have a consulting team with extensive technical skills, such as:
- Solution architects
- Systems administrators
- Network administrators
- Software engineers and developers
As the number of different cloud and on-premises solutions used by enterprise companies continues to climb, the services of experienced systems integration professionals are in high demand.
If you plan to become an SI, make sure you build a diverse team (or network!) to respond to the disparate cloud needs businesses may have. For instance, if your team is only comprised of Microsoft Certified Professionals, you will not fit for a project in a company which infrastructure is based on Red Hat Linux or Ubuntu.
How Does the SI Make Money?
Generally, a systems integrator gets money from the billed hours or man-hours during a project. Once it’s delivered, there’s no longer any revenue from that specific client. Long projects may be lucrative for this type of cloud provider.
Cloud Provider Type #2: The Independent Software Vendor or ISV
This is any company that engages in the development of its own cloud-based software or software suite. The company handles the entire development process of the software or service that is sold to its customers. It has absolute copyrights on the solution.
In this category, we count any kind of software publishers that make third-party applications meant to run on cloud platforms such as those provided by VMware, Microsoft or Ormuco. We also count these vendors on the same list.
Independent software vendors need significant upfront investments to run, as their solution may not be ready for the market before months and even years. Some of them may rely on investment programs to stay afloat in the meantime.
Being an ISV requires a strongly-skilled team of developers, plus project managers, product managers and, of course, time. After the product is released, an ISV also needs to continue adding features and upgrading the solution to respond to the growing needs of the market.
How Does the ISV Make Money?
ISV-type cloud providers make money on selling their solutions. The cloud subscription model guarantees they get revenue over the long run, rather than a single initial payment for a licence to use the solution. ISVs can also rely on resellers to help them achieve higher sales.
Cloud Provider Type #3: The Managed Service Provider or MSP
Because they no longer want to handle their computing matters all by themselves, some companies will choose to outsource their IT services. This is where the managed service provider comes on the scene.
An MSP acts as the IT department (or part of it) for a business. Depending on the contract, the managed service provider will offer services that range from simple help desk for user support to managing the whole company’s infrastructure and services. This includes tasks for hardware or software maintenance, upgrade and replacement.
MSPs are quite powerful as they will select solutions for their clients, or even host them on their own premises. A good way to become an MSP is to partner with technology vendors and build a set of cloud services that covers the needs of one or more specific verticals.
How Does the MSP Make Money?
This type of cloud provider usually gets contracted for a year or more. When it comes to budgets, some contracts will enclose a yearly budget for everything, while others will slice it into projects, with revisions throughout the year.
Also, long-term contracts impose to have a well-defined service level agreement (SLA) with the client. The MSP has to make the proper choices to deliver all services within both the budget and the SLA.
Cloud Provider Type #4: The Reseller
As the name may suggest, a reseller is a company that sells cloud services or platforms that it does not own.
There are different ways to resell:
- Affiliates will simply refer clients to the vendors;
- Distributors will offer the services under their brand, mentioning the original vendor’s;
- Other resellers will totally rebrand the vendor’s offer and sell it uniquely under their own name.
How Does the Reseller Make Money?
This type of cloud provider make profits through commissions and margins. Depending on their sales volumes, vendors will give resellers discounts they can make substantial margins from.
If you plan to be a reseller, be careful choosing the partner channel you want to join. Some vendors will require you to pay when joining their reseller’s program. You may also join an existing partner network that already offers multiple vendors’ products.
Cloud Provider Type #5: The Value Added Reseller or VAR
The value-added reseller is another kind of reseller.
Instead of simply referring clients or repackaging an existing cloud product, this type of cloud provider will add its own services to the offer. VARs can customize the offer for a particular industry, package it with another software, or develop additional features. This adds value to the original product, thus the name value-added reseller.
How Does the VAR Make Money?
A white-label product will make it easier for a VAR to build a strong offer. With plenty of APIs available, there is an infinity of possibilities to tailor cloud products to a specific audience.
For instance, many VARs are making money offering Ormuco IaaS bundled with their own professional and support services. One of them is offering the solution pre-configured for a virtual desktop infrastructure that fits for call centers and banks.
So, Which Cloud Provider Are You?
Generally speaking, the term “cloud provider” or “cloud service provider” (CSP) refers to any company providing some kind of cloud-based services. The term encompasses small to gigantic actors of the cloud market, serving either consumers or businesses with SaaS, IaaS or PaaS. But depending on how the company serves its customers, it falls under a specific category: SI, ISV, MSP, reseller or VAR.
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