Cloud Computing Gives VARs New Stickiness

Solution providers are being beaten over the head with the benefits of cloud computing: it's cheap, it's easy to sell and it's simpler to manage. But one of the big draws of cloud computing to the channel is its stickiness.

Solution providers say that they're experiencing microscopic amounts of customer churn, if any, and that's mostly due to the stickiness created by cloud computing.

Mike Martin, director of cloud computing for U.K.-based international solution provider Logicalis, said the cloud puts VARs in the driver's seat and lets them build a strong partnership with the customer, manage that partnership and create a lasting relationship. Logicalis is seeing its cloud computing offerings grow at an exponential rate.

"It makes us sticky," he said. "It gives us differentiation."

To create that stickiness, Martin said, solution providers must transition their business from being simply a traditional reseller or integrator and move away from the product sale. Cloud computing creates a paradigm through which solution providers must become not only the technology provider, but a services arm and consulting firm all in one. VARs become the true trusted advisor that many have talked about for years.

"Cloud computing is not a product you buy," Martin said. "It's not a SKU. It's not a technology. It's an IT delivery model. And our goal is to be a trusted cloud provider for our clients."

Cloud Sherpas, Atlanta, has seen incredible stickiness with its cloud computing offerings around the Google Apps platform. According to Cloud Sherpas, the company has seen zero percent customer churn since the company launched just over two years ago. Cloud Sherpas did this while moving more than 600,000 enterprise users to the Google Apps platform and putting its software to use within more than 8,000 companies representing more than 1.5 million Google Apps users.

Cloud Sherpas CEO Jon Hallett credits the stickiness to "the recurring snowball nature of the business." Hallett added that Cloud Sherpas pro-services approach only boosts the already sticky nature of Google Apps and the cloud.

Jeff Ragusa, Google Apps SMB channel lead, said what is giving VARs stickiness in the cloud, especially when it comes to Google, is that some cloud providers let their partners take the reins and control the customer relationship. When a partner handles the ordering, provisioning, support and billing, it makes them the one-stop cloud shop for the customer and boosts their relationship.

"We try to provide a framework for that trusted advisor-type relationship," Ragusa said, adding that most of Google's 2,000 reseller partners are seeing very little churn.

Next: What Is Negative Churn?

The cloud has become so sticky, in fact, that it's creating a new paradigm called negative churn. Negative churn is a theory that solution providers and some SaaS and cloud vendors are experiencing 100 percent customer retention with no disconnections, while throughout the year new customers sign on and existing customers add new services and users.

Microsoft has also noted that its service providers and partners have reduced customer churn with cloud computing services offerings.

"During the past several years, Microsoft has heard from its service provider partners that they were experiencing significantly low churn rates among business customers using Microsoft Hosted Exchange, Microsoft Office Live Meeting and SharePoint when compared with those using basic POP or webmail services," the software giant said in a statement earlier this year.

In a study of 695 SMB executives and technology decision makers in the U.S. and Europe, Microsoft found that SMBs that use e-mail and other online communication and collaboration services change their providers half as often as those using basic POP or web mail.

"This dynamic presents service providers with an opportunity to combine their existing network service offerings with enterprise-class e-mail to better serve their customers and improve their bottom line."

Allen Falcon, CEO of Horizon Info Services, a Westborough, Mass.-based cloud VAR specializing in Google Apps, said his Google Apps retention rate is 99 percent year-to-year through September and the only real customer churn Horizon has experienced is when customers are acquired or shut down completely.

And because of that stickiness and the addition of new customers, Horizon continues to grow. Falcon said the company has grown 350 percent over two years and October 2010 was its best month ever.

"We have yet to have anyone leave Google Apps for another platform or in-house system," he said.