Cloud & Mobility driving more profitable business models for Asia Pacific’s IT ecosystem

This emphasised the importance for the vast IT ecosystem in Asia Pacific to transform their traditional solution offerings to suit a new mobile-first, cloud-first world.

IDC has projected staggering growth opportunities for IT companies betting on cloud and mobility solutions and services in Asia Pacific. According to IDC, the public cloud services market in Asia Pacific will double by 2018, growing from $3.2 billion in 2014 to $7.1 billion by 2018.

Mobility has been identified by IDC to be much larger in revenue potential than cloud in Asia Pacific, and is expected to grow by 46 per cent from $20.3 billion in 2014 to $29.1 billion in 2018. Together, both cloud and mobility command about $36.2 billion in revenue potential for IT companies in Asia Pacific by 2018.

In the study, titled “The Uptake of Cloud and Mobility in APAC Sets the Stage for Evolution of Partner Ecosystem”, IDC interviewed more than 200 of Microsoft’s IT partners from nine markets in Asia Pacific, including Australia, Indonesia, Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam to understand their existing business models and growth strategies in facing these new market opportunities.

“The IT ecosystem has been core to our success for 40 years and will continue to be important to our ability to scale to the billions of users in Asia,” said Ananth Lazarus, partner lead, Microsoft Asia Pacific.

“Like all major technology shifts, there will be winners, losers and new leaders. The partner of the future has four key attributes for growth –they create scale, invest in differentiation, focus on value and win the hearts and minds of their customers. The ability of our partner ecosystem to be transformed into a profitable one is a top priority for us.

“This is why we have invested $225 million to transform our ecosystem in Asia Pacific through the right investments in training, incentives and business enablement. We are excited to see that many of our partners in this region are already transforming themselves alongside Microsoft to serve the needs of a different generation of customers in this region,” Lazarus noted.

Key findings from the whitepaper are:

Cloud is the new norm in Asia Pacific: Cloud-oriented partners, with more than 50 per cent of their revenues from cloud offerings, make 1.8x more revenues and 1.4x more gross margin compared with non–cloud oriented partners.

Cloud and mobility solutions are more profitable: Solutions partners can grow their gross margins by 20 per cent and value-added resellers can increase their margins by 100 per cent when they introduce cloud value-added services.

Partners who have a comprehensive cloud delivery organisation make 20 per cent more profits: These partners have typically been in the cloud space for 2+ years and are best suited to work with customers that are looking to undertake transformation projects.

Being an early adopter pays: Solution partners that were early to market with cloud and mobility "mash-up" offerings make 2.5x more revenues and 50 per cent more margins as compared with overall partner universe surveyed.

Partners view cloud across public, private, and hybrid models: More than 50 per cent of Microsoft's partners are working toward building a hybrid cloud proposition for their customers and have invested in private and public cloud offerings from Microsoft.

Having a clear mobility solution play will pay off: In the mobility space, ISVs tend to be more profitable and can grow their margins by 55 per cent because they are able to leverage the SaaS model of delivery, and monetise their earlier investments in R&D towards gaining higher premium on mobile enablement of applications.

Mayur Sahni- senior research manager for Services and Cloud Research, IDC Asia/Pacific- said, “A number of the channel partners we spoke to question the need to move up the value curve by offering high-end solutions and investing in building future capabilities. While increasing adoption of cloud and mobility across most industries has contributed to the growing revenues of partners, it is the forward-looking visionaries and early adopters searching for innovative solutions and value-added services who are truly reaping the rewards over their peers.”

“Given the increasing demand for cloud and mobile services, the time is now for partners to jump on the bandwagon, or risk getting left behind as the industry transitions to this new reality,” Sahni added.

An example of a Microsoft partner who has recently seen success by combining cloud and mobility solutions is New Zealand based company VMob.

The company developed a mobile engagement platform for bricks and mortar retailers used by global clients including McDonalds to help enhance their customers’ in-store experience through personalised content marketing.

The VMob platform uses a vastly expanded set of contextual data including GPS and in-store location, local weather, nearby events and public transport data to improve the relevance of every communication and interaction with users.

The entire platform, built on a modern service orientated architecture specifically for Microsoft Azure, has been instrumental in driving the rapid international growth of the company. VMob won Microsoft’s Partner of the year for Cloud Platform: Application Innovation.

Winning the Country Partner of the Year for Indonesia is Pasifik Cipta Mandiri (PCMan).

Founded in 2000, PCMan was focused on selling licenses and doing system installation. Three years ago, the company took a bold decision to turn the company’s focus to cloud platform and services, starting with Office 365. Within the last one year, the growth of Microsoft cloud related business contribution to total company revenue jumps over 15 times year-on-year. Currently, the cloud business contributes more than 50 per cent from total revenue.

Sahni noted, “Channel partners in Asia Pacific need to undergo constant change in their business model and must be able to support a regularly changing product and service mix. The base denominator in this equation is culture. IT companies that build a culture of change, which have innovation and disruption as their key pillars, will experience greater success, faster, in a mobile-first, cloud-first world.”