The Uber effect on the IT channel

Posted by Mike Vizard on Aug 11, 2015 11:04:59 AM

TaxisDuring the 2015 ChannelCon conference hosted by the IT industry trade association CompTIA this past week, attendees that work at IT services firms from across the country took comfort in the fact that most of their small-to-medium business (SMB) customers were taking a fairly deliberate approach to making the transition to the cloud.

As Tiffani Bova, an industry analyst with Gartner, noted during one presentation at the conference, the majority of SMB customers have only about 10 to 20 percent of their IT services delivered via the cloud. As such, most IT services firms servicing this sector aren't in a hurry when it comes to transforming their fundamental business models, Bova noted.

The fundamental issue that IT service providers seem to be overlooking is that the shift to the cloud isn’t necessarily just about them and their existing customers. If startups like Uber and Airbnb prove anything, it’s that new, more agile competitors can come out of nowhere to disrupt an entire industry. Think of it as the Uber effect. Regardless of the size of the company, senior business executives now go to bed at night worrying that some new competitor will emerge out of the cloud, either limiting the growth potential of their business or putting them out of business altogether.

Looking ahead to the cloud

IT service providers need to look past the rate at which their existing customers are moving to the cloud. Instead, they need to consider what percentage of their customer base is running a business that is likely to be seriously disrupted by a new service delivered via the cloud. If the answer is that more than a third of their existing customers are susceptible to such a disruption, the chances that they will be investing in additional on-premise applications and IT infrastructure in the months and years ahead is going to be substantially less.

Conversely, given the volume at which cloud platforms such as Amazon Web Services are now churning out production applications, the chances are good that that level of digital disruption is only just now getting underway. Every entrepreneur and venture capitalist around the globe has seen what Uber and a handful of other companies have been able to accomplish using mobile applications and the cloud.

Increasing mobility for IT service providers

For IT services providers, these digital disruptions are roughly equivalent to what occurs when a small town that was overly dependent on one industry suddenly discovers that the factories that employ most of its citizens are moving to some other part of the globe. Not only are the people that work for those factories suddenly out of work, every business that sells something to those people in one way or another gets adversely affected.

The good news is that IT services providers aren't necessarily tied to a geographical area now. The cloud enables them to seek out potential new customers anywhere. The thing those IT services providers need to keep in mind, however, is that while many of those digital disruptors could be potential new customers, they are making no bones about trying to put a large percentage of your existing customers out of business altogether.

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Photo Credit: Aaron Pareki on Flickr. Used under CC 2.0 license.

Topics: IT Services Trends

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