Select the directory option from the above "Directory" header!

Google Cloud partners could be in for a profitable five year outlook

Google Cloud partners could be in for a profitable five year outlook

Even though overall IT spend is expected to grow 5.7 per cent over the next five years, much higher growth is coming from what IDC calls the ‘3rd Platform’.

Credit: Unsplash

Partner revenue from Google Cloud opportunities is expected to more than triple over the next five years as the cloud market continues to evolve beyond lift-and-shift engagements to cloud-based solutions that address business outcomes.

This is according to a new Google Cloud-commissioned paper by industry analyst firm IDC that reflects the broader trend in the industry subsector that is perhaps doing better than any other as the disruptions from COVID-19 roll on. 

Countless studies over the past few months have shown how cloud technology, whether infrastructure, software or other subcategories, has surged since the novel coronavirus began marching across the globe, as organisations work to keep things ticking over with a distributed workforce.

Naturally, the IDC research encapsulated in the Google Cloud-sponsored Partner Opportunity in a Cloud World: How Partners are Winning in the Google Cloud Economy e-book is squarely aimed at showcasing the strength of the Google Cloud offering for partners and enterprises at present and into the near future.

However, it also speaks to a deeper reality for cloud partners across the board, regardless of the vendors with which they partner: opportunities abound.

And a big part of this trend stems from the broader digital transformation efforts that COVID-19 has helped to accelerate. 

“The cloud market continues to evolve beyond lift-and-shift engagements to cloud-based solutions that address business outcomes,” stated the IDC paper, which was jointly penned by IDC software channels research director Paul Edwards and IDC channels and alliances program vice president Steve White.

“That helps frame the Google Cloud partner focus on a wide array of Google Cloud–specific solutions across infrastructure modernisation, data management, smart analytics, application modernisation, security, artificial intelligence, and productivity and collaboration.

“This all leads to the confluence of lift-and-shift and business-specific cloud solutions elevating Google Cloud partner engagement and growth, where partner revenue from Google Cloud opportunities will more than triple by 2025 to an accumulated net-new partner revenue of US$341 billion.

“This number represents the value created in partner businesses based on their relationship with Google Cloud and its technology,” the pair said in the report.

It should come as little surprise that cloud demand is on the rise, given the way COVID-19 and the measures rolled out to stem its spread have affected businesses. But it remains to be seen precisely how enterprises choose to further engage with cloud technology and solutions, beyond simply ramping up cloud collaboration.

According to an IDC survey on how the COVID-19 crisis was expected to impact organisations’ 2020 IT spending plans, 40 per cent were forecasting lower spend, but more than half, 54 per cent, indicated either no change or an increase in spending. For 2021, meanwhile, 66 per cent indicated no change or a spending increase. 

While "no change" would ordinarily indicate inaction on the cloud spend front, it should be kept in mind that this consistent spend would continue in a climate marked by spending contraction in many other areas, including other subcategories of IT infrastructure. 

Perhaps a better view of market opportunity is in spend across ‘leading’ versus ‘legacy’ technologies, according to IDC. 

“Even though overall IT spend is expected to grow 5.7 per cent over the next five years, much higher growth is coming from what IDC calls the ‘3rd Platform’ (such as cloud, big data, social, and mobile) and innovation accelerators (i.e., AI, IoT, next-gen security, augmented/virtual reality, robotics, and 3D printing),” the paper stated.

At the same time, the so-called 2nd Platform, which has negative growth at present, includes hardware, software, and services related to client/server rather than the cloud.

IDC reckons that innovation accelerator growth rates are expected to be the highest, at 17 per cent over the next five years, while the 3rd Platform also has low double-digit growth, but only when mobile, the growth of which has slowed, is removed from the mix.

This is largely good news for Google Cloud partners, who by their nature are engaged across many of these technologies, positioning themselves squarely in the two growth categories, according to IDC. 

“Doing so makes it possible for these partners to help meet the needs of end customers looking to execute further on their business transformation journey,” the report said. 

How to make the most of the opportunities

According to the IDC paper, there is potential for continued steady spending, provided those customers that are increasing their spend can take up the slack from those that are lowering it. 

“This could minimise the COVID-19 impact on customer IT spending, and by extension vendor and partner revenue, especially outside of industries that were more adversely affected, e.g. retail and travel,” it stated. 

“Plus, accelerated growth is expected once the crisis abates, as end customers plan and execute on their continued digital transformation journeys, which is where partners are well-positioned to benefit.”

However, the report noted, spending on IT is now much more tied to value. 

This can be seen in another IDC survey showing that many end customers were reevaluating transformation projects in a bid to find a greater return on investment (ROI) and efficiencies from those implementations. 

This should come as no surprise to partners focused on solutions that provide business impact, which will benefit from close strategic relationships with clients — that is, understanding the business and quantifiable value of the solutions being deployed, the IDC report said. 

Indeed, the approach of being “close” to customers should serve partners well through any challenges that may arise, even one as big as COVID-19, according to IDC. In fact, a customer success model in which partners engage for the long term to help shape customer strategy can go hand in hand with a cloud focus and recurring revenue model. 

“That ongoing cycle of engagement can lead to both customer satisfaction and partner economic health. In addition, partners are working with customers that view COVID-19 as an opportunity to transform,” the report said.

Broadly, Google Cloud partners are benefiting from and embracing the surge in public cloud adoption, a fact that was validated by the findings of an IDC survey of Google Cloud partners globally that revealed average year-over-year revenue growth of their Google Cloud business of 35 per cent — while 20 per cent of partners cited Google Cloud business growth of 75 per cent or more.

Combine those growth rates with an average margin of 34 per cent, which partners can make on their own intellectual property (IP), includes services and software created and sold by partners, in Google Cloud deals and it points to “healthy businesses”, IDC conceded, but with at least one qualification: “Of course, partner IP margin will vary greatly among project-based services, managed services, and software, but many Google Cloud partners are embracing all of these.”

Regardless, partner IP surrounding the Google Cloud portfolio is also helping customers enhance their digital capabilities and business functionality.

“Indeed, Google Cloud partners are making investments in their own IP,” the paper stated. “IDC's Google Cloud partner survey revealed 36 per cent of partners investing 6 per cent or more of their revenue on this endeavour. 

“Those investments are being made across the spectrum of IP, with a specific focus on managed services, cloud services, and project-based services. These become important differentiators for partners, as well as drivers of partner profitability,” it said. 

Follow Us

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags IDCGoogle Cloud

Show Comments