This week I'm in Bangalore attending several partner meetings. One of these was with an application provider who has a very strong business in the telco industry. Their primary delivery model is on premise, but the private cloud portion of their business is at 15% of revenue this year and expected to grow to 40% over the next three years. In the course of talking about how the business will transition to the cloud, the CTO shared an interesting observation: cloud computing creates a desire for a menu of applications.
To explain further, in a traditional IT environment, a customer establishes a requirement for a certain capability. They form a team to define objectives and requirements, establish a budget, issue an RFP, and select a provider for the application. The key to this process is the budget. With traditional computing, there are only enough resources for a fixed solution, both from the perspective of capital expenditures and the people required for deployment. But when a businesses decides to acquire their application capabilities as a service, they are moving to an operational expense model, which frees them from having to associate new functionality with the cost of operations. This, in turns, gives the business the flexibility to consider complementary functions that can be rolled into the new service.
So, the CTO tells us, when a prospect engages with his company to evaluate a specific application, if the delivery model is private cloud, the customer invariably asks about additional capabilities and applications. This is not only an opportunity for the partner in question, it's an opportunity for the larger ecosystem.
This CTO has succinctly expressed something that we hear in a variety of ways from all of our partners: cloud computing implicitly increases demand for application capabilities. An obvious case in point is the plethora of applications on Facebook. When users don't have to install and maintain the applications themselves, they are more willing to install not just one or two, but numerous complementary functions. Of course, anyone who runs a data center would probably say Facebook makes it too easy, but that aspect can be controlled through policy and technology.
More importantly, the increased appetite for a menu of capabilities isn't met by merely providing a nifty catalog of applications. Application providers will meet their customer's needs by participating in a well-structured ecosystem of partners. Catalogs are merely an interface, the real benefit of complementary applications comes from an understanding of how applications fit together, as well as where and when a given partnership makes the most sense. And that requires a partner who can coordinate these relationships without unnecessary interference. Fostering an ecosystem in this way is exactly what IBM is doing with the Cloud Specialty.
With the partners in our program, we are helping them grow marketshare by connecting them to each other. The process is fairly manual for now, but look for tools coming later this year that will help automate some aspects of the program. But complete automation is not the goal, we are not trying to build an online matchmaking service for partners. We intend to provide the worldwide, cross industry market perspective that helps partners make sense of the opportunities they see.
Every partner that we're meeting with this week is on the cloud journey and has exciting plans for how cloud is expanding their marketshare and growing revenue. And in every case, IBM has a role to play in bringing our ecosystem to bear in building our mutual success. We look forward to growing our business with our partners.