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$5.73 return for every $1 spent on Google Cloud: Asian partners gear up for revenue growth

$5.73 return for every $1 spent on Google Cloud: Asian partners gear up for revenue growth

Market demand increasing for unique IP and differentiated services offerings

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Partner businesses built on Google Cloud are growing at a rate of 35 per cent year-over-year, as the modern-day channel “rides the wave” of cloud adoption across Asia Pacific.

With one in five partners growing even faster at more than 75 per cent year-over-year, new IDC findings highlight a Google Cloud ecosystem gearing up for accelerated expansion as customers modernise applications and embrace digital transformation projects.

According to research, specialists in Asia Pacific are expected to generate US$5.73 in revenue for every $1 invested in Google Cloud products, driven by specialised offerings, managed services and unique IP. This number is set to reach $7.78 by 2025 following more than fourfold market growth.

Specific to Australia and New Zealand, revenue is higher still at $6.66 rising to $7.39 by 2025, with India ranking at $6.11 and $8.33 respectively. Such figures place the region ahead of worldwide forecasts at $5.32, increasing to $7.54 within the next five years.

“Demand for cloud technology and services is growing rapidly, as businesses embark on digital transformation, and Google Cloud partners are particularly well-positioned to help customers plan and execute their digital transformation strategies,” said Carolee Gearhart, vice president of Worldwide Channel Sales at Google Cloud. “Our partners play a critical role in delivering Google Cloud technology and solutions to organisations all over the world.”

As outlined by Gearhart, the technology giant is “thriving, growing, and driving significant economic benefit” for partners, as the channel capitalises on increased demand for cloud infrastructure, data analytics, artificial intelligence, the Internet of Things and security solutions.

“I’ve seen firsthand how the global pandemic has further increased businesses’ needs for these capabilities, as they seek to quickly adapt or even to take this opportunity to accelerate their digital transformations,” Gearhart added.

As a result, partner revenue from Google Cloud-related opportunities is expected to more than triple by 2025, with 50 per cent of providers in the “late stage of digital maturity”. Meanwhile, and according to IDC, more than a third of Google Cloud partners have “fully integrated digital into their strategies and businesses”.

“This represents a tremendous opportunity for the ecosystem overall in building out their Google Cloud practices,” Gearhart advised. “At Google Cloud, we are focused on delivering end-to-end, best-in-class solutions. Many of our partners are extending these solutions and those who are creating their own unique IP around Google Cloud are seeing very strong margins associated with these products.”

Delving deeper, Gearhart said the channel is also benefitting from the vendor’s goal of 100 per cent partner attach on all customer sales, supported by “strong margins” on resale, IaaS, PaaS, and SaaS add-ons, alongside IT and business services and support for hardware and networking.

“We have a tremendous opportunity together to help customers across industries and around the world transform their organisations with the cloud,” Gearhart said.

Maximising margin

Of the $5.73 in partner revenue generated for every $1 invested in Google Cloud products across Asia Pacific, this is forecast to be predominantly delivered via services, software and resale margin.

According to IDC, such partner revenue is growing faster than that of the actual Google Cloud business, supported by a net margin opportunity of $121 billion through to 2025.

IT and cloud services created and sold by partners represent 52 per cent of net margin, with resale accounting for 27 per cent. This is in addition to business services (15 per cent) and supporting hardware and networking infrastructure (six per cent).

“Resale share of partner margin is an interesting outcome,” the report stated. “Many Google Cloud partners are benefiting from the vendor's promise of 100 per cent partner attach, and the managed services model has been a boon for many around consumption of Google Cloud Platform.

“Resale of Google technology also provides the means for partners to reinvest in other parts of the business to add more value to customer engagements.”

In a direct message to the channel, IDC advised partners to move beyond the commodity of “lift-and-shift’ projects, using this as merely an entry point to provide unique IP and differentiated solutions. Through this approach, partner IP can stretch to as high as 85 per cent gross margin on software, and between 30-50 per cent on professional and managed services.

According to IDC, 36 per cent of Google Cloud partners are currently investing six per cent or more of their revenue on this endeavour, spanning managed services, cloud services and project-based services.

However, on average, 66 per cent of Google Cloud partner revenue originates from their own IP, with deals dominated by consulting services, cloud software, implementation and integration services, plus support services and managed services.

A leading example is Singapore- and India-based partner CloudCover, which specialises in DevOps, data and API integration. The business recently developed and launched its first software-as-a-service product in the form of Strato, which allows customers to create dashboards to "monitor complex cloud systems holistically", combining metrics from infrastructure, applications, third-party monitoring tools and security.

Speaking as co-founder and CEO, Vishal Parpia said CloudCover spends time and resources on planning and executing advanced cloud solutions, specifically around infrastructure automation, data management and AI. For IDC, this is where partner revenue, as a ratio of a deal, and margin "start to jump".

"The value from the services needed to build a cohesive data platform can surpass the value of GCP consumption, especially when using cloud-native services like BigQuery," Parpia added. "We expect more revenue to come from products and reusable solutions (that are automated to a large degree) than from just pure services."


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