At the 2012 CRN Fast50 awards in Sydney, CRN hosted two live and interactive roundtables before an audience of some 200 vendors, disties and partner hopefuls. The first spawned a fascinating and at times lively discussion about what the cloud will mean for the future of the channel.
Of course we all know 2012 was when cloud computing evolved from one of the most hyped areas of our industry to an accepted and essential approach to buying and deploying business IT.
Yet many in the industry, including in the channel, have been left with a number of questions.
Ranging from the opportunities for virtualisation, the NBN, to how to manage the annuity model and customers’ increased expectations, this roundtable sought to address the growth of the cloud and what resellers and vendors need to do to make the necessary transitions to turn it into a viable business.
ATTENDEES
Michael Costigan, Avnet
Darren Haymes, DPSA
Robert Sherry, IBM
Toby Bowers, Microsoft
Brendan Donohoe, Telstra
David Henderson, Westcon Group
Charles Clarke, Veeam
John Donovan, VMware
CRN Rob, we’ve heard a lot about how the true origins of the cloud are really back in the mainframe days. Obviously working for IBM you have a unique perspective on this, IBM being one of the founder pioneering companies in this area, but of course now being one of the leading lenders in the cloud space. This notion of the cloud not being a new idea, is this something you think is perhaps a tad simplistic?
Rob I think most IBM-ers would recognise the fact that virtualisation has certainly been around on the mainframe since the mid-1960s. They probably recognise that cloud computing itself was a centralised mainframe-like technology with distributed notes, but I think that’s where the similarity would end.
If you have a look at what National Information and Communications Technology Australia (NICTA) would define as cloud computing, they really focus on things like the customer experience, which involves things like self-service, ubiquitous access, and as-you-go consumption models.
I think that’s a far cry from centralised and virtualised computing. So the other thing is if you’re looking back and ever wanted to leverage the technology that the mainframe delivered you, you’d virtually have to own one, and I think one of the key benefits in cloud computing today is that for many businesses, they can access computer power, which was previously prohibitively expensive – and that for many organisations is representative of a paradigm shift.
So to answer your question, I think we can thank the mainframe for some of the early technology that’s enabled us to evolve to where we are today. But I’d agree with you. It’s an over-simplistic notion to say we’ve been there, done that, based on some of the benefits that many organisations are deriving from cloud today.
CRN We all know bandwidth plays a very important role in cloud adoption, and with all of the press around the NBN, we’re perfectly aware of the bandwidth restrictions in Australia.
Michael Costigan from Avnet, I wonder if you might be able to talk us through how important a role you think the NBN will play in driving this sector of the industry.
Michael The promise of NBN is fantastic. It will allow small to medium organisations to adopt the cloud much faster, because they’ll be able to leverage the power of the network itself. It’s not just going to be a tool for people in their homes to download movies faster. It will allow organisations to access data, not only in Australia, but also overseas. The potential and the promise of the NBN will allow that adoption rate to move up considerably. It will also allow the spread of the different cloud models around Australia. We just have to wait and see how it’s going to roll out.
CRN David Henderson from Westcon, in a piece for CRN recently you cited Winston Churchill’s line that the ‘Empires of the future will be the empires of the mind’, partly as a warning to your own industry about the need for distributors to adapt to the disruptive effects of cloud and virtualisation. How do distributors stay relevant in this world?
David I think the cloud presents a number of really interesting challenges for the industry, distribution arms, for the resellers and for the vendors. We’ve got to come and understand as individuals and as groups what IP do we have. What intelligence do we have that adds value into our end-user customers. In other words, make sure you understand what your core competency is, and I think you’ll survive this transition.
But as you do that, clearly there’s going to be issues around a full integrated solution into the customer. Not only is it your core competency, but I think there’s a tremendous opportunity to look at who you’re partnering with.
One of the more challenging conversations with the partners that I engage with is around who should be my telecommunications provider. It’s an environment moving towards partnerships with new challenging vendors or the telecoms people, be it Optus, Telstra or many others. A really interesting dynamic I love about the cloud is the question of ‘who becomes the end-user of the future?’
When an end-user buys a service, the end-user now becomes the reseller. It’s the reseller who’s going to determine the brand and the infrastructure that’s being delivered into the marketplace, not the end-user customer.
No longer does the partner community become the trusted adviser; people that we work with, valuable associates in the sales engagement model, are all of a sudden the dynamic changers, where you the reseller become the decider as to which brand is going to succeed.
We all focus on the technology and how great it is, and we have the private hybrid, yes, got all that – but really you look at the channel dynamic and the most exciting thing from our viewpoint, and I think from our resale partners, is that the power is shifting and it’s a great thing to see, is it not? So I’m very, very in favour of cloud for that one simple reason.
CRN Back to bandwidth and network speeds, Brendan Donohoe from Telstra, we know latency is emerging as a key factor for companies considering the move to the cloud. What can partners do to better harness communication networks and offer real differentiation of their cloud services?
Brendan Hopefully we’re changing our image around one of the difficult vendors to deal with. It’s an interesting question, but to put it in perspective first, I’ll talk in Telstra’s terms about what we refer to as cloud and our cloud services. So we’ve made a significant investment in cloud – $800 million. When we talk about cloud, we are mainly talking about infrastructure-as-a-service, both dedicated utility computing and software as a service. We’re talking about storage; we’re talking about security.
So they’re the four main areas we mean by cloud computing, and we’re seeing lots of momentum. We’re having these discussions hourly with customers. [Latency] is one of the points that came up. So the starting point for latency is ‘what is the customer trying to achieve?’ and ‘how do they look at the moment?’ Are they going to have mobile workers, or are they just using a desk-based service?
There are a number of questions we need to discuss with them, and I agree the telecommunication conversation, or the network conversation with the cloud conversation, is just mandatory, because if you sell cloud on its own and don’t consider the customer’s access, it’s fraught with danger. So it’s a key question – what is the customer trying to achieve? What applications are they running? What’s their set-up for users?
I’d say we probably have one in 50, one in 100 cases where there is a latency issue. There’s certain applications under certain customer contracts where latency does become an issue, and we have solutions there. Things like optimisation are becoming more prevalent and that obviously helps as well. So there’s never a time yet when we couldn’t work around a latency issue.
CRN I’ll ask a question now of Microsoft, obviously for many years one of the most important and lucrative vendors for IT resellers. Toby Bowers, what is Microsoft’s plan to ensure partners continue to be relevant in the era of cloud and software-as-a-service in particular?
Toby We’ve been working for years to enable our channel to take advantage of the opportunities we see in the cloud. It truly is a new era, and you’ve probably seen us talking frequently about our own partner events.I’d say a couple of things – we are 100 percent committed to providing a path to profitability for our partners in the cloud.
We have for 30 years been a channel company and a partner-led business, and we absolutely believe our channel ecosystem is our competitive differentiator in the market. For more than 15 years we’ve also been a cloud services company, going back to the pivotal days of the internet.
So what we’re seeing now is the convergence of consumers demanding live and updated content on a multitude of devices and businesses demanding the efficiencies and scale and competitive advantage that the cloud brings them. We really think that that intersection provides a unique opportunity for Microsoft and our partners for that matter.
There’s some channel dynamics shifting out there in the marketplace and we’re seeing some very interesting things happen. We create our own journey towards becoming more of a services and devices company. I met with an accountant firm called Hanson’s, and they recently rolled out Office 365 to 16 users and they’ve seen some great business benefits with doing that.
The interesting thing that Hanson’s is doing as a tech savvy accountant is extolling the virtues of Office 365 to their small business customers, walking in with one of those devices and using Office 365 as well as some other technology products like Xero. We’re seeing that accountant channel emerge as an important influencer in that small business community.
Another example is more in the big end of town, one of our great ‘born-in-the-cloud’ partners Kloud has just helped us win a deal with Coles. It was 100,000 users of Office 365, and Coles have 16,000 PCs, and we’re rolling out 365 across 100,000 users. It’s an example of how cloud has untapped incremental opportunity for both us and our partners and the customer realises the benefits of cloud technologies, over more shop floor and mobile workers, kiosk workers.
We have another partner called Breeze, one of our worldwide award winners this year. They implemented a solution for Centrebet, the largest bookie in the Southern Hemisphere, all designed around the Spring Racing Carnival, and in particular the Melbourne Cup. With the Melbourne Cup Centrebet sees about 400-times the traffic than on any typical day.
Breeze went in as an emerging cloud-based system integration partner, recommended a solution that they developed in four months and it actually included an on-premises solution that ran on our site with Sequel Server and Biztalk, and drove the core betting application for Centrebet, but then had an elastic web-hosting solution into our Azure platform. In that first hour of going live, Centrebet saw 1.2 million transactions come in, and that system handled it without blinking an eye. And that’s the race that stops the nation. That was a timely example of that hybrid cloud scenario.
CRN John Donovan from VMware, virtualisation has certainly resulted in reduced demand for server and storage hardware, something that’s been quite disruptive for the channel. What advice can you give to resellers about transitioning their businesses to substitute returns on metal with returns on virtualisation?
John We’re living in amazingly interesting times. The transformation is with people demanding a more agile relationship with their IT infrastructure, and they want significantly better return on their investments. This really changes the relationship that the traditional resellers have as well.
What we’re doing in terms of the shift to cloud has been proven as being a much more agile and cost-effective approach to managing infrastructure. What hasn’t been clearly defined is the role of the integrators and the role of the resellers. Traditionally they’ve been the suppliers of that infrastructure and as that changes, and as we move to much more of a services based model, and a much more agile BYOD or bring-your-own computer-based model, it changes the relationship these partners have with their customers.
As vendors we need to help resellers actually understand the role they play in this transformation. That’s probably what’s not so clear as you move away from supplying physical hardware and move into much more of a transformational agent model. That’s a very difficult transition for many people.
But it’s really central to what they’re doing. The view that the relationship the reseller has with their customers as a trusted adviser or thought leader are words and phrases that are thrown around a lot, but I really think they’re very accurate in terms of the relationship those resellers have.
What we’re trying to do is build the competencies and the relationships those resellers have, so they can help guide the end-user customers through this journey through the cloud. As they create a much more agile infrastructure, as they modernise applications and as they move through to a much more agile end-user based relationship that the consumers have with the infrastructure, it becomes more dependent on us to help guide the partners through that.
This is absolutely turning the industry on its head. One of our key national partners, Thomas Duryea, has been doing some amazing stuff as they’ve re-architectured themselves from being a traditional systems integrator to much more of a cloud supplier, and we’ve helped them as they’ve built their competencies and accreditations so they can remain in that trusted adviser status. That’s proving to be a successful relationship and really illustrative of the responsibility we all have as vendors.
CRN Charles Clarke of Veeam, the growth of cloud computing has contributed massively to increased volumes of data clearly, data which is now distributed in new and more complex ways. How big an opportunity is there for the Australian channel to generate returns from cloud back-up services?
Charles The opportunity for a cloud backup is something Veeam has been helping our channel partners with really since the inception of back-up-as-a-service or hosting for back-up. Really for us there are two key opportunities for our channel partners to assess their customers in terms of cloud back-up.
The first that we see is around hosting of back-up services itself. We’re finding this is for a variety of reasons. We’re looking at customers who need some long-term archiving or back-up, long-term archiving of that sensitive data but are struggling with the cost of tape, or manageability of tape.
I was at the launch of AWS (Amazon Web Services) in Australia recently and that’s created a lot of ripples in the cloud market, and among our channel partners. So I think there’s a great opportunity for our channel partners to effectively be the glue between the customers and those cloud services in terms of providing that hosted backup.
That’s the first area. The second, to echo John’s point, really is about the channel partners being trusted advisers in terms of that journey to the cloud. The Forrester VMware Cloud Index published recently raised a couple of interesting points for us. First, systems integration was now second and the key concerns around cloud computing and barriers to cloud computing, and availability had come up to fourth.
For the channel partners to engage with their customers, to engage with vendors like Veeam and Microsoft and VMware and services like AWS to provide that hosted backup, to provide advice, to provide the pathway, the sort of grease to the wheels if you like, for the journey to the cloud, provides a massive opportunity for the channel here in Australia.
CRN Clearly one of the biggest engine rooms for the cloud is the actual datacentre environment itself. Darren Haymes of DPSA, the cloud has certainly helped drive demand for datacentres, but rising energy prices have increased the pressure on operators. How can resellers help their customers build more sustainability into the datacentre environment?
Darren There’s some great opportunities in the marketplace as we speak right now. So most datacentres in Australia are close to eight years old, or even older. A lot of the technology that was around back in those days has changed quite significantly.
There’s a number of key factors that are impacting on the datacentre. We’ve got rising energy prices, and so their IT managers are now working towards a focus on energy efficiency, particularly within the data centre space. You’ve got the carbon tax and rising energy prices because of major infrastructure upgrades around Australia.
The other things to be aware of is the NABERS star rating system. They haven’t announced a date yet, but basically it’s going to put a star rating system around a datacentre. So businesses are going to be forced to comply.
The other thing to be wary of is new ASHRAE standards that came out last year. It’s changed the tolerance levels in terms of how you can operate your equipment within a datacentre. A lot of datacentres we see typically operate at 21˚ Celsius; that’s not necessary today, the equipment has changed. There’s lots of ways you can introduce what we call ‘low hanging fruit’ containing your air. So a lot of datacentres you’ll see they’re mixing hot and cold air.
Whether you go a cold aisle or hot aisle solution doesn’t really matter, but there are ways you can bring sustainability about in a datacentre. Take the use of blanking panels with modular scalable solutions within a data centre space. Ten years ago datacentres were building one big block. These days we’re starting to see datacentres being built in modular solutions, so that again you only bought in for what you need when you need.
So there’s other things like introducing DCM (datacentre management) software which will help you measure your energy consumption and therefore you can start to make some decisions. You can’t manage what you can’t measure so you need to look at those sorts of considerations.The other thing is that density zones is a fundamental opportunity within datacentres. We often see within racks, they’re operating at 2 to 4kW.
These days it’s not necessary. There’s opportunities to encourage your end-user clients to look at virtualisation, introducing higher density into the racks. There’s vendors out there today with technology that allows higher density within datacentres. We’ve got a customer that’s operating at 32kW per rack which is quite extraordinary and unusual in the marketplace. I would encourage those sorts of things within the datacentre space, and there’s a lot of ways you can help your customers achieve sustainability within their datacentre.
CRN It occurs to me one of the major risks with cloud computing is that it’s increasing customer expectations right off the charts in terms of what they can actually deploy, and the costs they can get it for. Is that emerging as a problem, and if so how are you addressing it, how are you working with your partners to address it?
John I don’t think it’s a problem, I think it’s a bloody good thing. We’ve had 20 or 30 years of this industry, and the framework and how we’re told to use devices dictated by IT or infrastructure managers. I’m actually thrilled that we as users now get a chance to shape what IT infrastructure looks like and what devices we can use and where we can use them and what sort of data we access and where we want to be when we access it.
It’s the way it should have been at the very beginning. The reason we have all this IT infrastructure theoretically is to drive a better relationship with our own customers, right? Instead it’s been in many cases very limiting for us, so what we’re demanding and what the users are demanding through this revolution is a much more intimate relationship with the customers through much more agile devices. I think it’s a wonderful thing, and we should be reacting to that in a much more embracing manner than we probably have been historically.
CRN You can appreciate that many companies are very anxious about the dramatic drop-off in margins that that threatens?
Michael I see it as a margin opportunity. If you’re looking at complete transformation of IT infrastructure and in the services contribution that comes with that, it’s a tremendous opportunity. Unsustainable business models are unsustainable business models.
I remember a few years ago Paul Harrup drew this analogy between what’s happening in IT and infrastructure with the old age kind of typing pools. That structured approach towards data generation and management went away; it just wasn’t sustainable any more. The historical approach towards manufacturing of IT infrastructure and building and management of that has changed rapidly as well. Businesses are going to transform the way that consumers want them to transform.
CRN How long do you think that transformation’s going to take?
Michael I don’t know. Not fast enough. I’m loving it, I think this is fantastic. The rate of change that we’re seeing at the moment – make jokes about the tablet devices, smartphones and all that sort of stuff – but how quickly has all this stuff happened. This change that usually takes a full generation for us is happening in a number of, you know, single digit years, and it’s interesting the way that level of accelerated change is really driving a high degree of nervousness in the community as well.
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