CRN roundtable discussion: SMBs in the cloud

Tony: I think the comment about cashflow is a pretty important one here and one of the most important ratios in a reseller is billable utilisation. Engineers sitting on a bench unutilised is a dead cost to the business. Cloud services offer the ability for the reseller to move away from the product to a services-based environment, and cloud enables you to build environments for customers which vendors would otherwise take control of. 

Roy: To do that the partner does need a transformational plan. Most resellers have grown their businesses organically, opportunistically. They might have been an engineer – started up, started going, started moving forward, but now is the time when partners have to absolutely get a proper transformational plan in their business, to say ‘how am I going to go from a transactional based business to an annuity revenue based business’, and it is a journey. 

Cloud is not about how the SMB wants cloud, or why. They don’t really know what cloud is, but what they do know is that it ‘takes all that infrastructure stuff off my hands’. Go to the industrial revolution, same thing. They all had the steam plant at the back generating power, and eventually they just bought electricity off a grid. The SMB more than any other business wants that, because technology has become a complexity in their business, but they have to have it. They’ve got to be on social media. They’ve got to have websites, they have got to have ERP systems to interface to the big players out there, be it a mining company, be it a supermarket chain – so they’ve got to have this complexity – but why do they have to build it themselves?

Transactional business is going to end. It’s as much a fait accompli as many mainframes came to the end of the road, right. We heard the same guys screaming as they went off the cliff.

Geoff: The transformation thing has to happen for the client as well. So you go in there, you want to transform into a cloud player, which is what we’ve been doing over the last two or three years. Back in ’04 we were doing hosted solutions. So, ‘cloud’? Same thing, new name. The challenge is how do you work with them strategically, and that’s where a lot of IT companies I see out there in the market have the challenge. That is that they’re talking tech. They have to actually talk business plans, and that IT plan has to be about ‘how do we go into cloud?’ – ‘Why do you go into cloud?’ – ‘Can you network enable it right now?’

Stephanie: One of the key things we’re seeing for our clients is that we talk to them about the complexity being margin – so it’s really important for them to think about something that’s really unique and different. If you’re going to go out there and sell a Google Apps or an Office 365, it’s really hard to make any money – so think about something that’s really different to give to your customers.

Robert: There absolutely is a role for the channel in this new landscape. You’ve talked about them being this trusted adviser to help clients to really understand what are the best applications or best services to choose, when there’s a thousand suppliers and vendors advocating that they’ve got this cloud capability – but it’s also that the vendors need the reseller and channel firms to extract the value on that business application and that service, and annuity income is only as good as it lasts. So the retention in this model is going to be key as well.

Also, I think it’s incumbent on the vendors to educate and provide programs to the channel firms to enable them to develop the skills and capability so they draw on a lot of global experience that vendors have so these reseller and channel firms can get off to a fast start without having to reinvent the wheel themselves.

Roy: Every reseller that’s supplying into the market thinks they’ve got to go and build a cloud, they’ve got to go and build hosted exchange, or they’ve got to go and build file services, or back up and things like that. That’s not where it’s at. The future is most definitely in a different skill, because you’ve still got to have single sign-on identification. The partner has to do that, they still need security, they still need backup, just because the application’s in the cloud doesn’t mean it’s been backed up and can have disaster recovery added to it, or it’s automatically there, it’s not. Very often in the fine print, DR is not part of the deal.

Simeon: Yes, what you said, Robert, absolutely resonates with our experience as well. Telstra’s investment in cloud is in a number of areas, but one of the areas where I think we’ve been quite successful and have been quite pleased with our progress, is in the area of software as a service. We went to market two years ago with Office 365 in a former form, and we’ve since seen over 850 partners sign up with us to sell that solution, and there’s been extensive work done by both us locally and Microsoft on a global level.

We’ve seen some very successful partners migrate from an environment where they’re selling boxes or selling on premise exchange, into a cloud environment, some partners approach it in different ways. Some partners have the cash to actually spin off a dedicated cloud business unit, others use it to supplement their business. Others see it as an opening into a new area of business that they previously couldn’t touch. Once they start that journey, they can continue up the chain.

Robert: Looking at the surveys that IBM have conducted, 60 percent of customers who will adopt a cloud strategy will adopt a hybrid strategy, and that in itself creates significant new opportunities for organisations that can integrate these public and private environments, and if you think about almost all new applications are born in the cloud, organisations don’t want to have these application islands, you know their ‘private’ needs to be able to talk to the ‘public’ – so really again this new landscape, this new opportunity creates opportunities for organisations and vendors that can provide the capability, the tools to enable this integration.

Roy: Migration tools and doing the migration is going to be a massive business in itself, right?

John: The service providers are actually looking to create reseller communities. So they recognise they have potentially best of breed data centre services, and virtualisation management of cloud based services – but they don’t have the relationship building and management of disparate consumers or customers, whether it’s SMB or commercial. So there’s a number of service providers looking to go back and create reseller communities and for them to reach out and manage those customers, which is an interesting transformation.

We’ve seen a number of traditional systems integrators now become advisers around cloud-based services; we’ve seen a number of resellers transform themselves into resellers of white box or rebranded cloud-based services; we’ve seen distribution set up relationships with aggregators of cloud-based services and then being rebadged and resold, even through traditional route to market models, which is a fabulous transformation.

The other thing is the great range of options being delivered through disparate service providers. You’re not locked into this traditional MS model any more. 

CRN: How important do you think SLAs are for company’s cloud providers to differentiate themselves?

Nick: They have to be critical. The SLA has always been there, no-one is going to change the way they do business, and when you work with an integrator to deliver a service to you.

CRN: In the past it was probably going to be on or off. Now it’s more nuanced presumably?