CRN roundtable discussion: SMBs in the cloud

Nick: Well is it because I guess we at Distribution Central got lost in the cloud a while ago. We buy product from vendors and we sell it to resellers – so what is our position going to be in this bizarre love triangle? What we found out was you’ve got the ‘gonna gonna gonna’ – ‘you’re gonna have to do this, and you’re gonna have to do this’ conversation, what is going on, what’s happening. I really don’t care, because the cloud’s been here forever.

It was either called ‘bureau computing’ or it was called ‘software as a service’ or ‘managed services’ or etc etc. Where it gets interesting is when you identify what is a customer buying, and what does a reseller do? Because we’re talking about SME resellers here. The conversations we’re having with our SME resellers become really really interesting – because the bottom line is that cloud is not instead of, it’s as well as. This is what people really lose sight of. There’s almost this myth that’s created, that once you’re using cloud services, you don’t need anything any more. Well you goddam do.

Simeon: When people want to go into the cloud, they need to know more, they need to have more confidence than just about the solution they’re accessing. They need to know that confidence starts at their premise and goes all the way into the cloud. That’s why if you look at telcos globally and look at analysts’ research globally, they talk about the mix of telco and cloud vendors as being the perfect match.

Being able to provide that assurance of the network connectivity all the way into cloud, like a cloud services product – posted in our Australian data centres, accessed via one of our private IP networks, via a wireless IP connection end to end security and end to end SLAs and the full management experience – so I think that’s the full story that the telcos bring to the table and why we see it as a very serious investment for the future.

Robert: Coming back to Nick’s point, I think that’s going to counter one of the comments Roy made, and that is that the cloud environment will always co-exist with some organisations maintaining their own infrastructure. Cloud’s never a generic discussion, it almost always starts with a specific workload in mind, and there are some workloads that are ready and highly suitable to migrating to a cloud, but then there are some workloads that will never be migrating to the cloud by virtue of their complexity. They’re simply not virtualised or regulatory compliance prohibits them from moving to some kind of cloud environment. 

John: Can you expand on that? Why would you not be able to set yourself a target of having 100 percent virtualised applications and workloads?

Robert: You will always have an infrastructure play whether it’s a private cloud environment or just because they’ll host their workloads and applications in a traditional environment – just the way they have done for the last number of decades. It’s not going to be ‘everything moves the cloud’ – these two environments will co-exist, and there will always be a place for our channel partners to stay and remain in reselling and adding value to infrastructure sales, as well as developing new cloud services offerings.

Roy: I agree it’s the same, we didn’t get off minis and mainframes 100 percent ever did we? We are still using minis and mainframes today, all of us do. Whether we use it directly or indirectly. So cloud I don’t think will ever be a 100 percent model.

John: I don’t think you are thinking big enough. I think you should be thinking longer term , so think bigger, think about the transformation we’ve been through in the last 30 years. Don’t you think at some point in the future, whether it’s 5, 10, 15 or 20 years’ time, we can have floating devices that hold no applications, no information – it’s just this seamless connectivity through to some form of centralised easy to manage secure environment. Why is that not something that we could aim to build the industry towards?

Nick: Because this is why we don’t have electric cars. We live in a world where everyone has different interests. The strategies that are going to be competing against cloud are based on technology that hasn’t been thought of yet, and the only guarantee I have of that, is because cloud was doing that to whatever was happening five years ago.

In five years’ time, we are going to be talking about the stuff that made virtualisation redundant, the cloud redundant, whatever redundant, because we live in a commercial world and that’s what happens. What also happens is that strong, well-paid, influential reseller reps are not wanting their customer to do it, because they don’t want to get paid over 36 months. They want to get paid right now, right here. 

John: When I was working in systems integration, it’s purely a net present value calculation on the commission structure. You can get around that very easily just by paying people differently.

Roy: You must be hearing this all the time, like ‘don’t influence my reps too much’.

John: We hear that from the vendors as well, we’ve got enterprise reps paid on selling tin, and a competing strategy around MSPs selling infrastructure to a consumption model. So it’s economy.

Roy: The reps competing for your mindshare to sell it one way or another.

John: That’s what’s transforming the industry and if that’s how sales people are paid, we’ve got an issue. When your business is virtualisation, you don’t have that problem, but when your business is pushing tin, you have a problem.

Nick: We’ve got guys paid through perpetual, and guys who are paid through subscription and you can work it out, it’s not that hard.

Robert: When we talk about business transformation, channel firms need to transform their business so that they can accommodate and manage the transition away from lump income to annuity, and they need to think about new ways to compensate their sellers.

Roy: But the demand is coming from the SMBs regardless. You hear about it in all these sessions; 80 percent of resellers will tell you they’ve had their customer in one way or another ask about cloud and yet you ask them what are they doing about cloud and about 20 percent of the room will say ‘yes we’ve got a plan’ and the rest will sit there like stunned mullets.

John: The resellers, or value-added resellers or systems integrators or outsourcers available can be led by the demands of the customers, or if they choose to ignore them they can deal with the consequences. There will be perpetual licensed sales and tin going into standard environments for many years yet, but it will become a small part of total IT spend. 

Simeon: So that comment was spot on that the demand is coming from SMB.  It’s no longer about enabling partners or trying to get partners on board to drive cloud sales – pick your analyst, but most are predicting around 40 percent of Australia’s SMBs are going to make a move into cloud if they haven’t already in the next 12 months, so the demand is coming.

I think on the compensation model, one of the biggest barriers of SMBs moving into the cloud is ‘how do I get there?’ and that can never be overlooked. The compensation model about ongoing revenue streams is one component and often only a small component of the total compensation.

The big win for resellers is actually in providing professional services. So compensation is a tricky one, there’s no getting around it, but it is a change in model that the opportunities are still there and they’re still big.

CRN: How important do we think the issue of data jurisdiction is in Australia, or rather how important to Australian business is the issue of data jurisdiction? Is that an interesting way for you to differentiate yourselves?