Seasonal changes
Brian Pereira, chief executive of NSW- and Qld-based cloud services provider CN Group, offers the example of his retail industry customers. “Many of them will add significant numbers of staff over the next three months and then want to turn them off in the New Year. That’s compelling from a cost perspective because they are no longer committed to a one-year or 24-month contract with no exit.”
CN Group is a partner of NetSuite, Microsoft and SAP, and Pereira offers other areas of savings that customers find compelling. “Many smaller companies are now getting access to functionality that was previously only affordable by large organisations. They are also getting administrative overhead savings as the cloud streamlined many compliance issues around things like data security.”
But it’s a mistake to think of cost as the key criteria for many companies, says Beaugeard. Instead, he argues that one of the real attractions is simply to remove IT as an impediment. The company’s specialisms include deploying Office 365 and Xero’s SaaS accounting platform.
“We operate across the spectrum from enterprise down to small business. Fundamentally across the business landscape, people are waking up to the fact that running their own IT infrastructure is not an appropriate use of their time or resource,” says Beaugeard.
“Companies want to focus on core business and let people who are good at IT focus on the IT.”
Cloud isn’t just changing the way companies manage IT or pay for it. The person signing the check is also changing. Often that decision maker is determined by the size of the company, says Tucker.
“Generally speaking, for companies up to about 150 users, you are dealing with the owner or the CFO They tend to move a lot quicker. In that mid-tier of companies from, say, 150 to 400 staff, that’s when you are dealing more with the network manager or IT manager. “
It’s this tier where the cloud integrators meet the most resistance. They are harder to deal with, says Tucker, because they are a little more focused on issues like self-preservation. “In those companies, we do tend to try and sell into the C-level “
In the corporate space, Tucker says the new generation of CIOs are great to deal with. They often have a business background. Likewise in larger companies, Tucker says IT suppliers tend to be selling into department managers who appreciate the immediate benefits to their business.
“If the CIO is anti-cloud, you can definitely sell into businesses units especially if those business units have their own P&L. They see it, they get and it offers amazing savings.”
He says this dynamic is causing quite an upheaval in the corporate management of these departments.
Winning more hearts and minds to cloud will require a different sales pitch, says SAP’s Ryan. “We need to be placing the emphasis on better, faster and more frequent innovation, speed of deployment and business agility that is enabled by cloud, as opposed to just cost savings and data sovereignty or security.”
Numbers game
Of course, the cloud also has to make good business sense for seller as well as customer. For many traditional providers moving to the cloud, the shift to annuity-based payments is quite a challenge.
Even with the more sophisticated take on an old idea, fundamental issues remain. Distributions Central’s Nick Verykios adds: “The issue for many companies trying to make money in the sector is just getting enough volume in terms of people wanting to use their method for doing their computing.”
“You don’t have the lumpy cashflow that you normally you get and which many companies rely on,” says Tucker.
“As the amounts are smaller via monthly annuity, it becomes a bit of a numbers game. Cloud integrators need to have the numbers.”
Tucker suggests companies with larger infrastructure and sunk costs face more of a struggle to make the transition from a more traditional systems integration or managed services model. “The smaller nimble businesses that don’t have the staff transition a lot quicker “
CN Group’s Pereira agrees. “The traditional SI environment we grew up with – where you would spend six to nine months implementing a solution – is gone. In the cloud, companies can be up and running much faster and that a significant change.
“You no longer get paid in large chunky amounts of dollars as an SI; you have to learn to model your business around small annuity payments based on the number of users your customer will have.”
Telsyte’s Gedda suggests that VARs can make a business out of adding value to cloud services without any existing on-premise clients. But he says the real challenge is among channel companies that have established businesses in reselling products and offering services around the products.
“If a cloud service obsoletes a product, then the existing channel business is under threat. It’s not easy for a business to transform into a service provider if it has a strong business around project work.”
He believes, however, that the allure of annuity revenue associated with IT-as-a-service is now enough to get channel businesses rethinking their business models and how they can succeed in a cloud world.
“The cloud integrator has the cloud service as the baseline and looks at the many ways to add value, from security and protection to integration and workflow management,” says Gedda. “While there is nothing stopping integrators from becoming cloud providers themselves, the potential to add value to what the cloud already provides should not be overlooked. The cloud itself – rather than a switch, router, server or storage system – should be viewed as the product you can add value to.”
The cloud integrators CRN spoke to also made it clear than adjusting to an annuity model is only the start. There are fundamental cultural issues that need to be addressed, in particular around skills. The salespeople who are good at selling big licence deals are not necessarily the right people to sell annuities. The technicians who enjoy the company of computers more than the company of customers probably will struggle in the new world as well.
According to Gedda: “This is another challenge as many cloud skills are quite different from their on-premise equivalents. VARs should review the adaptability of their existing skill sets to the cloud world and not be afraid to adopt new skills as required.”
It’s a fascinating trend, says Beaugeard. “All of my team are turning into infrastructure people with development skills because there is so much you can script and automate in the cloud.
“If I look through my staff list, I can see other changes too. The Office 365 guy in my enterprise division used to be a Microsoft-certified trainer. He came to us with very few preconceived ideas and very little consulting skills. And he turned out to be brilliant.”
Beaugeard contrasts that appointed with another now former employee who came is an Exchange implementation person; just two weeks into the role, the employee realised almost everything he knew was redundant.
“These are the things that can create conflicts in an organisation and can lead to people fighting against the move to cloud.
“You need people who are able to understand business needs, who can do lots of scripting to make it happen fast. They need to be passionate about being fast but also have that underlying technical depth to be able to deliver. It’s a new breed of consultant,” says Beaugeard.
Pereira agrees that it’s a very consulting-based approach. “You are no longer proving tech advice about how fast the hard drives spin. That sort of technical detail is no longer required because the clients we service expect they will get what they need when they need it.
“They don’t really care about brands,” he adds. “The days when we would go out and sell IBM and HP for their brand – that happening less and less.”
Rebirth of a salesman
There are also clear changes in the nature of people who sell technical solutions in the cloud.
“The buyer has changed, the buying process has changed, the buying cycle has changed,” says MG365’s Gregory. “The trick is to gear up a conversation about the business applicability of the solution and the business outcome for their customer. The partners I speak to tell me that technology purchasing decisions in their customers are increasingly being influenced by line-of-business owners. Partners are increasing their value by bridging the gap between business requirements and IT’s strong platform for delivering.”
VMware’s Daniel McLean says that educating customers is critical. “Cloud integrators need to explain how the cloud can lower cost of infrastructure migration; or how SaaS alters business processes to deliver a better cost base for a business service; or how can PaaS provide more capability that can deliver a competitive advantage.”
Loryant Strant, director at Melbourne-based Paradyne, a major Office 365 partner, says a core skill is being able to quickly adapt to change and absorb a lot of new information. “The people I need to employ must have a constant thirst for knowledge to improve. It’s not like the days where we had the three-year life.“
RULES OF ENGAGEMENT: redefining vendor relationships
Relationships vendors and their partners are being redefined in the cloud era. That adjustment has not always been easy or comfortable for either party.
“All the vendors have struggled to work out what this ‘cloud integrator thing’ is. Microsoft has a very close relationship with Telstra but that has disenfranchised many of their partners,” says HubOne founder and CTO Nick Beaugeard. However he does credit Microsoft for working through the issues and improving its relationships.
“Microsoft is doing a better job now with their partners, but boy, it’s been fun because they have a whole legacy of traditional partners who don’t have anything to do with the cloud.”
Meanwhile, fellow Microsoft partner Loryant Strant, director at Melbourne-based Paradyne, says it is obvious that reseller-vendor relationships will have to change. “If you think about the late ’90s and early 2000s, the reseller was the customer of the vendors because the reseller was the one you had to sell the kit to and they would recommend that to customers. But that’s not necessarily what’s happening now.”
Customers, he says, are making those decisions themselves and then choosing the partner.
Brian Pereira, chief executive of NSW and Qld-based cloud services provider CN Group, says the maturity of the program depends on the maturity of the vendor; some are more mature than others. “NetSuite have been in the cloud market before the cloud market even existed. They are very mature in terms of their ability to deliver.”
Other vendors understand what cloud is doing to their business says Pereira but they are taking more time to get to the point where they are really driven by the cloud. “They have traditional cost structures and maintenance payments that fund their business today.”
MAKING THE SWITCH: Advice from cloud integrators
The days of big lumpy project payments are over. The business and its costs need to adjust to lower value monthly annuities, but the good news that these can be sticky despite the lack of contracts.
The people who make big licence sales once or twice a year may not be the right kinds of salespeople to sell those annuities. Cloud integration is much more a business-driven consultative sell.
The nature of technical staff is changing too. You need people with a thirst for knowledge who understand business imperatives.
Be prepared for a little dislocation in your relationships with key vendors. The big IT companies are adjusting their businesses to the cloud and that means they are changing the way they structure their partnership deals. Many partner programs are built structured on the basis of mature and well-understood market dynamics, but the cloud sector is still evolving… quickly
Expect a lot of M&A activity. The name of the game is to grow customer numbers quickly. In future, acquisitions will be more about the client list and less about the staff and management.
-1.jpg&w=100&c=1&s=0)
.png&w=100&c=1&s=0)
