In June, CRN invited a group of small, medium and large system integrators and sponsors to chew over the topic of hybrid cloud, and how they find the right solutions for customers of all shapes and sizes.
GUESTS
- Michael Chanter, General Manager, Thomas Duryea
- Jason Rylands, Northern Region Manager, DPSA
- Peter Paddon, MD, First Focus IT
- John Vidler, Regional Director Solutions, Huawei
- Rodney Gedda, Senior Analyst, Telsyte
- Josh Rubens, MD, Cloud Solutions Group
- Philip Patelis, MD, Xcentral
- Anthony Woodward, CEO, Bulletproof
- Paul Voges, Executive General Manager of NSW, Oakton
- Steven Kiernan, Editor, CRN (Moderator)
CRN: I’d like to start by asking about the impact of cloud on small, medium and large customers. XCentral is in the SMB space, what are you seeing?
Philip Patelis, XCentral: We’ve been focusing on the 25-to-75 seat space. Our customer is generally an uneducated buyer. A lot of people at this table deal with enterprises, and your customers are coming to you asking about compliance and regulation, but our customers come to us saying, ‘We want a solution’. They don’t have an understanding of those risks or compliance issues. Because we’re dealing with less-educated buyers, we feel the responsibility to educate our customers about where the data is, who has access to it and the security measures in place.
CRN: First Focus IT is more in the mid-market space; how does your experience compare?
Peter Paddon, First Focus IT: There’s a slight difference in that they’re coming to us thinking they want the cloud, but not knowing what the cloud is. I think that that’s pretty common. You talk to five IT guys about what the cloud is and you’ll get six opinions. Customers say, ‘Right, I want to do this in the cloud’ and generally the first question we ask is, ‘Why?’.
One missing piece in the cloud discussion is that data centre and on-premise technology has changed. Quite often what the customer is looking for is easily achieved with a small tweak to what they’ve already got on-premise or through a financing deal or a software subscription services deal. It doesn’t necessitate actually moving to a public cloud model.
There’s still a hell of a lot of confusion in the marketplace. Some very big players, like your Amazons and Microsofts, are pumping a lot of money into marketing, and they’ve done a very good job of convincing people that they need the cloud, even though the customer might not have a requirement.
CRN: Thomas Duryea works with larger accounts and more educated buyers. What do you think?
Michael Chanter, Thomas Duryea: Most enterprise organisations are under pressure to be fairly lean. We often see a 1,000 seat or more environment supported by fewer than 10 IT folk. If you get up into tier one enterprises, they’ve got some strategies. But where we play – which is the upper mid-market and lower-end enterprise customer, say, up to $500 million revenues – there’s still a lot of strategy missing. They’re still searching to understand the right approaches.
Education is still a prevalent theme. SMEs can take their five servers and deploy them in the cloud, but they’re not sure how to do it. Enterprises probably understand the technical issues, but they don’t understand the operation. How do you operationalise IT ops in public, even a mid-tier cloud, that you’ve been doing for years on-premise?
Some of our customers will have hundreds of their machines within our cloud environment, and that’s something that they’re struggling with.
CRN: What about government? Oakton plays in that space…
Paul Voges, Oakton: A few years ago there was a lot of talk about sovereignty and the risk of data moving offshore. That seems to be moving into the background a little. It’s still an issue, particularly with citizen data and security data, but we’re seeing an appetite now more for public cloud and more for private cloud, some hybrid scenarios and some integration we wouldn’t have seen previously.
CRN: Cloud Solutions Group works across different customers sizes – how does your experience compare, Josh?
Josh Rubens, Cloud Solutions Group: In SME, a lot of the time you’re selling to the business manager or CEO, so they’re definitely not going to be educated around everything in the cloud, so it is a bit easier to control what you do.
In the mid-market, we see the data centre as still being fairly relevant. And a lot of them want to dip their toe in the cloud, because they’ve been told by the board, ‘What are you doing in the cloud?’. So they need to get back to them with an answer, and we see them doing things like backup or disaster recovery. It really depends on their next refresh cycle. A lot of our customers are saying the next [refresh cycle], or the one after, they will put everything out into the cloud. Just how realistic that is, I don’t know.
CRN: Let’s talk about public cloud. Bulletproof has a private cloud and has partnered closely with Amazon Web Services. Anthony, what workloads are going where?
Anthony Woodward, Bulletproof: Our vertical has tended to be internet-facing workloads: web, e-commerce, CRM, that kind of thing. Those workloads are set aside from a lot of the back office and on-premise data centre workloads. They still have to be integrated, but they are seen as being separate. The focus has tended to be on the low-hanging fruit, workloads that are easy to move to the cloud.
We are now seeing customers getting educated through that process. In some cases, the answer might be, ‘Let’s leave that on-premise until we get to the logical refresh cycle’. In government, that’s just not an option for certain classifications of data. But for others, it is. We have got a number of government clients who use the cloud for workloads that meet the classification spec that can go into the cloud. That’s a big change over the past few years.
CRN: Rodney, what is driving customers to the cloud, or holding them back?
Rodney Gedda, Telsyte: I agree with the sentiment around the table that people aren’t moving wholesale to the cloud. Investment is happening in parallel. More than 50 percent of Australian organisations greater than 20 staff now have some sort of infrastructure in the cloud – of course that doesn’t mean they don’t have anything on-premise. In some cases it will compete, but in some cases they will grow in parallel.
Hybrid cloud is a good opportunity for service providers to step in and offer services such as integration, security and management between what’s happening on-premise, what’s being hosted and what’s happening in public cloud. Our research tells us that the hybrid data model will become increasingly strategic for organisations; there’s no doubt about that.
In terms of spending, public cloud is relatively small compared with on-premise, but the markets for public infrastructure is about $300 million and forecast to be more than $600 million in five years’ time.
In terms of reluctance in going to the public cloud, there are two things in play. There’s the corporate restriction, which might not have any rhyme or reason to it. And there’s also government, which might be restrained by regulation for things such as health records. But the restrictions are being reduced. The government will come to the party eventually.
I don’t see cloud as being an endgame, I see the hybrid approach as being the long-term model. Some customers will go to cloud and some will come back on-premise. The cost to put up a private cloud might be a fraction of what it was a few years ago, and that gives customers less incentive to just say, ‘Okay, we’re moving wholesale to a public cloud for cost reasons’.
CRN: Jason, tell us a little about what DPSA is seeing in terms of the data-centre space?
Jason Rylands, DPSA: DPSA is a fairly niche distributor specialising in data centres. Our main product is APC by Schneider Electric. We’ve seen an evolution of the channel. We went through a wave of companies building their own server at an on-premise data centre. Our average order size was around 20 to 40 racks per month. Over the last few years, we’ve seen those customers move out to the co-location space. We are seeing a trend away from customers building on-premise and that trend is accelerating.
There are a couple of reasons for that. One is to do with the NABERS rating – that star rating on buildings – and efficiencies. You just can’t build server-run data centres in commercial buildings anymore. Government, for example, can’t rent a building that’s less than four-and-a-half stars.
Also, when you start to look at the numbers, if you go back to a co-lo provider, they may charge you something around $2,000 per rack, per month, which is around the 4kW mark. To build that 4kW rack solution, a general customer needs to buy the infrastructure, they need to buy the UPS, the cooling and build the server room, et cetera.
If you take out all the costs of building a server and just look at what it does cost to run a 4kW rack, it equates to around $1,200 to $1,300 a month in energy. Compare that with a co-lo provider that is charging $2,000 and you haven’t had to buy the UPS, the power, the cooling, the maintenance. So the cost stacks up quite well.
We can’t get away from on-premise, because we still need those connections back to the data centre. We still need IT infrastructure, routers, switches, and then generally there will be some applications that can’t be put into cloud-type services yet.
We are seeing a real trend, or fear if you like, from resellers that have said, ‘Our customers are moving to cloud’. We have to reassure them that there’s still a very large requirement in the channel for on-premise hardware. There are also the services in helping a customer take that journey from a pure on-premise solution to a cloud service. There’s a lot of migration, there’s compliance, a whole load of things.
CRN: When people talk about cloud, they often talk about cheaper prices. Peter, can you talk a bit about the reality versus the hype in terms of cloud costs?
Peter Paddon: The CFO is typically very interested in a solution that is going to drive cost savings for infra-structure into the future. A lot of these conversations begin with the CFO saying, ‘Three to five years ago, I spent three-hundred grand on kit and I don’t want to have to do that again’, and that’s a fantastic way to start the conversation.
As a system integrator, we’re in this position of being able to design a solution for this customer as cost effectively as possible and we can draw on a lot of different capabilities. We can draw it on-premise, we can draw on public cloud, we can draw on our own private cloud infrastructure.
What we find is that one of the most cost-effective options for the CFO is to buy some infrastructure and finance it over three years, because the cost of kit is actually quite comparable to going to Amazon. We’ve found there really isn’t a very big cost differential between on-premise, public cloud and private cloud in the kind of outsourcing opportunities we’re talking about.
For us, the majority of the revenue and the majority of the cost is in the services that go around that. The question is how can we build a solution that’s going to reduce the ongoing administration costs, because that’s where the real money is. If we can say to the CFO, ‘Look, by putting the infrastructure in private cloud it’s going to be 25 percent more expensive in infrastructure costs, but it’s going to be 25 percent less expensive with maintenance’, all of a sudden there’s a cost benefit.
We’re never going to be able to beat Amazon in terms of storage costs. But where it does become very cost effective against Amazon is if I’m working with a digital agency that has five terabytes of media files, and I can buy a cheap NAS drive and stick it in their office on-premise and then use VMware or StorageCraft or something to replicate that into Amazon or into Rackspace.
Josh Rubens: I agree pretty much with everything Peter’s saying, but I think there’s such a focus on cost when it comes to cloud and, as Peter said, it’s not going to be really that much cheaper. If the key reason customers are going to the cloud is to save money, I think a lot of them are missing the point.
Michael Chanter: You’re right Josh: we always have this starting place of cost, but it doesn’t always add up to a massive differential. I think there are very specific use cases, where cloud is really good and there are real economic benefits. Our job is to find those cases and educate customers around them.
We’re doing a lot of work at the moment in helping customers with backup-as-a-service and archive-as-a-service. If it’s something like backup-as-a-service, we can capture information locally and archive off-site and keep some of it on-site. What we can do in that is drive a whole lot of capex and management costs around tape, and that is absolutely 100 percent a cost saving using a cloud platform. The return on investment is clear.
But you’re not going to provide hosted Exchange. If it’s mail, it’s commodity service, the customer has access to Office 365. Unless there’s a bunch of reasons not to, then that’s our first course every time.
The problem a lot of IT organisations face is that you need an expert in everything, and so you need an Exchange guy, you need an SQL guy. If you can remove mail out of the equation, maybe that’s an operational cost saving. There are cost savings to be made, but they are just in very specific areas and it’s our job to find those opportunities and educate our customers.
Anthony Woodward: We find that a lot of customers are looking for the strategic advantage around agility and fail-fast, and being able to spin up things and work with digital agencies to very quickly roll out marketing campaigns. Those are the things that an on-premise platform usually can’t solve.
We’ve tended to find that the discussion has been, ‘I want to take advantage of all these great strategic things about cloud and I don’t want it to cost me an arm and a leg’. The cost still needs to be comparative, but it isn’t about saving money by sending an existing workload to the cloud, because all I’m really doing is swapping one server for the cloud.
A managed service provider’s hybrid offering can provide a lot of the benefit of on-premise and the benefits of cloud, all in the one piece. That’s why I think this hybrid environment is really starting to show now.
Paul Voges: We sell more business side now so it tends to be the chief marketing officer, HR or the CFO. In some cases we’re offering ERP-as-a-service. The reason for that is not to drive costs down in terms of the cloud, but the overall staffing that is required. We’re finding companies have a whole set of IT people, but only 20 percent of them are utilised at any given time, but they have to keep the skills in case they need it.
That cost-out conversation is really important for us because where we add value is on the front side, where the marketing department has an operational budget that they can’t actually use for capex. But if you can then take that and use the opex to build a digital platform to engage with clients – which is one of the things we are doing – you can get access to money that previously would have been constrained by dealing just purely with IT.
CRN: Phil, do you have any examples of just how cost-focused your clients are?
Philip Patelis: One of our customers is [scented candle manufacturer] Sapphire Group. Microsoft is in the process of doing a case study on them. In the interview with the CFO, Microsoft’s marketing person asked, ‘So, how much money are you saving now’, and Paul, the CFO of Sapphire, said, ‘Well, actually, it’s more expensive’. You could have heard a pin drop.
He went on to say that it’s not the raw cost of, ‘This is what we had yesterday, and this is what we have today’. Because what we had yesterday wasn’t working and we needed to expand our business and grow it in the future.
Jason Rylands: We often have this conversation with our partners. We ask the questions, ‘What is your business? Is your business to run a data centre?’ Because if your business is not to run a data centre, then why are you doing it? You have this really large cost centre when there’s far more skilled partners and companies that can do this. That’s one of the journeys that our partners and resellers are really trying to push to their customers.
CRN: John, I was hoping you could tell us a bit more about efficiencies and improvements to on-premise technology.
John Vidler, Huawei: There are ongoing improvements happening within the technology base every day, and those ongoing improvements allow you to achieve certain efficiencies that you were never able to do before. You can increase the temperature, turn the air conditioning up, turn off the humidifier. Certainly in the area of open standards, the ability to connect cloud and cloud infrastructure that wasn’t able to be connected before is happening as we speak.
The idea that you can use hybrid clouds to connect Amazon, Microsoft and other services seamlessly to the application with on-premise functions is an ongoing development and that’s something we see happening every day and certainly something we are heavily involved in ourselves.
Going back to Jason’s question, ‘Do you need to be in the business of data centres?’, some customers do need to be in the business of data centres – the obvious one from our perspective is the CSPs [communications service providers].
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