The National Broadband Network manages to attract an awful lot of attention for something that, at best estimates, won't be usable for several years at least. But resellers ignore the coming of the NBN at their peril.
Industry watchers agree the high-speed network will have a deep and lasting impact on the way Australian businesses are run and the way they buy and use ICT equipment and services. It is safe to say every single business in the country will be affected by its roll-out in some way.
For enterprises which already use private high-speed networks, the NBN may seem a little oversold. You can buy a 100Mbit connection today in the larger cities, it's just very expensive.
However, the effect of the NBN for many SMEs is a massive price cut in their bandwidth costs. It also means introducing a large number of companies to online and network services that consume higher amounts of bandwidth which made them unaffordable.
The NBN is a "game changer", says Brennan IT's managing director, Dave Stevens, because it will provide 10 times the speed for the same cost.
Stevens says that a Gigabit connection between Brennan's Sydney data centre and a customer in Epping, in the northern suburbs, can cost around $10,000 a month.
"Even if it falls to $5000 a month, so many more business deals become viable," says Stevens.
Winners and losers
The NBN will instantly kill off a popular arm for many resellers - provisioning connections between offices. Today a reseller buys services from a telco and equipment from a vendor to connect two offices of one business.
But under the NBN, every business and every building will already be connected - that means goodbye to ISDN, PSTN, cable, ADSL, SDSL, SHDSL and leased lines. And farewell to the skills and knowledge that supported their roll out.
"The channel no longer has to think about how you connect," says Geoff Heydon, marketing manager at Alcatel-Lucent.
Instead, resellers will need to develop expertise on managing bandwidth and purchasing traffic. Every customer will be asking - how much bandwidth do I need to run my business?
Resellers can answer this by counting the number of employees and the hours they work, and the applications and data sets they use. The better consultants are at judging the capacity of services and applications, the less unused bandwidth a customer needs to pay for.
IT managers will buy connectivity and be responsible, along with the reseller, for choosing the right amount.
Today, if a service or application requires dedicated capacity, one approach might be to lease a dedicated line. Under the NBN, one could simply set up a VPN.
Of course, a company will want to make sure its network is capable of taking advantage of a 100Mbit connection, and in some cases that will mean upgrading routers, switches and cabling.
"When the NBN connects to your network you don't want your company to be the bottleneck," says Microsoft's Paul Voges, small midmarket solutions and partners director.
Telcoinabox CEO Damian Kay says it is vital that resellers make the switch from voice to a converged voice and data business. Telcoinabox is pondering how to make changes to its own business such as migrating ISDN and PSTN over to IP.
The company is also looking for other products that require a high data rate. "If resellers stay in the now - with fixed wire, copper wire, PSTN - they are just going to die away over time," says Kay.
Going hard on software
The big winner is selling applications via the cloud. On-tap provisioning of software services will present the opportunity for companies to make a strategic shift in the way they do business.
"Once you have 100Mbit you can think very differently about how you manage your business, how you manage and store your data, how you buy licences, how you collaborate globally. It opens up a fantastic opportunity for SMEs in Australia," says Gen-I's CEO Phil Varney.
Software collaboration is already showing signs of becoming a killer application for high-speed networks. Microsoft Office Sharepoint Server, which covers CMS, wiki, document management and workflow, has grown faster than any other program sold by Microsoft.
The current version took two years to hit US$1 billion in sales, claims the vendor.
An important part to collaboration is videoconferencing. Applications and supporting hardware have reached a new level of maturity and the long-promised take-up of the technology by SMEs is starting to happen.
In 2008 videoconferencing vendor Polycom hit double-digit growth and topped US$1billion in sales for the first time.
Axxis Technology's Mathew Dickerson says he is seeing a take up of videoconferencing among regional businesses. Axxis is installing a $20,000 high-definition package at four offices of a graffiti removal company, including Dubbo and Sydney.
Staff use NextG connections on notebooks to connect into four-way video conversations.
"We really haven't done much with videoconferencing in the past," says Dickerson.
Videoconferencing is already being supplanted by teleconferencing - essentially a higher definition version of the original. Telepresence, usually restricted to purpose-built rooms, is coming to laptops and desktops with high-end audio and video definition.
Voges says the technologies that will flourish in the next couple of years include CRM, collaboration, business intelligence and document management.
Microsoft is hedging its bets with cloud computing. Although it is introducing Microsoft Online (the launch on Telstra's T-Suite is promised to be mid-2009), the vendor is counting on companies wanting some software on premises and paying for it by conventional means.
Voges says he sees three arms to software distribution on the NBN: on premises under licence, online by annuity and partner-hosted.
"I don't think everything will be cloud," says Voges.
The NBN's killer app
No, it's not as sexy as telepresence. In fact it's more mundane than email. Many industry watchers believe one of the most popular applications will be: backup.
A high-speed connection to a data centre will give companies and individuals the ultimate in backup - a single-button service that copies all the data on your computer to an offsite location.
"You basically have to run your own data centre in this country if you want to do backup. And the price is so expensive that you can only do backups once a week or you have to do them locally and then replicate to a data centre on an infrequent basis," says Kaseya's Dickinson. "It's not an ideal solution.
"But if you have 100Mbit to the home and to the business you'd be able to have that instant point and click backup which is something we are all looking forward to, because security of our personal and business data is essential to our ongoing well-being."
Dickinson says few resellers have the skills to set up proper offsite backup and disaster recovery. The current, bandwidth-limited process of backup is overly complex because it forces companies to choose which data to back up, and within an affordable schedule.
It also encourages onsite backup products such as tape which is an expensive technology to automate.
Kaseya is working to automate the backup and disaster recovery process with its Acronis module which encrypts data between office and data centre.
"One of the best things you can do is get rid of tape because it is one of the most manual parts of IT," says Dickinson.
"We are trying to simplify that to a drag and drop manner and provide a high degree of disaster recovery and backup for resellers that don't have that sophistication, and that's a huge market."
Kaseya's hosted backup service is three to six months away and will probably be run on the Amazon S3 platform. Why Amazon?
"The number of services that are being rolled out across that platform, it's a pretty amazing story. Simplicity - that's why you want to be part of it."
The cloud is here
Any conversation about a high-speed network always ends up in the same place: cloud computing. Cheap and plentiful bandwidth lets companies store their data - and the headaches of looking after it - elsewhere.
Cloud computing models reduce the amount of on-premises equipment needed to run a business. The impact of cloud computing on the reseller business model is obvious - less installation, integration and hardware sales.
The upshot for customers is cheaper access to ICT services, which is a good thing. Resellers need to make sure they stay relevant and in tune with best practice.
"You don't need a data centre. Maybe you don't need Microsoft licences any more. As long as you have failover to 3G to keep it all going, you don't have to have all these fixed costs," says Bill Lang of Bill Lang International, a channel consultancy.
Providing cloud services favours larger players who can scale up to increase profitability. But businesses will need resellers to talk them through the process, show them how to connect and provide the interfaces and tools to work with cloud services.
"Someone has to sit down with government departments, schools and CIOs and explain it to them," says Lang. "Those that get on top of this stuff earlier are going to have a great opportunity to cherry pick a few new clients from those resellers who are adopting a wait and see attitude."
Resellers need to start with a broad needs analysis of a customer's ICT requirements, says Lang. Then they need to present options from server- software-integration to a cloud solution, with a comparison of benefits and ROI calculations for each approach.
The good news is you don't need a fat pipe to take advantage of cloud computing.
Lang knows this from personal experience at a startup in the US which was one of the first customers of salesforce.com. The company had basic CRM functionality in a faster time to market than setting up a server onsite. "We only had to pay on a monthly basis and if it didn't work out we would shoot it."
Recently Lang went through the CRM pitch again for Bill Lang International in Australia. His reseller immediately wanted to go down the path of new server, software licence, systems integration.
"We had to raise if they had a cloud version of it that we could rent. They led with what they know how to sell, which all sales people do, and what they get rewarded for."
Selling clouds
There is less work to do in selling a cloud service because generally the cloud provider worries about backup, integration, patch management, security and access.
But that also means fewer opportunities for resellers to make their margins. Cloud computing will force resellers to change their business models to guarantee profitability, says Lang.
Resellers need to assess commissions for cloud-based services and work with cloud providers to ensure there is a compensation model that makes sense to the reseller.
The shift to hosted applications will force resellers to become brokers for cloud services, earning recurring revenue from the commission trail.
The popular metaphor for selling cloud computingis selling financial services. "The IT reseller model is probably going through what the financial services industry was going through 10 years ago, and still is," says Voges.
Lang prefers an insurance broker analogy - resellers need to represent multiple insurance agencies rather than being a tied agent to a single bank, for example. He points out that, until the financial crisis, the overwhelming share of mortgages went to brokers who could present several brands to customers.
Moving from an upfront payment on dropping a box and selling software, to an ongoing commission annuity, will have a big impact on cash flow. Resellers who are well capitalised are in the best position to withstand the change in revenues, says Lang.
He advises resellers to talk to their financiers and prepare for the financial strain of moving to a three-to five-year revenue stream.
Choosing the right cloud provider is very important. Lang, who is training resellers for NEC's Apps Net platform, says NEC's approach matches his top criteria to look for in a cloud provider.
The provider must be willing to train resellers in using and selling cloud services. Ideally the provider has partnered with several brands. NEC offers two types of CRM and plans to add another three, whereas Telstra's T-Suite is one fixed suite of applications, says Lang.
Ideally the cloud provider would only sell through the channel. Telcos are retaining their direct sales forces, who will inevitably compete with resellers. However, the telcos don't have the relationships with customers, and the transition to cloud is going to depend on large amounts of trust, says Lang.
If the goal is to win 100 percent of money spent on ICT services, resellers are in a good position. "Whoever's got the best relationship with those customers and the right skills, they're going to be best positioned to win that game," says Lang.
Lang's advice is to start developing skills now by selling cloud services that are currently available and figure out what other services they would want. "Ask what your customers in schools are going to need in the long term, and make sure that is on the platform. Don't wait for the NBN to happen and then start thinking about this stuff," says Lang.
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