While value-added resellers are scrambling to break into managed services, Glenn Kennedy is determining which of them he’s about to buy out. In April, Kennedy turned the collapse of channel veteran Dataflex into an opportunity, rolling the failed government specialist reseller into his expanding VTS IT Group, which he’d already bolstered in October last year through the acquisition of Toowoomba-based Downs MicroSystems.
Kennedy claims that most resellers – even those who offer managed services – "don’t really want to fix the customer’s problem".
"They just want to mask the problem. I believed there was a better way to run a business," says Kennedy, who founded VTS in 2008 after 17 years as chief operating officer of privately held IT solutions provider NetStrategy.
What was missing, until recently, was the software and infrastructure that enabled resellers to scale, he says. But the recent arrival of operations and infrastructure management tools have allowed him to offer the IT equivalent of a mobile phone plan to customers.
"I take your IT environment and this is what it will cost you and not a cent more and, if it does, it will cost me. People said we were crazy. I couldn’t have done it 10 years ago."
Kennedy founded VTS on Kaseya because he "can fix an environment before it breaks".
"I know the failure rates of hardware and issues with software upgrades, and I can build an environment from scratch. If you tried that with someone else’s build and run model, you’d fail."
In providing managed services, Kennedy confronts a common issue – making it pay. There’s little argument that customers are demanding that partners manage their infrastructure, but shared risk is often a sticking point.
"We just wouldn’t be able to do what we do at the cost we do it for without the core factors behind Kaseya; that ability to remotely control and monitor environments, that’s where a massive saving happens for us." Kennedy says each technician handles 750 desktops and this will increase to 1,000 desktops by Christmas. That is four times the industry standard in productivity and "goes exactly to the bottom line". This is what is powering Kennedy’s thirst to buy resellers – for their customer lists.
And he will need to boost productivity quickly to meet what he predicts is a rapidly rising demand for services. "Big data is going to be massive in our business," he says.
"Other resellers are saying you need a sales system to put into your ERP [like Salesforce] and pump out orders. But we’ll give you the hardware and develop the software at no cost and you pay a monthly fee. We would be scared to do that on a remote device if we didn’t have software monitoring the environments."
Gartner places Kaseya about centre of its Magic Quadrant for client management tools, in the visionary quadrant on par with Absolute Software and ahead of niche player FrontRange, but well behind leaders Landesk, IBM and Microsoft. The analyst notes that Kaseya is popular with MSPs and is a good choice for mid-sized client organisations looking for an all-in-one package but lacking security monitoring.
Kaseya Australia managing director Dermot McCann sees the boom as organisations embrace the internet of things, cloud and big data – especially with managed backup.
"We rebranded as an IT management cloud company to reflect the fact that the IT department is dealing with a very complex evolution," McCann says.
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"For an IT management cloud, it’s a much more complex problem to solve [than software as a service] because you have more transactions, alerts and management requirements. We have to manage it, command it centrally, manage remotely and we also have to automate it."
Kaseya recently bought 365 Command, a company that helps MSPs deliver Office 365 productivity software services, which is a big growth driver, McCann says.
"The channel is trying to embrace Office 365 and [learn] how they can monetise it. We’re developing the next generation of cloud management tools to give VTS better capability to manage Office 365, Salesforce and Dropbox; that can’t be done case-by-case."
Opening doors
While VTS was born into managed services, Accucom has transformed in the past few years.
"We provide end-to-end services from the riser to the desktop and mobile devices," says Tom Sidhom, sales and marketing director of Seven Hills, NSW-based Accucom. "We’ve traditionally done it on-premise or outsourced and now we do it using the cloud as well."
Accucom bases its services on Landesk, which Gartner recently praised for its shift from device licences to charging based on the number of users.
"I haven’t seen anyone else do that and, in a world where people have a couple of devices at a minimum, I’m surprised," Sidhom says. "I understand the reluctance [by vendors] because device-based licensing will earn you lots more money but [Landesk] is really leading the way."
Accucom also benefits from Landesk’s acquisition last year (from VMware) of Shavlik, a technology that eases patch management. Shavlik’s automated software licence tool saved one of its customers $140,000 in their first year with the MSP.
"It brought to the customer’s attention that they were heavily over-licenced in some areas and under-licenced in others," Sidhom says. "They were then able to charge back internally and use it for budgeting the following year."
Landesk has led to deeper conversations with customers, says Sidhom: "It has opened doors for us; it caters for all ITIL disciplines but doesn’t force you to comply with every piece." (ITIL – the IT Infrastructure Library – is a framework for delivering IT services.)
"The most important part for me is it’s information you can use to save and make money."
Sidhom sees customers ramping up their use of hybrid infrastructure – storing data on-premise and in the cloud – and a surge in BYOD and mobility (areas where Gartner says Landesk leads).
Sydney-based Landesk manager Andrew Souter says another key differentiator for users and their IT advisers is the platform doesn’t require complex security server settings to do its job.
"All you need is a net connection and the client will call back so there’s no restrictions of firewalls," Souter says.
Coming soon is a feature to help MSPs manage the welter of devices and processes under their control – a failing of the suite until now, Gartner says.
"It displays your database as giant bubbles – so the bigger the bubble, the more important the data," Souter says. For instance, Landesk uses it to see who, among its some 400 US employees on the Verizon cellular network, is blowing out their mobile phone plan.
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Avnet general manager Darren Adams says cloud heavily influences how partners serve their customers, especially in delivering backup, disaster recovery and business continuity, communications and data analytics.
"Each of these services moves end users away from an expensive capex model to a true, consumption-based opex model," Adams says.
Similarly, MSPs should be aware of their own investment limits; this is where Avnet is poised to help, he says.
"There are resellers who invested in their own cloud infrastructure along with their managed services. They reached a point where the cost to compete against large players was not viable. Partnering with a large cloud infrastructure provider, then wrapping their managed services around that would be a more profitable solution."
Adams says Avnet has a white-cloud program to deliver private or public cloud solutions that includes sales, content marketing and training.
"The key issue for resellers, when it comes to cash flow, is ensuring their business maintains a reasonable profit from sales, perpetual software licensing and so on. In addition, they must constantly drive resources into growing subscription revenue," he says.
"The sooner a reseller maps out their strategy, the better. Hoping and waiting for subscription revenue to come along, rather than defining a strategy, will result in failure."
Oriel is one IT firm that isn’t waiting around, says its CEO and Olympic swimming gold medallist Chris Fydler. Three years ago, nearly two-thirds of Oriel’s revenue was from projects but the company is transforming to grow its cloud and managed services offerings, and expects that dependence to nearly halve as a proportion of revenue over the next year.
"We identified a need around 10 years ago for managed services. We tuned our business to be annuity-based and then created products around managed services," Fydler says, pointing to Exchange as one example of this.
"Two years ago, we started to build our own hosting environments. We were one of the first HP CloudAgile partners, then the advent of public cloud providers like AWS [Amazon Web Services] hit the market. We could see it was impossible for small guys like us to keep up.
"We decided to tailor our solutions to focus on management of that infrastructure rather than its provision."
Oriel has built a managed cloud gateway product on AWS, based on Riverbed technology at the customer’s site. "That provides a clean, secure and encrypted replication of backups and starts to do away with tape and we put all that info into AWS cloud. We have a large bank come onboard with that solution and we see an opportunity in mid(-tier) to enterprise space with people wanting to do away with tapes in their infrastructure."
That’s not to say that Oriel has ripped out its own infrastructure. As an example of the continued need for hybrid solutions, Oriel maintains its HP equipment for customers who have bespoke requirements, applications or operating systems that won’t sit on public cloud. This led Oriel to form an eight-developer team to help customers manage their IT, Fydler says.
"We’re putting a lot of investment into a front-end portal that gives the customer one view, whether [their workloads are] sitting at AWS or Oriel or their site, they can see that infrastructure."
Fydler says one of the biggest changes at Oriel was its own cultural transformation, which included pooling software developers and IT operations technicians into a "DevOps" team.
"It’s been quite difficult. Culturally understanding it now, it’s not about building something and walking away – it’s about managing. In instilling ITIL into our service desk, we can understand the things we need to get right.
"Constant reinforcement is the key. We had to constantly remind ourselves that the business was changing and how we think about customers is changing," he says.
Andrew Sjoquist, CEO and founder of Sydney IT service provider ASE, says customers also have an innovation, which is why they turn to MSPs.
"So many IT managers arestill buried in the day-to-day operation of keeping servers up and patching," Sjoquist says.
"Once they get relief from that quagmire, the ability to look around and see what else is possible, like mobile apps, [helps them] to change the status and stigma of IT in organisations."
"We’re looking at an IT manager who spends 80 per cent of their budget on keeping the lights on. We’re working to get it down to 50 percent so we free up their IT budget to advance the business rather than doing housekeeping."
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