A Business Case for Cloud Computing

By Lisa Terry
  
Each day, solution providers of every stripe are bombarded with cloud come-ons. Cloud has simply become inevitable: some compare the shift to cloud with the transition to client/server twenty years ago.

After early fears that cloud would displace the Channel, industry consensus has shifted. Now the prevailing winds say that cloud brings with it the same kind of complexity that client/server did, not to mention additional points of failure. That means SMBs and enterprises will be more, not less, reliant on solution providers to navigate and manage their cloud services. According to a recent Microsoft survey, almost two-thirds of enterprise IT and 16 percent of SMB decision makers have hired or are planning on hiring vendors to help understand and deploy the cloud.

What’s not readily clear is what path each solution provider should take. “Each [solution provider] needs to take a look at their current services, offering, and value, and determine what that means in the world of cloud,” says Eric Martorano, director, SMB channel strategy, marketing and online services for Microsoft (www.microsoft.com).

Find a Path
Apacheta (www.apacheta.com) is a mobile computing ISV helping consumer-packaged goods, service and transportation based workers access data and applications while out in the field. With real-time remote access becoming so critical, delivering its software via the cloud was “a natural progression,” says Don Grust, CEO.

For Apacheta, the idea of hosting its software gave way to finding a third party to host. “For us it makes total sense to work with a partner,” Grust says. Apacheta chose a hosting provider they already knew, transformed its software to be multi-tenant and scalable, and implemented operations, administration and maintenance functionality to support it. So far less than five percent of Apacheta’s customers have adopted its cloud services, “but for new opportunities, at least 50 percent want a SaaS model,” Grust says.
Apacheta’s strategy is working because the ISV followed a cardinal rule for adopting cloud services: start from your core competency. Grust knew Apacheta’s was mobile software, not running a data center.

Finding the right path into cloud starts from within. Experts recommend these steps:

Start with your core competency. Base your first foray into cloud on who you are in the market today. “Cloud is not the same as supporting on-premise applications,” says Larry Walsh, president of The 2112 Group (www.the2112group.com) and principal blogger for Channelnomics. “If you’re light on engineering, go with a sales model.” And if you depend on hardware margins more than services, an agent model will be less of a jolt to the
organization than one based on recurring revenue, and will allow you to learn the business before getting more deeply involved.
“The objective is to introduce new technology to help customers be more competitive and keep it working properly,” says Peter Sandiford, CEO of Level Platforms (www.levelplatforms.com). “With cloud there is no difference, it’s just a bigger opportunity.”

Know your customers. Understand their specific needs, and make the most of your deep understanding of their vertical markets. “Partners who truly understand the needs of their vertical market have a greater chance to be successful,” says Microsoft’s Martorano. Align closely with the ISVs in your space and work with them on their cloud strategy.

Prepare the business. The degree of change depends on the starting point; those heavy on services with recurring revenue have a shorter distance to travel than those dependent on hardware margins and break/fix. Leaders need to build a business plan, and retool the sales organization to sell on business benefits, not feature and function, with compensation models adjusted accordingly, says Renee Bergeron, VP, managed services and cloud computing for Ingram Micro (www.ingrammicro.com). Tech people must retool as well to manage remote environments, not hardware. “You’ve got to be able to conceptualize because you’re not touching what you’re managing,” she says.

“It’s a different product set, a different language, a different place in the market—it’s not an easy transition,” says Stuart Robertson, co-owner of SWI Global Services (www.swiglobalservices.com), a cloud integrator formed out of the combination of an SMB VAR and a systems integrator. Also key: invest in building strong cloud vendor relationships and “understand how you will end the relationship up front,” advises Dave Sobel, CEO and founder of Evolve Technologies (www.evolvetech.com).

Do your due diligence on potential partners. It doesn’t take much to hang out a cloud shingle; thorough vetting is essential to ensure the required credentials, infrastructure, certifications (especially for some vertical market requirements), and financial wherewithal, not to mention channel-friendly programs.

“Beware of clouds in sheep’s clothing,” warns Michael Cohn, co-founder of
Cloud Sherpas (www.cloudsherpas.com). Robert Grapes, director of product marketing and product management for N-able (www.n-able.com) warns that cloud-pricing models vary widely and often include overage changes.  

Ease in slowly. Start with something related to your current offerings; many recommend BDR or storage for a first cloud offering. Thoroughly test any offering you’re considering. “Have a process down” for on-boarding and ongoing tasks, recommends Jeremy Appel, co-owner of SWI Global Services, which partners with Microsoft.

It’s also important to let prospects test the waters before adopting a cloud solution. For example, OS33 (www.os33.com) offers a QuickStart program that enables a solution provider to set up a branded, working cloud environment for a customer for demo or testing. “They can log in to try it out,” says Jacob Kazakevich, president and co-founder of OS33. “It takes people time to get comfortable with the cloud.”

Evolve Technologies was already a managed services provider with strong virtualization skills. Transitioning to the cloud meant taking the next step. “Our strategy is to sell a set of services bundled together to provide value to the customer and margin for us,” including infrastructure and horizontal software, explains Sobel, whose company partners with two hosting providers. “Bundling makes our offering unique.” Moving to the cloud “lets me do a lot more stuff I wasn’t able to do before,” says Sobel. “There is more flexibility in the way we
do services,  and more selections I can offer the customer.”

Breaking Down the Cloud
Knowing how to slice and dice the market is one step toward finding the right path:

Software as a Service: A provider licenses an application to customers and delivers it over the Internet. The more mature offerings tend to be horizontal business applications; vertical, line-of-business apps are coming to cloud more slowly, but may represent the best opportunity for cloud integration by vertically oriented solution providers.

Platform as a Service: A combination of infrastructure-and software-as-as-service to enable ISVs to deliver software over the Internet.

Infrastructure as a Service: The equipment used to support operations, including storage, servers, and networking components, maintained by a service provider and made accessible via a cloud. Smoothstone (www.smoothstone.com), for example, offers VoIP cloud services to midmarket customers. For solution providers, “actual revenue booked from the customer can be higher than an on-premise sell, because they’re able to bundle in services customers would have gone to multiple providers for,” says James Whitemore, executive VP, Smoothstone.

Within Infrastructure as a Service are these sub-categories:
Public: A service provider makes resources, such as applications and storage, available to the general public over the Internet. When Michael Cohn and his co-founders launched Cloud Sherpas three years ago, they quickly homed in on Google Apps, complemented by integration services and their own add-on tools. The former VARs “felt there would be a need in the market for systems integrators in the cloud, but the organization had to be pure cloud integrator,” says Cohn.

Private: A proprietary network or data center that uses cloud-computing technologies, such as virtualization. Zenith’s SmartStyle Computing, for example, is a complete on-premise system consisting of processing capacity (CPU, memory), advanced storage and virtualization technology to enable VARs to deliver IT as a monthly fee. “With our solution, the channel is relevant; they can configure the box, and perform day to day monitoring as they do today,” says Rajeev Laghate, VP of operations at Zenith InfoTech (www.zenithinfotech.com).

Hybrid: Combination of the two, such as a private cloud that secures additional storage resources as needed from a public cloud. Backup and disaster recovery, in which a device sits on the premises and data is also replicated in the cloud, is an example of a hybrid cloud—and a good starting point for solution providers, says Austin McChord, president and CEO of Datto (www.dattobackup.com). BDR “is broadly accepted because it’s more foundational.”

All the Right Moves
In theory, there are lots of directions a solution provider can take in cloud services. But in reality, unless they have their own software to deliver via SaaS or their own data center, many will take the role of agent or integrator for cloud services; getting a commission for selling the software or infrastructure, then getting paid to configure, monitor, and remediate it. Another reality: not everything will go cloud; many environments will be hybrids for some time to come. And even when applications and data are in the cloud, plenty of IP-based hardware will still be on premise and need sale and support: printers, security and surveillance equipment, A/V, handsets, switches and routers, displays, PCs/thin clients, and so on.

To help solution providers transition to cloud, many existing vendor and distributor partner programs offer business development counseling and funding, training, and their own or vetted vendor partners’ cloud tools and services.

Solution providers will need administrative tools to help them manage customers’ multiple cloud relationships, such as cloud-friendly remote maintenance and management tools (RMM), professional services automation (PSA), or a cloud computing IT delivery automation platform. OS33’s solution enables managed service providers to mix and match resources from any public or private cloud and integrate and configure raw storage, CPU, and RAM into business-ready web and Windows-based applications.

The real message is to do something, now. Analysts expect explosive cloud growth in 2012, and solution providers want to be leading their clients into it, not scrambling after them. “Now is the time for experimentation,” says Dave Mitchell, director or strategy, ISVs and developer relations. “Don’t wait for the business models to be perfect.”