Your slice of the pie in the sky – a value-added reseller’s cloud-selling primer.
You’ve decided cloud is the way to go. It offers you a crack at annuity revenue, while your customers like the fact that it spreads out their costs over time and takes a load off skilled IT resources, freeing them up to do development, or reduce internal IT costs.
Gorillas in the mist
The vendor leagues are contested by the big gorillas – Amazon Web Services ($6 billion revenues in Infrastructure as a Service (IaaS) and Platform as a Service (PaaS)), Microsoft Azure, Google, IBM, Oracle and Cisco.
“It’s a hyper-competitive market, and the giants are making enormous cloud network and datacentre investments,” says Paul Hartley, VP: research and consulting at research fi rm Market Strategies, in his blog on LinkedIn.
We’re not seriously suggesting that you will come up against these monsters when you decide to enter the cloud business, but there are options of working with them. let’s look at some of the realistic choices for a VAR and ways of skirting the challenges.
Choices
Business model
Step One is deciding your business model. Sean Nourse, chief solutions officer at Internet Solutions (IS) says you can build your own cloud services and take them to market, or resell services from a large-scale cloud provider. “The first option carries the highest risk and requires an enormous investment in engineering and a very clear technology vision. The lower-risk, lower-margin option – reselling cloud services – is probably best, as the large, focused cloud service providers have incredible economies of scale, allowing them to keep costs low and invest in very sophisticated engineering and product development.”
Another option to grow into is that of cloud-centric professional services firm, offering high-margin business consulting and system integration services. Then there is the black belt option of cloud services broker – an emerging beast that understands the various cloud offerings, how best to engage with cloud providers, and how to implement services optimally for customers.
What as a Service?
Assuming you decided against DIY, Step Two involves picking the offering. Cloud services can be infrastructural (IaaS), bought from Amazon, Google or IS; application-oriented (SaaS), bought from Microsoft Azure, Oracle Cloud, or Connection Telecom; or platform-based (PaaS).
The choices are:
• Host infrastructure and let your customers deploy applications they built on their own platform to it (IaaS);
• Host common platforms and let customers deploy the applications they built for that platform on it (PaaS); or
• Re-sell existing cloud-based applications for customers to use on a subscription or pay-as-you-go basis (SaaS).
For most resellers, systems integrators and independent software vendors, PaaS offers the best combination of flexibility, skilled resources and margin. IaaS offers maximum functional flexibility but leaves much work for developers, and SaaS offers less flexibility, but developers have less to do. Nourse says IS focuses on its main strengths — infrastructure-related cloud, and works closely with partners that deliver more niche or application-specific cloud services.
Find a vendor
Step Three is to choose a vendor. “The beauty of cloud services is that you can experiment with different partners, from core IaaS providers to tightly vertically-integrated cloud application companies,” continues nourse. “This lets you find a good fit before making long-term commitments.”
Migration
The next step is to stage a proper migration for VARs and their customers, says leane Hannigan, cloud solutions director at Westcon.
“Resellers should decide which applications they want to take to the cloud first – perhaps those they view as the least risky. We recommend running a hybrid cloud/on-premise environment to begin with until the VAR has enough experience to migrate whole environments.”
Hannigan says hybrid environments minimise the cashflow impact on resellers, who are used to the cash infusion of the capex model of on-premise IT, and will have to acclimatise to the opex model of cloud.
“Ultimately, cloud annuity revenue is the smart way to go, if you can ride out the initial dip,” she adds.
Not without challenges
Cloud can offer resellers a welcome evolution of their current business models, but it’s not without its challenges or learning curve.
Nourse says VARs will still need their existing, hard-won skills to implement and integrate a cloud-based solution, including an understanding of the underlying technologies and the customer’s business needs.
Also remember that successful cloud implementations live and die by their wide area internet connection.
“You will also need to increase your skills around connecting to and managing virtual environments — WAN technologies like MPlS are crucial, as well as understanding of virtualised environments, federated authentication and security, and newer technologies like cloud containers.”
Pull quote:
“Ultimately, cloud annuity revenue is the smart way to go, if you can ride out the initial dip.” leane Hannigan, Westcon
Side box:
Case in point
SME-focused cloud communications provider Fat Budgie has made a good business out of offering a mix of IaaS, IaaS, PaaS and professional services. Sacha Matulovic, MD (and marketing director of its parent company, Connection Telecom), says before 2014, the company white-labelled and re-sold Connection Telecom’s cloud-based PBX service under its own brand.
“It has worked pretty well for us,” he says. So well, in fact, that it became its sole thriving business, and Fat Budgie was acquired by Connection Telecom in 2014, cementing that company’s market leadership.
He explains the model. “We had the choice of re-selling their PBX service off their core network, which would have been lower-margin, but we have our own network so we’re one tier up. I’d say resellers with their own network and service desk can get into cloud communications services quite profitably. We also provide integration with other cloud platforms and applications, for instance Google, which entrenches us in a higher-margin space.”