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BUSINESS TRANSFORMATION UP AS NEW CHANNEL MODEL
According to Gartner, by 2012 one fifth of businesses will have no IT assets and the SaaS market will show consistent growth through 2013 when worldwide revenue will balloon to around $16 billion. A large percentage of this growth is predicted to be hosted desktop and it is expected that in the UK 43 per cent of SMBs will be looking to rent business software by the seat and by the month. “The current economic climate has caused many companies to have limited access to capital,” observed Lee Broxson, Head of Sales at Griffin. “These companies are looking for faster and more secure access to meet the demand for online services, driven by the uptake in acceptability of online services and social networking.”
Margin opportunity The significant margin opportunity for the channel isn’t from cut down web-based apps, it’s from providing the rich application experience that customers are used to and with the benefit of being remotely served, remotely supported and paid for on a utility (pay per user per month) basis rather than a big license cost hit every 12–24 months, says Broxson.
Rather than immediately transforming their companies into cloud suppliers, resellers may prefer to focus on selling customers something they already know they want, and partner with a service provider that will have all the cloud products packaged up ready for when the demand is there. Applications like online backup, hosted UC
email and even hosted voice are simple bolt-ons to a reseller’s portfolio. “These are products for which there is already a demand and that generate new recurring revenue streams without cannibalising revenue from existing products,” added Broxson. “They will get the reseller and their customers used to the model without a revolution in their business or
significant capital outlay.”
There is nevertheless a measure of hype around the cloud, reckons Broxson. A few early adopters with specialist requirements are buying cloud from Griffin, but this demand is dwarfed by the demand for private connectivity, he says. “Orders for leased lines and MPLS networks have increased thousands of per cent in the last 18 months,” commented Broxson. “These are generally high value long-term contracts that add real value to customers and from which resellers can earn very reasonable margins. SMEs are not yet ready to rent all their applications by the seat. However, as a precursor they are looking at replacing their current data networks with private MPLS networks with a view to facilitating cloud computing in the future.”
When the time is right for a customer to think about moving to the cloud model, they will first approach their voice reseller because a trusted relationship has been built up over many years, and because most resellers have already dabbled with leased lines and Ethernet. With this in mind it is time for resellers to plan their vendor relations, observes
Broxson. “Focus on vision,” he said. “A strategy based on more of the same generally means less of the same. Focus all your time on things that only you can do and that contribute the most to your vision. Focus on the biggest deals and key relationships. Eighty per cent of customers probably contribute only 20 per cent of the profits.”
Hot technology Industry analysts hail the cloud as the most important strategic technology for 2011. The European Union has set up a three year cloud research project and the Government is deploying its own cloud computing strategy. Yet the telco industry appears reluctant, even uncertain about how to truly realise the full potential of the cloud, according to Tom O’Hagan, Managing Director at Virtual1. “For those in the channel who adopt cloud computing there is a wealth of rewards,” he commented. “Demand for outsourced cloud solutions is strongest in the SME market, the traditional stronghold for the channel. What’s more, cloud solutions are an easy sell into this market. The flexibility and simplicity of managing one central system combined with the ‘pay for what you use’ pricing model offers savings of both time and money.”
Generating profit through monthly recurring revenue rather than capex charges may seem like a barrier to suppliers, but O’Hagan says this model offers many advantages. “Not only does it remove the concern of upfront investment for the customer, with standard contracts lasting
three years resellers can enjoy better long-term value from each sale,” he commented. “There are also good cross-sell and up-sell opportunities. In an ideal world, the cloud can run voice, Internet, WAN, firewalls, servers, operating systems, backup and more. And of course, the more services a customer takes the less likely they are to move to another supplier.”
O’Hagan also noted that high speed resilient access is essential to running a cloud system, offering a secondary revenue stream to channel suppliers. The more services a customer takes, the more bandwidth they will need. “It will be the simplicity of the cloud that wins out,” believes O’Hagan. “Service providers who adopt the cloud now will be best placed to reap the rewards.”
Also urging action is Adam Knight, Director of Technology at Mitel, who says now is the time to plan for changes in the market. “The communications industry has and will be facing some significant changes, with the delivery methods for communications applications increasingly becoming more software and not platform driven,” he said. “The pace of change is accelerating with two extremely significant changes now underway in our industry. Firstly, analysts widely predict that mobile phones will become the natural business device of choice. Secondly, due to the large scale availability of cost-effective bandwidth being wired or wireless, cloud computing and virtualisation is a viable service from the cloud and will become prevalent.”
Mark the date for 2011
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Cloud computing is already woven into our every day lives. For example, Google Apps, Sales
Force.com and Apple’s itunes are cloud type services. “The opportunity for resellers is to broaden their access to customer based offerings or hosted managed based offerings around premises equipment,” added Knight. “They should also tap into the economies of scale so that they can do the same thing but use shared resources within a services environment that are provisioned and delivered cost-effectively across the network.”
Mitel says resellers should become a trusted advisor to tenants and clients and work with them to build services on a cloud delivery basis within their private network, or to build that on behalf of their customers and co-host it, effectively bringing together the best of breed technologies on network services, LAN, WAN technology as well as communications services. “This is not a revolution but an evolution,” commented Knight. “You have to offer both so you can build a recurring revenue model which helps cover the peaks and troughs of a project model. It isn’t a question of jumping from one wholesaler to another. Both will co-exist for a long time as will the need to service analogue and digital capabilities for customers for years to come. It is about continuing with the traditional model where that works, while at the same time discovering new ways to service the needs of new customers who wish to have their communications delivered as a service over a network.”
n Gleneagles Hotel
9th, 10th & 11th November 2011
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COMMS DEALER JANUARY 2011 41
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