Are You Ready for the Cloud?

A recent study of providers across the globe concluded that traditional carrier and Telco providers are not ready or not able to offer cloud alternatives. Even those providers that have acquired cloud companies still are challenged to find the right sales force to migrate enterprise subsystems to the cloud.

Approximately 70 percent of 600 CIOs surveyed indicated that they spend 13 percent of their budgets on service provider public cloud as an infrastructure in a managed offer, and they estimate their demand will grow to more than 40 percent in three years. This development is forcing enterprises to evaluate their business processes across all departments and identify how cloud can support them.

The decisions are not clear cut. For example, a company may need higher security on premise managed by local or onsite resources owned by the company, but for communication and collaboration the company needs public cloud offers. For back-up and recovery a relationship with a provider or MSP may provide a solution that makes the cloud attractive for reducing resources and access to data. Before selecting which cloud solution is right, each process should have identified requirements and risk rate, and the solution should meet those demands by process or client.

Providers, therefore, must address the obstacles they face when dealing with enterprise customers. Cloud offers from such companies as Amazon, Microsoft and Google can almost fully support the small-medium business self-service customers, but their models are completely inadequate for enterprises, which have often relied on traditional providers for SLAs for connectivity. It is not certain that these providers can manage the cloud SLAs. To effectively meet enterprises’ requirements, providers will have to initiate major restructuring of their go-to–market, sales and delivery systems.

Some providers have already filled their gaps in cloud offers: OpSource, Terramark and Savvis and other providers have purchased other companies to acquire cloud offers. But it still remains to be seen if they can they sell their cloud offers. Only NTT, which purchased Dimension Data and OpSource, has the system integration skills to sell the offer in a consultative fashion. Even if each of these companies have cloud offers, getting the offer to market and selling it will still take several years. To fill their cloud gaps, Telcos must acquire, partner or build to meet the demand.

‪Which companies will be the winners in off-premise cloud? How will the market evolve between SPs (Verizon), asset-heavy system integrators (SI) (CSC), over the top players (Amazon, Google), cloud pure plays (Rackspace)?‬ It is unlikely that Rackspace’s, Amazon’s or Google’s offers would be considered an enterprise infrastructure offer as they have limited ability to address the SLAs of enterprises. Service providers address SLAs for connectivity; however, they will need to develop the consulting skills to enable migration of subsystems to public or private cloud.

Obstacles preventing companies from delivering vary. Verizon has more than 300 SIs or professional service staff that must be trained, and the company must deal with changes in leadership, alignment with Terramark, and lack of processes. Savvis/Centurylink has the same challenges. NTT is quickly retooling DiData to sell cloud offers. This company is the only one with the SI, cloud and connectivity of SLAs for enterprises. Some outsourcers such as CSC have good white label vBlock (VCE) stacks that will be a standard offer in the cloud. Just as Ericsson, IBM and HP do with different infrastructure technologies, some just as these Sis do will also manage infrastructure as an outsourcer.

‪As it currently stands, partner-to-partner partnering with vendors is the primary strategy that would really change the cloud market, because it is the quickest way for providers to move from connectivity providers to full offers of cloud enablement. Vendors have deep relationships with system integrators and have created loyalty and preference with top-level integrators, for example, Accenture, IBM and HP. Service providers, Tier 2 and cable operators that create partnerships with low-end vendors, which have SI Lite VAR partners, will be able to target the mid- to low-end market with loyalty, incentives, training and partnering offers. Partnering for risk-adverse Telcos enables them to change, invest and move to new technologies. Partnering 1) allows for white labels for cloud offers and the acquisition of go-to-market sales skills; 2) reduces investment up front for cloud-based offers (if white label is leveraged); 3) reduces sales staff training; and 4) derisks the cloud for the provider’s sales team, which is generally focused on connectivity.

‪Providers need to refine the lifecycle of their offers to increase their chances of offering targeted cloud services. They need to really understand their subscribers, for example, are they wireless or wire line (they know which but not what the business is)? Service providers must identify connectivity requirements, for example, size, and most importantly, understand their customers’ business IT processes, needs and systems. Once these factors are fully understood, providers can develop consulting and migration strategies and successfully deliver cloud to enterprises.

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Lauren Robinette
lrobinette@acgresearch.net
www.acgresearch.net

Partnering or Vendor Outsourcing: Speed Your Time to Market

All major vendors offer some limited to complete outsourcing capabilities in either advanced services or outsourcing of management of the network operations center. The goal of outsourcing is to allow a provider to focus on other priorities like; customer acquisition, increase value to customers and deliver value add services such as cloud computing or other up-sell services.

Service providers are either true telco or a carrier and tend to be very slow to move to a new technology or offerings potentially missing inflections in the market. Their internal silos and sales teams are set up to sell connectivity and access and less able to sell the advanced offers, such as unified communications, cloud offers and video services, demanded by the market.

• ACG Research investigated nine companies with unique profiles and ranked them on their ability to address key factors:

• Communication and Unified Communication: Offers which build on connectivity and take IP communications and convergence to the next level.

• Technology Portfolio: Virtualization end-to-end portfolio and technology that creates value and customer stickiness.

• Multivendor: Capabilities to address service providers’ environment to deal with outsourcing all or part of their infrastructures.

• Connectivity Capability: Knowing what the outsourcer’s capability is in providing robust connectivity to meet demands of providers as a customer.

• Customer Service: The ability to create value for on demand, on time resolution and coverage in the markets the providers do business.

• Change Management: What are the processes to change the current do-it-yourself in-house provider IT to outsourcing or out-tasking parts of the network? Does the outsourcer have change management processes tuned to carriers?

• SP Specific Offers: The outsourcer’s ability to have a dedicated team and tune multitenancy offers to handle the environment of the providers.

• System Integration Skills: The ability for the outsourcer to offer system integration to customers of the providers or to the provider to address gaps in migrating a customer or provider to a virtualized infrastructure or process.

• System Integration Experience: What use cases and customer lists can the outsourcer cite?

• Cloud Vision: What is the outsourcer’s ability to outline the cloud reference architecture and deliver technology, thought leadership and understanding of the provider’s cloud opportunity?

• Cloud Experience: In looking to an outsourcer for quick time to market there are requirements that dictate that the outsourcer has done this before and in many instances. What use cases can the outsourcer cite?

Our Outsourcing report covers the following: Cisco, HP, IBM, Globecomm, Avaya, CSC, Ericsson, Alcatel-Lucent, and NSN. For more information about this document contact ACG Research at sales@acgresearch.net.

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Lauren Robinette
lrobinette@acgresearch.net
www.acgresearch.net

SMBs Leading the Way to Cloud Adoption

I had the pleasure to speak at the Ethernet Alliance (EA) members meeting held on February 17th, 2012, in Santa Clara, CA. My keynote topic was how the cloud computing market is affecting enterprise customers. Side note: What I really enjoy about the Ethernet Alliance is its approach to the user community. EA members continue to seek direct input from the users of the technology the EA is developing. It is a refreshing change from the typical vendor-driven standard body that infrequently takes direct contributions from the user community. John D’Ambrosia, the outgoing chair of EA, has done a great job reinvigorating the Ethernet Alliance community.

Back to my topic, I find the cloud services pattern of adoption interesting. Since the downturn of 2008, the small and medium business market (SMB) has bravely gone on and adopted cloud-based services. Several companies ($100+M in revenue) in Silicon Valley are now 100 percent in the cloud. They have completely out-tasked their traditional IT departments. This movement was born out of necessity. With minimal funds available for capital purchases, the SMB market moved to cloud to address and change their operational and capital expense models. This movement has become so common in the last year that some large IT equipment distributors have created cloud-based solutions for their value added resellers (VARs) and systems integrators (SIs) to sell. Instead of fighting the movement to the cloud, the distributors have embraced the cloud in some fashion so they can gain revenue either by direct capital purchases or through operational expense-based cloud computing models.

How are VARs and SIs moving to cloud? At MSPWorld in Austin, TX, VARs and SIs that participated on my panel “Practical Steps to Jump Starting Cloud Based Services” agreed that integrators need to stick to what they know and incrementally move to a services-based cloud channel model. This will require a changing from a reseller of hardware to a consulting relationship with their clients as well as establishing a different approach to the SMB market. With the combination of ease of use and the movement to expense-based pricing models of the cloud, the integrators are in a good position to help this market rapidly adopt cloud services.

Large enterprises are reluctant to move to the cloud due to several factors. The first factor is a fundamental concern about the privacy of their data. Large enterprises have the most to lose because of restrictions and regulations with compliance and governance. Enterprises have dabbled with certain cloud applications such as Salesforce.com or have implemented virtualization in their data centers. Though server virtualization is a good first step on the path to cloud computing, it is not the ultimate step. It does buy CIOs some time within their organizations because they can claim they are using cloud services when talking to their peers.

What will be interesting to watch is the development of true cloud services from the major global service providers. This group has the experiences dealing with complex, SLA based engagements with the Fortune 1000 organizations. In addition, they have invested in driving long-term, trusted relationships with CIOs in this market. As the service providers gain more practical experience with delivering reliable and secure cloud services, I believe you will see the other shoe drop into this market with large enterprises investing more heavily into cloud services.

Marshall Bartoszek
mbartoszek@acgresearch.net
www.acgresearch.net

Juniper's Partner Conference Beats Expectations

From January 16-18 in Las Vegas, Nevada, Juniper played host and hostess for 1000+ partners, analysts, press and service providers and delivered three days of workshops, presentations, demos and announcements, which focused on Juniper’s plan to address how partners meet the market demands.

The company announced that it is moving its channel program from point product certification to domain coverage, Edge, Core, Access/Aggregation, Data Center, Campus/Branch, Enterprise WAN, and consumer and business devices with security within each domain to support the architectures within customer environments. Focused players in networking or security will also be supported by the new channel program. Juniper will continue to focus on value-based recognition by adding deal registration and other features to recognize the selling investments made by partners. This move will require different investments from its partners to deliver more value to customers. Companies, traditionally, focus their portfolios on technology, but to truly differentiate, they need to address how partners are selling and help them maximize their selling. This should be Juniper’s next move. Juniper must ensure that their investments in marketing the solutions support technology domains and leverage social marketing to stimulate awareness to their partners’ customers.

The solution or domain approach will enable Juniper to determine how partners need to be supported. Security is the number one issue cited by providers and vendors need to have a managed services solution to offer partners. Managed security as an up-sell to connectivity is a market opening begging for a strong leader.

Resellers are looking for value, differentiation and increased margin. Adding services to their product portfolios can increase their value, differentiation and ultimately profits. Although there will be fewer VARs and resellers selling capital expense-based equipment this year — and maybe for the next five years — more enterprises, small and medium companies are moving critical and noncritical operations to cloud based options or anything as a service and resellers and VARs will have to address this migration.

This migration provides Juniper and other manufacturers with opportunities to raise awareness and support VARs and resellers by showing them how to add services to their portfolios. Becoming a managed service provider is generally out of reach for most of the resellers with perhaps the exception of Fishnet, which just purchased a SOC to address their customers’ need for a managed security offer.

Many resellers are already in the managed service business and four of six partners featured on one panel indicated hat they derive some revenue from services. Three of the partners indicated 5 to 10% of their revenue is from managed services. Fishnet indicated that much of its revenue is from services but did not state how much, which could be from the company’s own services, partner resold services or professional services from its system integration capability.

With providers such as Google and Amazon being a fairly high risk and businesses reluctant to migrate key processes because of lack of service level agreements that meet business critical infrastructure, service providers such as Verizon, ATT and others may have opportunities. They may be in the strongest position and have the best infrastructure investments to be the back end for customers’ business to business needs. Generally, the businesses supported by VARs and system integrators may benefit from service providers partnering together to bring their business customers the SLA they require, especially as VARs and SIs add more high-margin services to their businesses. Vendors such as Juniper may need to find a way to encourage the provider to reseller connection through programs that add value, create reselling and add operational expense offers to the resellers’ product portfolios.

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Lauren Robinette
lrobinette@acgresearch.net
www.acgresearch.net

Partner-to-Partner Partnering

The next wave of managed services

Partner-to-partner partnering is gaining momentum and VARs and SIs are recognizing that it is an excellent opportunity for them to change their business models to add services to their portfolios. They also recognized how important the channel is to extend their reach to customers that they do not have today and most likely will never be their customers as most SMBs depend on the local VAR or system integrator for IT outsourced support.

Factors influencing the demise of the old business models:

• Cloud- and network-based investments are growing while the on premise or equipment sold on site is declining.
• Enterprises and SMBs are migrating to cloud to decrease costs and improve productivity associated with their IT investments.
• Partners traditionally selling hardware, software and integration need new models to take advantage of these trends.
  

Vendors and service providers are responding to the trend and creating programs to extend their reach. Companies such as Momentum have launched a new partner program targeting value added resellers and managed services providers.

Presidio Networked Solutions has been profiled for success in its selection of partners to create value with white label programs.

MSP partners such as YouSendIt engaged ACG Research to create their channel plans and strategy. Their partner program represents referral, resell, affiliate and custom ISP partner programs.

Even distributors are reinventing their organizations to enable their assets, VARs and SIs to migrate to cloud offers. Distributors are feeling the pain of the pick-pack and ship revenue decreases. They recognize that vendors, a huge source of revenue (their revenue source for the last 10 years) need to market to VARs and SIs or risk losing revenue as more customers demand new service offers.

Trade groups and organizations are recognizing the need to “educate” the industry. ACG Research recently kicked off and conducted several panels for Everything Channel’s Cloud Boot Camp 2011. Our analysts focused on change management strategies for VARs, SIs, MSPs and SPs to show them how to connect the opportunity for adding profitable services to the traditional VAR and SI mix. We focused on the following:

VARs/SIs:

• Migrate or lose customers to your competitors.
• Alter your sales force to deliver incentives on services over product to gain annuity that is renewable.
• No NOC, No Problem: establish partnerships with MSPs and SPs that increase your portfolios.

MSPs and SPs:

• Increase your reach to inaccessible customers by creating programs to reach 200,000+ VARs and SIs.
• Target not just your customers but the customers of your partners through programs that extend marketing through the partner to their installed base, identifying the cloud initiatives for enterprises and SMB.

Partners have to keep ahead of the next economic pressure that is changing the mindset of their customers by understanding the trends and knowing how their current assets can be leveraged to address these changes. Partner-to-partner partnering allows you to evolve with the changing markets and meet the demands made by enterprises and SMB. It’s either that or lose the customer.

To read more from Lauren Robinette, click here.

Lauren Robinette
lrobinette@acgresearch.net
www.acgresearch.net