From left: Doug Tutus, Newlease | Peter Stein, Express Data | Courtenay Snell, Jasco Consulting | Nadia Cameron, ARN | Craig van Zeyl, Dataract | Tim Sone, Ensyst | David Hanrahan, Dimension Data | Paul Voges, Microsoft | Jason Arnold-Auland, The Missing Link | Lee Welch, Ingram Micro | Nick Stranks, Ethan Group | Tanya ...
PV: If we are claiming efficiency on the datacentre side, and then on the workforce/productivity side of the business, and we don’t deliver that in the first few months of the opening, the criticality drops down to where it was in the dot-com days. We need to very vigilant as a channel. All the points on virtualisation or moving things into the cloud, and turning some software into a utility, is absolutely critical, but if we keep explaining the problem without showing how we’ve delivered on the ROI – whether it’s the reduction in energy or virtualised servers – a customer can look back in two years’ time and argue they’ve spent a lot of money, but they’re not sure if things are better. The way we operated as an integration channel before, where you focus on utilisation and project-to-project, is very different to managing a business case or ROI.
DH: We have been very good at promising for years. We are starting to get asked for different types of case studies and client introductions, where customers want to measure what happened afterwards. We have a number of clients using things like the I/O maturity model at the start of projects, where we showed them what they could get, through projects to decide whether a new function someone has come up with should be included, and afterwards to see whether they moved to. They didn’t have other management tools, and as an industry, we haven’t had many for them over time. But we are starting to get asked for customer case studies where someone has actually got that return we promised. That’s probably been happening gradually, but we’ve seen it really pick up in recent times. We need to get systems in place to measure and show proof of the value we pitched.
NC: Is selling on business efficiencies, or the cloud, a longer sales cycle?
PV: It depends on what you’re selling. The inflection point is right – talk of cloud has been there for two years, and I suspect in the next two years the market landscape will look very different. We’ve had to shift a large chunk of our $US9bn R&D investment to cloud enablement. That probably wouldn’t have happened three or four years ago under the traditional model. The interesting thing on the channel side is when you’ve programmed in a way to sell software in a certain way through rebates and so on. Many reseller businesses have been modelled on selling traditional servers and software, and cloud will be a threat for many of them. As well as vendors having to change and put focus on our sales people, marketing and software, the same thing is happening to the channel. It’s quite a massive shift and I suspect it will take some time. Everyone is talking about cloud, but when you start to think about what it means for people and businesses, and the pioneers out there, there is still a long tail of partners that are going to take some time to get their heads around how to move to it.
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JAA: There are still traditional blocks inside businesses as well. On a daily basis, you run into an IT manager that has built an empire, and if you tell him to move everything into the cloud, he won’t have his blinking lights anymore.
CvZ: You have to go back to the point we made at the beginning of the conversation, which is the business efficiencies. The big thing, and the telcos have been through it and some didn’t survive it, is you’re making an upfront cost on a three- or five-year contract and the risk has shifted. Whereas before it was a hard sales cycle and the risk was in your sales person and pre-sales activity, the risk now is in the project and the customer remaining successful.
PS: The customer is quite happy to move from CapEx to OpEx as long as it’s a managed OpEx price. I was in a conversation with a hoster and asked him why he didn’t charge per GB instead of per user, because he can’t actually manage how many users there are. And he said it was because the end customer can’t forecast in their books exactly how many GB they’re going to be using, if there’s a viral infection or a peak load where lots more data is going through.
CS: Didn’t we have those CPU-based models with the ASP boom of the 1990s?
GP: There are too many differences from the ASP days. One is the maturity of the market and acceptance of technology. An ASP was also almost an outsourcer – they were taking a licence from someone and delivering it to you. Alongside that, ASPs didn’t share infrastructure across multiple customers, and the price point was not at the same level we can do now through economy of scale and sharing resources.
DT: Time takes care of things in a lot of ways. The delivery mechanisms are more robust, there’s a higher level of trust, but more importantly, the reseller is looking for an innovative new business model. There was no white-labelling in the old days, whereas if the channel today builds its own channel and white-label services, that’s your evolution for cloud. If you’re going to market direct today and going into cloud, you’re barking up the wrong tree. You won’t get the economies of scale you need to stay in business.
DH: Until you put something on the end of ‘cloud’, you have nothing to sell. Is it cloud infrastructure, collaboration? What business seems to be looking for from cloud functionality is better efficiency, better cost management, on-demand and elasticity of services.
GP: Self-service is also part of it.
DH: And they want it to scale quickly. For a lot of clients, that doesn’t have to just be a public cloud discussion. They may actually look to phase it in by putting in the same type of infrastructure privately first. Some customers are starting to cherry pick the services they will trial out of a public provider. But both come back to the theory of efficiency: The business is demanding better efficiencies out of IT services and whether it’s public or private, they still want better integrated systems, better management and they want better delivery of services. We are seeing the start of discussions about new and innovative charge-back options internally and externally, and that’s going to accelerate over the next year or two. As it does, there will be even more reason for people to move.
GP: IT is in competition with external providers now too – IT used to be a monopoly within the organisation it was serving. Today, as a business unit manager, I can go and buy a hosted mailbox for $10 per month. If I then I ask my IT guys how much it costs to get it from them and they’re not sure, or it’s $50, I’m going to think there’s something not right. It’s deregulation of IT in many respects. Now there are public benchmarks that internal IT has to provide.
PS: But that works on the concept that everything comes to a normalisation point and the delivery of software is going to be exactly the same. If you look at cloud offerings today, they’re packages with no changes. There are no extra connections, APIs or getting new product.
DH: That’s a maturity issue. Providers are keeping things simple and risk-free, because no one can afford to have failures at this stage. But it’s also because customers aren’t ready to consumer highly complex, customised services from an external provider yet. They don’t have management in place for it. It’ll start to change over the next 12-18 months.
