ARN

Business Solutions: Selling business efficiency

This roundtable looks into why channel partners need to be positioning IT in terms of business outcomes and enablement.
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 Lord, Dell | Gianpaolo Carraro, Microsoft | Katarzyna Czubak, IDC

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 Lord, Dell | Gianpaolo Carraro, Microsoft | Katarzyna Czubak, IDC

Selling technology for technology’s sake simply doesn’t cut it anymore. ARN recently brought together a panel of industry representatives to look at why selling business productivity, ROI and innovation are critical to the channel’s success and how these elements will be the force behind cloud computing take-up.

Nadia Cameron, ARN (NC): Why is it so important to sell business efficiencies to customers?

Tim Sone, Ensyst (TS): When we look at the landscape and what’s happening today, the old way of approaching customers doesn’t work anymore. If you’re not going up the chain and talking about business efficiencies and how you’re improving your customer’s environment, it’s a dead-end conversation. For us, it’s a mechanism to open up conversations with customers, make sales stickier and make them more profitable.

Craig van Zeyl, Dataract (CVZ): We always sell to business based on ROI messages. What we noticed in the market downturn is that people still had money, but they would only spend if there was a good, sensible ROI. Not just ‘you folks will be better’, which doesn’t work. It had to come down to cost of processing, customer service and quality of service. We have been hammering in on that and selling business efficiency as a package, at the right price. As a result, business still happens – if we didn’t do that, it wouldn’t happen at all.

Jason Arnold-Auland, The Missing Link (JAA): We have always tried to steer customers towards having an ROI-type conversation. The willingness for business heads to want to go down a technology path when they have budget allocated, or who just want to get the project in and going, meant we could gloss over that before. But the last 18 months really brought it [ROI] back to the fore. Our customers are very much in the mid-market space, and when you’re talking to a business principal – because that’s usually who you’re engaged with in that space – it’s really a matter of getting in and making it happen. If you don’t deliver, you have hard questions to face.

Nick Stranks, Ethan Group (NS): We’re involved not just at a systems administration level, but right up to CEOs of most of the companies we deal with. We’re not a supplier, we’re a partner to those businesses and I think that’s why we’ve succeeded over the last few years and grown dramatically. They are still spending with us, and we know why they defer certain projects and what they’ve got to do to get projects over the line, as well as what they need to from us to actually spend the money. Recently, we’ve seen some big instances where those who have simply waited for the HP order at 3 per cent have gone. You can’t survive on that as a business anymore.

NC: Did that position change because of the downturn, or is it just maturity of the market?

Tanya Lord, Dell (TL): I do think the GFC contributed.

TS: I think people over exaggerated the downturn to some degree. A lot of companies stopped spending simply because it was seen as the right thing to do, rather than because it was necessary. The companies you could demonstrate a real ROI to were still interested in spending the money where appropriate. What they did is stop spending dollars on frivolous things such as the million-dollar lobby upgrade. Instead, they spent it on things that would generate ‘this and this’ for their business lines. I hope it carries on, because it means the market is tougher and you won’t have as many people trying to do a drive-by with your customers.

Gianpaolo Carraro, Microsoft (GP): Being involved in quite a few early adoption programs, we have good connections with the venture capital market. A similar thing happens there: Good companies get the money, regardless of the economy. What stops happening is the business models on the back of the napkin, and young kids trying to do something. It some respects, it’s a healthy element of high-level scrutiny in the purchases. So a really good company can extract itself from the masses and the clutter where everyone can be someone.

Peter Stein, Express Data (PS): One of the things we saw over the last 12 months was a lot more competition in the channel, because of restricted access to revenue. From a distributor’s point of view, we were finding the same deal was going to a lot more partners for a request for quote. Whether that’s the end customer being more active in seeing what’s out there competitively, or the reseller being more competitive because they had a number to match, I’m not sure. But there were definitely instances where business who usually stuck to one area, tried to scale into either side of it.

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Courtenay Snell, Jasco (CS): We found internal processes being managed to a greater degree, which meant more accountability was being put on the people making decisions. Thus, they were going for choices that provided better reporting facilities, a better way to gain visibility into the environment they were actually spending money on, and it wasn’t just smoke and mirrors. There were no under-the-table deals – it was the accountable, above board and visible changes that made a business impact.

NC: Is that because customers recognise the critical importance of technology to deliver business outcomes?

CS: There’s still a need and want to continually improve, I just think there was reluctance for a while to embrace new things or step outside the comfort zone. We’re seeing things becoming a lot more positive, and the trust factor with our customers is coming back. They’re not getting scrutinised to such a degree, they’re more comfortable that the information we’re putting in front of them is suitable.

David Hanrahan, Dimension Data (DH): I think you’ll see two things starting to change this year. Last year’s spending rates were on the basis of working with already allocated budgets, so people were deciding whether to spend the budgets they had or not. It meant people got a lot more competitive, margins got tighter, and there was a lot more focus on the projects that went ahead. This time, the budgets have been cut, often to where people were running last year. Secondly... the whole visibility of what IT can do and the cloud from a productivity and user perspective, is really starting to drive discussions we’re having around what projects get up this year. It’s not just doing something for IT efficiency and business dashboarding, there’s also a strong focus on what it’s going to do for users as well. We didn’t see that as much last year – it was more the GFC excuse.

Paul Voges, Microsoft (PV): I think customers are a lot smarter now. It’s much harder to say technology will solve the problem, because they have been through several cycles of buying technology and expectations are higher for a start. That’s one thing. But one of the things we all sell, particularly in the services space, is something the customer can’t necessarily see or touch, but which offers productivity and efficiency. Making that real to a customer has become a firmer focus. No matter how good your sales people are, if you’re selling the new features as better on this version than the last version, it’s probably not a good value proposition. Given some of the moves we’ve seen from Government around the education revolution and healthcare, it also shows technology has to play a much more visible role in the economy overall. The challenge with that is people want to see some proof. They won’t just believe that 2010 is better than 2007 – that doesn’t really sell the story.

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TL: It’s getting across the cost to customers of doing nothing right now. You have to change that mindset and make the business case. If they stick with what they’re doing now, what’s the cost impact opposed to migrating now from XP to Windows 7 for example? We’re seeing a lot of discussions and those business cases being presented at a board level, and having the justification behind that. I think it’s analysis of where the budget is going and whether they can afford to delay it, or do they need to do something right now. Doug Tutus, NewLease (DT): You find certain businesses looking for smarter solutions. What the GFC has done in many ways is open people’s eyes up to more choices. Our channel primarily works in the subscription/cloud side of the equation, where there is strong interest, and that’s quite encouraging for us. Overall, that choice is not being driven by the economy; it’s natural evolution of technology. It’s much like power, water and other utilities we use – today, you just expect it to be delivered. IT is rising to that maturity level overall.

NS: IT is now much more of a mainstream topic area, and not a segment of the business. It’s involved in everything, so you have every sector looking at how IT can aid their business unit. Rather than relying on the old IT manager to do it, the CEO is asking what cloud can do for him, and then asking the IT manager to follow up and research it. What you’re getting is a lot of non-standard engagements with people like us.

TS: Cloud is something we’re actively driving into customers, rather than them coming to us. When we open up those conversations, they’re very aware of it because cloud has become a very public term and everyone wants a piece. Once we get into the details and how it helps, it’s quite compelling.

DH: There are two parts of that cloud conversation playing out: One is the business looking because they’ve run out of datacentre space, or because power costs are going up and they have no where else to put that infrastructure. We’re also getting the more traditional instances where IT has run very reactively, and a lot of those more reactive IT services-focused companies are getting stuck because they don’t have the elevator pitch or position on what is cloud. Because everyone has heard about it, and you’re getting it from all parts of the business [the same is happening with virtualisation], we’re having organisations come to us to help them plan which parts of the business cloud fits, where they can take advantage, and where they should steer clear. They need to have their stories straight, because if they don’t have an answer, they may not have a job.

PS: It’s the same with social media. Within businesses, everyone is so exposed to social media outside of work, and the new guys coming into businesses are saying ‘why can’t we connect like that or just send instant messages throughout the organisation’? So it’s being driven up to a management level, not necessarily the IT level.

DH: At the other end of that, people understand what IT can do for them, but the big concern – some of which was GFC driven – was the focus on understanding what’s happening in the business. If you look at the Gartner Hype Cycle for cloud services over the past year and the past quarter, the lowest point in the graph is cloud services governance. The hype has gone well ahead, but people aren’t sure how they’ll manage in this new world – from a contract perspective, in terms of security boundaries, or whether it has a real impact or not. They’re still struggling to move security around with virtualisation inside their walls. When it moves outside as well, it’s a far bigger struggle. I think they’re being asked hard questions about how to manage these environments that they’re not ready to answer yet.

PS: Do you think security was more apparent in the last year? During the GFC, everyone was putting up walls and barriers and blocking everything out, and the first thing you think of is your insurance policy.

DH: It was more practical than that. We hit a level of server virtualisation that’s driven certain sprawl as well. The gap between the number of physical and virtual servers is not wide enough apart and we’re not getting the amount of efficiency we promised we would. They don’t get the cloud-like scenario where they’ve virtualised everything. They run out of infrastructure space on the floor because they haven’t done capacity management properly. And they also find that with automatically moving services between datacentres, they don’t have management systems in place to find out where it’s running, when it’s running, and if it breaks, who it affects. They’re already seeing that in-house, yet we’re telling them to virtualise everything – switches, servers, storage – and they see the problem getting bigger. Then we’re saying ‘we’re now going to put some of that outside your organisation as well’. I think the enterprise management story will have to start growing and come together again.

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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.

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PV: The timing is going to be key. If you went back seven years and tried to run the types of networks to enable these services, it would be very expensive. Ten years before that, it was the mainframe providing that situation. There has been efficiency delivered by infrastructure and better capabilities. At the moment, we have IT departments that are resistant to change. At some point, the economy of scale you get through a cloud-based public or private model will be so different to what they are paying on-premise that the shift will happen.

CvZ: There’s another element to the shift, and it’s not internal to external IT. If I come back to the work we’re doing with Salmat, they’re an operational shop – they’re not an IT shop. What is happening is that a customer’s internal IT is going to a business provider, not an IT provider. When you talk about cloud, you talk about moving services, but the real risk for IT-related businesses is that if customers can buy the outcome the same way as getting the lights on…this will be removing the IT discussion completely. It’s not your IT or my IT, it’s just who I buy this service from.

DH: There’s another driver from the business from a risk and governance perspective to have guaranteed DR solutions. Backup is not a problem for anyone, but restore is and it’s getting worse as data continues to grow. Cloud services can drive cost down for people who can’t afford to put that redundancy into their own environment. Backup and DR services through de-duplication means there’s less going along the wire and you can put those services into the cloud.

NC: Are there specific technologies that help drive the business efficiency discussion?

CvZ: We don’t look at it from a network, server or managed services perspective – we look at using technology to increase productivity, reduce the time of the process and reduce the cost. But I do think cloud will do exactly that. We standardise on Microsoft technologies and were quite religious about being standardised. This helps me know what my folk are doing, but also so our customer knew what we were doing. What this does for us is that when Microsoft comes up with these fairly big steps, we can automatically leverage those from a service delivery perspective, and have the platform with a billing model that is per service or fixed charged.

GP: To be slightly controversial: Pushing the business efficiency model is really about the reduction of cost of IT. We shouldn’t forget the innovative element of IT – there needs to be the other side to the conversation. So let’s make what you’re doing now, cheaper and faster but, at the same time, what is it you cannot do today, that IT can enable.

PV: It comes back to the visibility of the benefits. How many people today use unified communications, or instant messenger, and get access to questions they need to run their business instantly, as opposed to sending a fax to your Perth office? We take those things for granted. With the business intelligence we run now, the reports I get compared to seven years ago are now real-time, and I can see which parts of the business are performing and which aren’t. There are tangible benefits to business intelligence, unified communications and things that cut down travel, but I wonder how many IT departments and businesses out there have got so used to the innovation technology brings that they don’t consciously think about it anymore. Maybe there is a job for us to re-educate people on what things looked like 10 years ago compared to now and what they can look like.

DH: Examples of technologies that are not around cost savings but that are driving change: The Windows 7 release, which has driven Vista out of people’s minds, is creating a surge in desktop refreshes. A lot of that is still onsite, but where we’re seeing significant projects around that is delivering the same user experience no matter where you are for a seamless view. The business efficiency there is they don’t want users confused if they’re accessing things from their desk, or the airport. We’re seeing a huge take-up of desktop projects driven by virtualising desktops and putting it back into the datacentre, particularly around contractor management. We are building projects around Systems Centre and Windows 7 to deal with that. And Exchange 2010 – we’re seeing nearly all deployment being sold not just as the latest upgrade, but because it offers things like putting rules around rights management. So the governance piece, the same user experience and making it easier to use things, de-duplication in the software, are driving businesses to look at new technologies.

NC: At a distribution level, what questions are you being asked by resellers today?

Lee Welch, Ingram Micro (LW): We are giving a lot more support to resellers than we ever have done. Our systems architect for example, is out there all the time helping partners to put solutions together across multiple brands. We sell a hell of a lot of traditional licensing and we haven’t seen any downturn. So it’s certainly not indicating that traditional licensing sales are suffering.

PS: In the last six months, there has been a real tipping point. Media has been a major driver behind it, and every presentation you go to includes cloud.

LW: Some customers are scared about moving into the whole cloud area because they don’t see the maturity in the channel.

DT: The influencers are at the start of the education cycle – they need to become more educated in making money and promoting the hybrid cloud model.

TS: We’re facing great opportunities because right now is the moment of disruption. It’s an opportunity for people in the channel to change their business model and find new ways to deliver these business solutions. Those who do so early will make a lot of money out of it. Those who sit on the fence and stay behind – by the time they realise what’s going on, it will be too late for them.

PV: We deliver utilities and tools people can use. But it’s the integrators and partners who are doing the innovation at the customer level. There have been some broader things done with Infrastructure Optimisation, which shows the benefits customers get from moving from basic infrastructure to more dynamic infrastructure in the long-term. But where resellers make their money is how you stitch this together to make things more productive. What we can do as vendors is provide more transparency on things that don’t work. The more we do at a vendor level, the less innovation there is at the partner level.

PS: You don’t want all channel partners to be brokers, because it lessens the whole value of the channel. Microsoft has great products, but so do other people. The challenge that applies to hosting is where that hosting happens – is it the vendor that hosts the solutions, or does the reseller or hoster do it? There are two totally different solutions that come out of that. If the vendor hosts it, it is unlikely to bring in opposing products. If it’s the reseller, that allows better communication with the end customer about what their needs are for things that aren’t just run of the mill. The thing we’re noticing moving into the software-as-a-service arena, is that there are so many specific apps around particular vertical industries – niche products that give value to what that customer is doing.

DH: Driving those business decisions are things like business dashboarding, integration of systems. When you start to integrate multiple systems in one spot, you usually increase complexity somewhere else. The role for the channel is to try and manage that complexity and get the best balance of products that meet those demands and deliver the outcome, as opposed to just being vendor-led, as we have been in the past. We are starting to see that in the market already, and customer are demanding what it means for their users. We don’t do Exchange programs anymore or desktop SOEs – we do contractor management programs and things like that. It’s a gradual change that’s accelerating that. A lot of the talk about cloud has done a lot to promote that and given us a new place to talk to customers about.

Katarzyna Czubak, IDC (KC): The vendors used to talk about products and technologies, but they don’t do that anymore. They are there to support a business, which is the most important thing. And as consumers, we have so much more access to information through social networking and so much more power, that we are enforcing the businesses to deal with us in a certain way and think about how their business is available to us. We talked about the GFC, but I don’t think it was the major factor behind why things changed. It pushed us to look more at cost savings, but we have been very savvy for a long time on delivering the best experience and tools to our users, because no one can afford not to.

CS: Is part of the channel ecosystem going to be killed off, and will another ecosystem be created at the same time?

DH: We are all value-added resellers in this room: There is no place for just a reseller today. You have to be able to define what their value is, in the market they’re operating in and the customers they’re dealing with. Solutions are so horizontal; you need to be able to very clear define the value around the vertical you are offering it to and the individual customer. If you can’t find a place to add value, it will go direct.

CvZ: So what we’re seeing then is that we have a solution focus driven by consumer, which in the enterprise is the business user; brokers are being eliminated; the project management role is going into the project office, which has come out of IT as well; and the infrastructure is going into the cloud. It’s not a bright, shiny place IT is going to.

GP: IT as an execution engine might not have a good future, but IT as thought leadership for users of IT in the evolution of the business has a very bright future.

PV: What’s happening to infrastructure is the same thing that happened to information – if we deliver what we’re supposed to, infrastructure becomes information. It depends on how we position it as a community, and how we enable it. If you try to undermine the IT department as part of the process, that is how it will be perceived. But if you allow them to become a business partner, then it’s a very different proposition.