To The Channel: Is the Cloud Your Pivotal Opportunity or Your Demise?
To The Channel: Is the Cloud Your Pivotal Opportunity or Your Demise? by Stephen Leaden
Introduction
Over the last 60 months with the rise of VoIP and UC, the channel has incurred tremendous pressures and a requirement to change along with it. The channel has seen incredible disruptions to revenues and certifications alike. Legacy voice VARs have had to cross train and get data certified. Revenues for maintenance have been cut in half, largely due to the ability to resolve 80-90 percent of all service-related issues remotely, no longer requiring a technician to “truck roll” to site. The channel has also become a victim of Move Add Change and Delete (MACD) revenue, down as much as 90 percent from just a few short years ago. Now enter the cloud for another disruption.
Some opinions claim that the cloud will be an even BIGGER disruption than VoIP and UC have been. To quote a channel partner in Canada, “with the advent of the IP Telephony and UC cloud I can see two-thirds of my staffing becoming irrelevant in the next four years – this is the topic that keeps me up at night.” The VoIP/UC cloud is an industry trend, a “train heading down a track that cannot be stopped.” Simply, if the channel does not adapt to it, it could mean the end for a channel partner as we know it today.
Specific to UC and IP Telephony, the cloud is a huge disruption and will change how enterprises and the channel alike will do business over the next 36-60 months. Gartner Group predicts that the “Voice as a Service” market will grow annually with a CAGR of 36 percent to $2.2B before 2015 from the current $700M market, a short two-plus years out. That’s huge growth and opportunity for the channel if just viewed in that way.
In one recent study conducted by the 2112 Group, the channel continues to earn less than 10 percent of its gross revenue from the sale of cloud-based products and services. IT solution providers and Telephony agents are projecting cloud to become a greater part of revenue; however, the biggest factor slowing cloud adoption among channel partners is the inability to find qualified technical and sales staff. Informal surveys have shown that sales teams in general cannot explain the differences among PaaS, IaaS, CaaS, SaaS, private, public, and hybrid clouds.
Key Market Drivers
There are key market drivers for the Communications as a Service (CaaS) and Infrastructure as a Service (IaaS) markets. They include:
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Technology Changes at an Unprecedented Rate – Some organizations now see Unified Communications and associated IT applications changing at such an unprecedented rate that moving to a cloud infrastructure is about being strategic and going to market faster than the competition, and less about lowering or managing costs.
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Faster Ramp Up Periods– Because the cloud model is already built by the provider in most cases, the ability to implement a cloud solution typically provides the advantage of a faster ramp up period over a capital-based solution. In addition, a cloud solution can expand quickly among endpoints and applications.
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Minimal (sometimes zero) Capital for Start Up – In many cases there is minimal (even zero) capital required to invest in a cloud infrastructure.
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Recent Recession, Less Capital – Many organizations have less capital today than they did just a few years ago and therefore the emphasis on cloud becomes apparent.
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Less Staff forComplex Projects and Staff Training Cross Border – In today's right-sided market, requirement for staff for more complex projects is an issue and utilizing a cloud provider is a possible answer.
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New UC Models Being Offered In The Cloud – UC models are now being offered in the cloud which enhances the ability to utilize the cloud as a possible candidate.
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Telephony and UC are “Headaches” and Not Part of the Native IT Infrastructure – Telephony and UC are, in some CIOs minds, “headaches” and not part of the native IT infrastructure. Telephony is a different model and has greater QoS requirements at every touch point than a data-only model. Telephony and UC are different technologies than traditional IT technology and it's been a slow road in many cases to integrate both the native IT and Telecom organizations together. In this instance, the more a CIO can “simplify” and delegate out their Telephony and data infrastructure, the better.
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More Applications To Manage – With Unified Communications taking on adoption rates more significantly today, Unified Communications and associated applications becomes an even larger area to manage for the IT organization as a whole.
Strategies for the Channel
As disruptive as the IP Telephony cloud appears to the channel, there are a number of strategies any channel partner can engage with and leverage as a cloud opportunity and overall cloud strategy. They include:
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Realize That the Cloud is An Industry Trend and Not Recognizing It Could Be the Longer Term Demise of Your Organization. Ignoring the cloud trend is simply a recipe for disaster, and not recognizing the cloud trend could be the demise of your organization, either partially or entirely depending upon your organization’s current infrastructure.
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Create a Department or Division Within Your Organization That Focuses on the Cloud. Establish a department or division dedicated to selling the cloud solution. Learn as much as you can about the cloud, about cloud trends, what programs and solutions manufacturers are offering relative to the cloud, capital required to invest in a cloud-based infrastructure model, and what gross revenue opportunities are available by introducing a cloud solution in your organization.
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Intentionally Design And Build An Ongoing Revenue Model Within Your Organization. For the short-term, capital projects will always exceed cloud-based solutions in terms of revenue to your organization. However, looking out 36 to 60 months, a cloud-based revenue model in many cases will exceed a capital-based model, and therefore develop a plan to intentionally build a larger ongoing services revenue model.
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Realize That There Are Many Services Your Organization Can Offer Relative To a Cloud Solution. There are many services you can continue to offer to the enterprise that are native to your current organization.For example, you can deliver on endpoints, including testing and implementation, project manage a multi-site cloud solution, perform network assessments, implement cabling infrastructure, deliver and implement data network infrastructure, deliver and manage carrier infrastructure, provide training services, deliver hybrid solutions that the cloud does not offer currently, offer NOC monitoring services, and professional services for Contact Center, Unified Communications, and more.
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Train Your Sales and Technical Staff Towards a Cloud-Based Model. It's important to note there are newer acronyms associated with a cloud-based solution, and even more important to understand enterprises’ needs and whether a cloud-based solution will fit that organization. Training your staff, both on the sales and technical side, will help facilitate a need for the cloud, an understanding for a cloud solution, and the enterprise’s opportunities to utilize such a model.
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Focus on a Five 9s Model. Not much is mentioned around a five 9s model today. However, any executive expects an endpoint to be available all but five minutes per year at their desktop. This equates to redundancy and resiliency in the core and in the local closets, designing for a better model, better value, and additional revenue.
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Consider a Hybrid Model. At this stage not all cloud models offer all the solutions an enterprise may be seeking. By offering a hybrid model, i.e., some services in the cloud and some services on premise, you'll be able to personally deliver on-premise solutions the enterprise is seeking (and cloud cannot deliver on) and “own” part of the model that you are personally delivering on. For some organizations, this hybrid model could include leaseback of the equipment along with the IP Telephony cloud solution, and therefore provide you the opportunity of including a capital-based model as well.
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Consider a Managed Services Model. Your organization could offer a non-capitalized model that is premise-based, that could offer all of the features and functionality the enterprise would get if they purchased a capital-based solution, with the exception that your organization would offer a rental model for all equipment and circuits for ‘XX’ months.
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Consider a Private Cloud Solution. By investing in a larger IP Telephony server solution and in rack space in a co-lo facility (including a redundant co-lo facility), you can offer your own private cloud solution. You will need to come up with a model that is financially doable, along with internal resources that can deliver on the promise of a professional implementation and SLAs associated with ongoing support. Ultimately, this solution may prove to be very lucrative.
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Align Yourself With Several Carriers To Sell Quality Of Service-Based Services and Associated Networks. If you have not done so already, align yourself with several key carriers to sell Quality of Service-based services and associated networks - this way, you can align IP Telephony cloud-based contracts with an MPLS or Ethernet-based contract and create additional revenues.
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Intentionally Move Your Organization’s Financial Model to a Residual-Based Model. Create a company and sales-based model that is residual-based, and make it appealing to all within your organization as a way to grow your cloud-based business.
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Choose Your Partner(s) Carefully. Most of the manufacturers are quickly rushing to provide the channel some type of cloud-based solution. However, not all partners are the same. Some provide higher margins, while others provide an upfront capital-like solution in order to provide the channel a migration path towards a longer-term cloud-based revenue. Some provide better delivery and service support models than others. Some provide better marketing, sales and technical resources than others. Whoever you choose to partner with, choose wisely.
Summary and Conclusion
The VoIP/UC “CaaS” cloud is a HUGE disruption to the channel, an even bigger disruption than VoIP was several years ago. It can be your opportunity or your demise depending upon how you look at it and how you approach it. Longer term, this could be the single largest opportunity your organization could realize.
The VoIP and UC cloud market is still in the early-adopter stage for larger deployments. Until now, the SMB market has been the focus for the IP Telephony cloud. It’s not too late to start your cloud channel strategy.
So the question is: are you and your organization ready for the cloud? If not, then it's definitely time to do so. The strategies presented within should give you a starting point from which to launch your cloud strategy.
Look at the cloud as “the single most pivotal moment” for you and your organization. Then go ahead and take the plunge – it will be worth your time and investment.