Transitioning from premises based solutions to cloud deployments for applications is a big step for many resellers so we have spoken to key suppliers to ask, ‘Why do it and where are the opportunities?
Delivering services and applications from the cloud is not new – after all online backup for example has been available for years. However, more and more applications and services are ‘coming online’ driven by the need to reduce costs, improve flexibility and the availability of faster, cheaper and increasingly more reliable connectivity solutions. All of this should add up to a great opportunity for reseller.
But there are questions to be answered…
So why voice resellers should now be delivering IT services from the Cloud? And how do suppliers ‘shake’ the resellers out of their CPE based comfort zones? What kind of applications that may be best suited to this type of reseller?
And when you have the answers to these then consider, what are the first steps that resellers should take in their journey to the cloud? And for those in the business for the long term, are they viewing cloud-based services as key to building value for the future?
So why should voice resellers now be delivering IT services from the Cloud?
Philip Toms, Re-sale Manager, Exponential-e: Resellers in the UK are increasingly recognising the need to include cloud solutions and services in their portfolios. This is particularly important for voice resellers, since they will need to transition from the traditional voice space to being providers of fully converged voice and data solutions. This is a vital part of the market’s evolution and organisations that fail to recognise this will ultimately lose business to those that do.
Once resellers have their high performance, cloud-based infrastructure in place, they can use it as a platform to resell both their traditional voice play, as well as lucrative new data services, such as back-up, disaster recovery and Software-as-a-Service offerings. Since cloud services can be resold without the need to deploy complex and costly specialised IT systems, resellers also benefit from the ability to launch services quickly and cost efficiently to their existing client base, thus locking in new deals and generating revenue streams more rapidly.
Andy Elliot, Marketing Director, International, Mitel: Simply put, voice is an IT service, so voice resellers should be offering it as an integral part of their customers’ broader cloud-based IT strategies.
Whether it’s public cloud services, private cloud deployment in an organisation’s own virtualised data centre, or a hybrid of both, the benefits of deployment are becoming clear. These benefits are as relevant and possible for voice as any other IT service and can include flexibility, cost savings, business continuity and team productivity.
Voice resellers need to recognise that IT teams now control voice decisions, so they have to embrace cloud simply to remain relevant to the people making those decisions. Any lack of cloud offering will mean resellers are excluded from the conversation which, in an increasingly cloud-focused market, is not a good place to be.
The struggling economy is making capital expenditure ever more challenging for businesses, and this offers opportunities for voice resellers. A subscription-based model of cloud communications services can not only help resellers more easily attract and retain new customers, but can also deliver on-going revenues for the long-term.
Whilst the analyst community is predicting growth in cloud communications forecasts, the reality is that voice resellers will need to balance both cloud and CPE offerings to optimise their market opportunity.
Stephen Barclay, Head of Sales at Entanet: Many traditional voice resellers are finding their margins being squeezed and their customers demanding newer technologies and popular hosted applications such as VoIP, a growing market generating profitable opportunities. Therefore, the move into selling hosted applications from the Cloud seems an attractive and logical progression. The move also opens up new opportunities in the form of selling the connectivity infrastructure that underpins the adoption of cloud services by their customers. Understanding the options, their features and what differentiates them is an important step for voice resellers to take if they’re going to succeed in the hosted application market.
However, many are also discouraged by the thought of the unknown and will need help and support from their suppliers to confidently and successfully make the move into cloud based solutions.
Tim Loveday, Sales Director, Indirect Channel at Coms Plc: The cloud gives many advantages over traditional IT services, from disaster recovery and business continuity right through to scalability and on demand services as required. When you couple this with the reduction in CAPEX and OPEX costs that cloud services offer compared to a traditional wall mounted PBX/server, it really is a very sensible option for any reseller to be considering.
Tony Smith, Sales Director Indirect Channel, Siemens Enterprise Communications: Resellers are increasingly well positioned to deliver IT services from the cloud. This is primarily being driven by the reduced cost of both connectivity and the cost of rack space. As the cloud market matures, deployment becomes more cost effective and the benefits more obvious. Adoption therefore increases and accelerates.
Such benefits of cloud migration include the ease of deployment and both the flexibility and scalability of the cloud to enable organisations to remain agile. Cloud in the longer term provides cost benefits because it is so scalable. Although, it’s not all about cost. Reliability and security as well as ROI and TCO are obvious proof points for cloud adoption.
How do suppliers ‘shake’ the resellers out of their CPE based comfort zones?
Andy Elliot, Marketing Director, International, Mitel: It is customers, not vendors, who will provide all of the necessary ‘shaking’ of the voice reseller community to provide a catalyst to move to the cloud. Voice resellers who stick to their CPE comfort zone will likely see their target market rapidly diminish as their customers’ cloud based IT strategies increasingly include voice.
Savvy resellers will listen to their customers and embrace the cloud to aim to remain an integral part of their customers’ strategies. But the vendor challenge is twofold. Firstly, we need to make it easy for our voice resellers to add cloud based communications services to their current CPE offering and secondly, minimise any cost associated with this portfolio extension.
Stephen Barclay at Entanet: Wholesale suppliers need to support their customers and provide them with the training and support they need to confidently move from their CPE comfort zones into providing Cloud based services. This comes mainly in the form of education and training, providing them with the tools and knowledge they require to feel confident providing this new range of services.
Tim Loveday, Sales Director, Indirect Channel at Comms Plc: Resellers are used to a huge up front margin/commission from installing traditional CPE, the way for a supplier to shake a reseller out of this is really two fold. As a supplier we need to educate the reseller that a large amount of CAPEX can be a huge barrier to sale for an end user, especially if they have a limited budget, and giving them a reduced cost of entry will not only remove that barrier to entry but also speed up the decision process. With both of these elements combined we can get to a higher frequency of deals making a smaller margin but netting the same result. In addition to this we need to further educate the reseller that making a higher margin on an on-going monthly basis will mean that they are never searching for the “big deal” at the end of every month to hit their targets and that they drive more value in to their businesses by having a recurring revenue stream.
Tony Smith, Sales Director Indirect Channel, Siemens Enterprise Communications: Suppliers need to make it easy for resellers. There is a lot of talk around the generic term ‘cloud’, and this has led to a lot of confusion. Suppliers need to think about how to tactically take a cloud offering and position it in order to make it easier for the reseller to sell.
With this in mind, we are seeing suppliers packaging cloud elements up into smaller and easier to understand bite-size chunks. For instance, product offering is available as one package, training as another and commercial, terms and pricing as another. Moving resellers out of their CPE based comfort zones will be a gradual process and it is up to suppliers to provide the necessary support and information during this transition.
However, there are still a lot of prerequisites needed to sell the cloud. In terms of infrastructure required to provide a cloud offering, resellers need a data centre, virtualised servers and improved connectivity. In some cases they can re-sell someone else’s infrastructure but it is better to offer their own.
This is becoming more viable with services starting to appear that allow resellers to avoid the initial infrastructure cost. Pay as you go models from larger cloud providers are making it easy to deploy cloud as required and on a very scalable basis.
TFM Networks, Stewart Yates, Managing Director at TFM Networks: The effects are happening now. Times are tough out there and business is introspective in how they make or maintain more profit from less revenue. IT infrastructures are one of the first places a business looks for savings and economies of scale. Also, business is not really interested in CAPEX as much so want to update technology from normal OPEX budgets. Cloud delivery achieves this.
James Arnold-Roberts of Genius Networks: Our reseller partners report that the move to hosted or cloud-based services is being driven by specific business needs resulting in varying degrees of virtualisation. Some corporations with particularly complex IT estates are choosing to re-locate their entire communications infrastructure to the cloud in order to take full advantage of the most up-to-date network delivered services. Some want to make the move to fully featured unified communications without the upfront expense, while others are electing to improve customer service capabilities by virtualising their contact centres.
The type of IT applications that may be best suited to these types of resellers
Andy Elliot, Marketing Director, International, Mitel: The cloud services market for IT applications is very crowded, with IT resellers and service providers dominating. The opportunity exists for voice resellers to leverage their considerable expertise in voice to differentiate themselves by focusing on applications where voice adds value to their customers’ investment in the cloud and other IT applications in the cloud environment.
Core telephony services, integrating voice with CRM applications, cloud-based contact centre applications and cloud based video communications, conferencing & collaboration applications, are all areas where voice resellers can thrive.
Stephen Barclay at Entanet: The obvious choice for voice resellers is to move into the provision of hosted VoIP services. They are already familiar with the voice market and the features and benefits of traditional PBX based services, so moving to hosted VoIP solutions is relatively simple and a move that can be very profitable. Once they have experience in providing hosted applications of this nature, many may be confident enough to expand this to cover other types of hosted applications, increasing their portfolio and taking advantage of further market opportunities.
TFM Networks, Stewart Yates, Managing Director at TFM Networks: In the comms environment, probably Hosted IP Telephony (HIPT), SIP trunk delivery (replace ISDN30 trunks), online collaboration and online meeting tools. Video Conferencing and extending on communication tools, pave the move to hosted desktop via apps like Citrix and Virtual Data Centre services.
What are the first steps that resellers should take in their journey to the cloud?
Philip Toms, Re-sale Manager, Exponential-e: Choosing the right network partner is crucial. A partner should be able to act as a trusted advisor, while also providing a flexible network that can agnostically support multiple cloud service providers and deliver robust Layer 2 network services.
Andy Elliot, Marketing Director, International, Mitel: Firstly, listen to the voice of the customer. Talk to customers, understand where cloud fits in their IT strategies and where voice fits within that context. With a clear view of customer requirements resellers can then start exploring cloud applications and products to offer within their portfolio. The customer engagement will help prioritise and focus where time and resources should be applied in a reseller’s evolution to becoming a cloud service provider.
Secondly, consider all aspects of the cloud: private, public and hybrid. All three have a role to play, depending on the target market that the reseller operates in and the customers they are approaching.
Thirdly, consider differentiation. There is arguably little point in investing in a ‘me too’ basic cloud telephony service where the only differentiator is price. Consider the other cloud services that can be wrapped around the voice service to add value, such as UC, video, collaboration, contact centre and CRM integration. This can be important to differentiate a reseller’s offering, and improve margins. When differentiating, take great care to avoid ‘cloudwash’. The industry is awash with vendors proclaiming that everything in the cloud is good, which can lead to a high level of customer scepticism. Resellers can avoid cloudwash by having a resolute focus on explaining how applications delivered in the cloud will deliver tangible improvements to their customers’ business.
Tony Smith, Sales Director Indirect Channel, Siemens Enterprise Communications: The majority of resellers are still in the early stages of the adoption cycle, enabling voice over the cloud remains a challenge, particularly in terms of the usual security and reliability concerns. With no organisation clearly leading the way in cloud adoption – companies still perceive a certain amount of risk to a full cloud deployment.
However, the first step that resellers should take is a mixed strategy/ hybrid on-premise solutions approach. E.g. UC – can be used out of the cloud while keeping the voice system on-premise. Cloud deployment is not a rip and replace job. Resellers must carefully consider their main objectives (savings, efficiency, productivity, contactability and compatibility) and ensure that the cloud packages they offer hit these requirements.
TFM Networks, Stewart Yates, Managing Director at TFM Networks: I would find a new product that would be a saleable add on product to existing customers and test it on some good customers. Something that doesn’t initially affect existing revenue stream so your business will see sustainable benefit from its introduction which allows you to use the profits created to re-invest in the business to keep growing and expanding.
Are cloud-based services a key to building business value for the reseller?
Philip Toms, Re-sale Manager, Exponential-e: The business value of cloud services is already clear to the end customers of resellers, but the advantages they bring to those on the other side of the business equation are no less tangible. After a very low barrier to entry, cloud services allow resellers to grow their product portfolio and future-proof their business models. A competent network partner can provide resellers with an easy-to-use, affordable and high performance cloud solution, underpinned by a strict end-to-end service-level agreement. Such a platform lets resellers quickly take services to market, without building their own in-house systems – a process that is both costly and time-consuming.
Richard Carter, Group Sales and Business Development Director at Nimans: Recurring revenue is the key to The Cloud,” said Richard. “The cost of bandwidth and quality of service is coming down all the time making SIP trunks and hosted much more viable. From a reseller perspective they need to join the party because if they don’t they will be missing out on chunks of business. Certainly a percentage of business is going hosted it’s just a question of how much.
At the moment a lot of end users especially in the SMB space, are not aware of the possibilities. When they do become aware it’s the flexibility that will appeal to them and accelerate demand. Charging methods are the biggest difference as companies do not have to make the same traditional upfront investments they used to. There’s no CAPEX and they can flex up and down based on a fixed monthly cost.
For any company, the flexibility of knowing its monthly staff costs is critical. For example they know that an individual member of staff is going to cost say £3,000 per month in wages, £300 for their car, £50 for a mobile phone and potentially now £15 for their desk phone. In comparison, £15 per month doesn’t seem that much for an essential business tool. But for a reseller it can be a great profit generator.
Andy Elliot, Marketing Director, International, Mitel: Cloud services give resellers the opportunity to build on the recurring, subscription-based revenue streams that they already enjoy with the network services and mobile elements of their business, but with higher margin unified communications as a service (UCaaS).
Subscription-based UCaaS services can create long term, contractual customer relationships that can certainly add value to a reseller’s business. This is of significant importance in a market that is being increasingly consolidated through merger and acquisition activity.”
Stephen Barclay at Entanet: Yes, this growing market provides resellers with profitable opportunities and, if the move to providing cloud based solutions is done right, it could definitely help them to build business value. Demand for the latest technologies is high and whilst cloud services are the latest talking point businesses are keen to adopt them and benefit from the cost and efficiency savings they promise. By responding to this demand resellers can make profitable revenues, if they are able to meet their customers’ expectations successfully.
Tim Loveday, Sales Director, Indirect Channel at Comms Plc: The demise of the hardware based system is happening very slowly and the uptake of cloud is gaining momentum so the quicker the reseller adopts this, the more value they will add to their business. Add to this the fact that cloud based services are extremely sticky, bearing in mind that once all of a customers’ information is in the cloud, it will be very hard for a customer to step away from the flexibility it brings, and therefore the reseller should see a residual income for many years to come.
Tony Smith at Siemens: Yes, they are – traditionally a resellers business is built on recurring revenue streams. This can come in the form of maintenance and network revenues (lines, minutes, and mobiles). Although these will still exist, there will be a change in where the revenue stream comes from. In future business value will shift from where they sit today to new recurring revenue streams such as the ISDN to SIP technology change, mobile contacts and connectivity/ internet. The cloud is becoming, and will be, key to ensuring that these revenue streams remain.
The end user business customer is increasingly looking to consolidate the number of vendors it deals with. Businesses no longer want to deal with three to five vendors and just want one point of contact. With this in mind resellers need to offer broader portfolios to customers. If they don’t someone else will and this is key to adding value to the service they offer.
In my opinion the most sage comment received during the writing of this article was from Richard Carter when he said, “… the flexibility of knowing its monthly staff costs is critical. …they know that an individual member of staff is going to cost say £3,000 per month in wages, £300 for their car, £50 for a mobile phone and potentially now £15 for their desk phone. In comparison, £15 per month doesn’t seem that much for an essential business tool. But for a reseller it can be a great profit generator.” Very apt.