The sudden popularity of cloud computing understandably raises a number of awkward questions for the distribution channel.
But for the top brass at one of the industry's biggest and fastest-growing disties, the new technology and business model represents an exciting opportunity to derive further value from its core offerings and competencies.
That's the word according to Westcon Global CEO Dean Douglas and local boss David Henderson, both of whom sat down for an exclusive interview with CRN at the company's recent Sydney facility launch.
"What do you get beneath a cloud, what do you really need from an enterprise standpoint?" Douglas said. "Well, you're probably going to need some CPEs [customer premise equipment] to support the networking infrastructure and you're going to want security and probably some storage.
"So I think our portfolio of networking, security and storage products leaves us well placed when it comes to software infrastructure and middleware to support that. We're not selling PCs, printers or whatever. We're selling products that really do drive the right technology platform for the future of enterprise; small, medium, and large."
Douglas and Henderson also painted an optimistic picture of Westcon's future locally, where cloud solutions are steadily gaining traction.
Douglas and Henderson at Westcon's new Sydney facility launch.
"Cloud is certainly part of the future for Westcon Australia. There is no future without it," Henderson told CRN. "Having said that, the early adopter phase is probably coming to an end. We were just talking to a vendor this morning who's forecasting that over the next 24 months, his business might shift from maybe five to 12 percent [into the cloud]. So it's certainly not 'mass acceptance' yet."
Douglas conceeded that adoption of public cloud services at the enterprise level had "not been as significant" as the industry had hoped, with a reliance on point-based solutions being a chief issue for potential customers.
Last year, Westcon began trialling its white-label, public cloud service for resellers in Britain and other parts of Europe. Douglas said the company had learned "a tremendous amount" from its pilot cloud system in terms of the reseller, end-user interfaces and how you bring together the different and disparate point solutions into an aggregated platform.
"Now that we've got some experience we think we understand it pretty well. I think it's something you'll see us move to market with as cloud adoption starts to pick up," Douglas said.
He said the strength of Westcon's public cloud service was its positioning behind the storefront of the reseller.
"[It] provides the reseller with the opportunity to really leverage the cloud as a gateway to the end user, as opposed to trying to create something totally separate," he said. "This is really going to change the way in which the resource can go to market and therefore the cloud adoption rates will change."
Westcon's white-label cloud service was originally expected to be online for Australian partners by March this year but has so far failed to materialise. Douglas confirmed that Westcon was still going forward with its white-label cloud offerings, but could not confirm when the service would be made available locally.
Henderson said Westcon Australia was still in the midst of laying the groundwork for its cloud-based services.
"Building supportive infrastructure, getting through the legalities [of cloud] and getting finance models together that resonate with partners and their customers is what we've been working on," Henderson said.
He added, however, that one of the key factors slowing down cloud adoption in Australia and abroad is a lack of appropriately trained resellers.
"When we talk to the bulk of the mid-market guys, one of the first things they say they have an issue with is training their organisations to be able to sell cloud," Henderson explained.
"Building the infrastructure is one thing, but it's a challenge to actually get their sales organisation to go out there and move from selling a transaction to an IT manager to all of a sudden be sitting in front of a CFO talking about capital expenditure versus the operating cost expenditure."
In response, Westcon has launched the Westcon Academy training facility, where channel partners are able to build cloud selling skills, including how to transtion from addressing the balance sheet to operational costs.
The costs associated with building the proper infrastructure is another key issue confronting resellers that want to get on board with the cloud.
"It's well and good for a partner to think about building a cloud but where are they going to get the money from?" Henderson said.
"It's easy to paint the dream, but the practicality is where the hard work and heavy lifting really starts. This includes restructuring your training and competence within your organisation, getting more financing to build it up, delivering it to the mid-market, getting the finance model right – is it a twelve month contract [or] is it a 36 month contract? How do I survive in a cash flow environment between taking a transaction and moving to annuity, how do I bank roll that?
"I think these are the real issues that the partners are actually thinking about, as opposed to the end users' demand for the cloud."
Internationally, Douglas said the shift to a cloud subscription model was proving very fruitful.
"Many of the resellers can't afford the cash flow to go to a monthly model that varies by user. What we saw was that minimum subscriptions were a year and that many of the end users were willing to accept the fact that they would pay a year's subscription up front for a certain number of users to have access.
"So the subscription model becomes a little more palatable and the adoption becomes a little more rapid if we can get folks to think about selling in that kind of environment with that kind or rigour.
"While the end users may demand some capabilities that are just unreasonable I think that logic prevails generally. Logical discussions get folks back into what they really want and what they're trying to accomplish in order to get the migration from CAPEX to OPEX and a more user-based cost model."
VCE: "A natural fit."
Westcon recently made headlines for signing a distribution deal with the VMware, Cisco and EMC vendor alliance (VCE) across the Asia Pacific. Henderson said the partnership was "a natural fit" for Westcon that would help drive the company deeper into the ecosystem and alliance environments.
"I think there's a maturity inside Westcon distribution today about going where we add value and recognising the places we shouldn't be and where there are better suited organisations," said Henderson of the VCE deal.
According to Douglas, the VCE partnership will have no significant impact on the company's white-label cloud offerings.
"They're separate initiatives. Even though VCE takes advantage of virtualisation it is designed for a 'traditional IT infrastructure' kind of environment," Douglas explained. "It is much better suited for private clouds and hybrid implementations of cloud technology. In terms of going to market and adoption, it's going to be very different to the way enterprises look at public cloud."
Both Douglas and Henderson stressed that the VCE deal plays to the company's advanced capabilities as a hardware distributor, with an emphasis on reducing costs and adding greater efficiency to clients.
"[VCE] requires a little more integration, it requires a configuration on demand, it requires some other capabilities that distributors have traditionally not had, which is why we have invested heavily in our new facilities," Douglas said.
"If you look at the cost of deploying VCE at the moment and the customers and partners who are embracing VCE, it's clearly an enterprise play," added Henderson. "So the question you may ask is if a bank's buying this from Dimension Data or Logicalis, why would distribution be in that conversation?"
He said it was imperative to understand Westcon's value in the supply chain.
"I think the new model for distribution going forward is understanding the supply chain and clearly identifying where we add value, cost reductions, increases efficiency and customer responsiveness. We're very happy to be able to sit down in that alliance of the vendor, VCE and the systems integrator and bring to the party efficiencies they need."
Copyright © CRN Australia. All rights reserved.
Issue: 334 | December 2014
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