We're no longer resellers, Mr Vendor, we're your customers

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This article appeared in the November 2016 issue of CRN magazine.

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We're no longer resellers, Mr Vendor, we're your customers

COMMENT  |  I returned from September’s HP Inc and Hewlett Packard Enterprise Global Partner Conference in Boston thinking about the vendors’ directions, messaging and plans for the coming years and how this impacts me as a partner.

HP and HPE, like many other vendors, are acknowledging that the cloud’s significant impact on the global IT industry has been more about behaviour than technology. Simply put, customers want to buy an outcome, and often as a service.

This has led to a power swing in the channel. In the eyes of the customer, we are now the vendor. And vendors, we are now your customers!

Somerville Group has been a traditional  systems integrator for more than 30 years, but in recent years we have invested mostly in developing our cloud strategy, making the transition to the new style of cloud service provider. As a service provider, we are now the vendor in the eyes of the end customer. We are held responsible for the development and delivery of the outcome and ultimately the associated services levels. 

Hybrid IT has many moving parts. Customers are looking for improved resiliency and better uptime. They are increasingly averse to outages, and rightly so. Just look at the significant outages at major carriers and public cloud providers in that past six months. In the service provider model, we hold the responsibility. If we have an outage, the customer looks to us, firstly to fix it, then to explain how we will prevent it from happening again and finally to compensate for breach of service-level agreements. 

The increasing appetite for “as-a-service”  solutions are significantly changing the spending habits of our customers. The “C” word, cloud, is at the front of every customer’s mind. There has been a stampede of public, private and hybrid cloud providers out there. 

Our customers face a constantly evolving challenge to make decisions on what applications are relevant and where this data should reside. We assist the customer in this dialogue and offer the ability to deliver on the platform that make the most sense today. That might be Office 365, Azure, AWS or it might be dedicated hypervisors in our data centre.

With so many variants of provider in terms of style and capability, customers are being pulled in many directions. Our role is to provide clarity, a clear and concise roadmap and a set of options that are deliverable today. Customers are looking for providers to take some ownership in that process and to own (or at least wrap SLAs around) their hybrid environments.

Solving customers’ technical challenges

I could fill pages on how we go about helping our customers address their technical challenges. Even though we are focused on a few specific verticals, every customer presents a different set of challenges when you get into the detail.

Somerville ISNet has a very mature ecosystem that offers customers a path to hybrid IT. Our focus has been built around the ability to deliver flexible solutions to customers in an environment of rapid change. We take a ground-up approach, beginning with the IP network and connectivity. This is a long-term, core business for us – the aggregation of wholesale bandwidth taking a multi-data centre, carrier-diverse approach. To deliver the outcome to the customer, I don’t need to own the fibre, but I need to own the packet.

Over the past few years, we have consolidated our on-prem and cloud security solutions from a diverse range of security vendors down to a handful of tightly integrated solution suites bringing together gateway, endpoint and mobility into a unified, enterprise-level platform. The net result for the customer is the ability to secure their data in a hybrid IT environment.

One of our largest growth areas is in assisting our customers in wrangling with their rapidly expanding data. What is it, how do I expose it to make it useful, how do I secure it, where do I store it, how do I back it up and archive it and for how long? 

These are the real challenges our customers face today. The cloud simply adds complexity and offers them another place to put apps and data; it does not ensure they can meet their compliance requirements.

The changing nature of vendor relationships

The increasing customer demand to consume their technology “as-a-service” is changing the dynamic of who the vendor’s customer is. We, as the service provider, are increasingly the “end user” when it comes to ownership of the technology, and in turn, we become the vendor’s customer.

Think about the carriers, which have long purchased routing, switching and other core networking technologies to deliver carrier services. When was the last time you asked Telstra what ethernet switch connected their fibre service to your site? Never, and frankly we don’t care. We just want a standards-based gig link, 24x7 service.  I don’t care whose technology it runs on. That’s your problem Mr Carrier, and if you don’t deliver, I want compensation under your SLA!

Today the more mainstream infrastructure technologies – servers, storage, security and backup – have become just pieces of the service. The vendors were traditionally in the driver’s seat thanks to their ability to generate demand at an end-user level, now they find themselves in a different position. 

However, to date, the vendors have had little interest in consumption models, as-a-service options or funding mechanisms. I’ve been in discussions with a certain vendor over consumption-based licensing models for a simple thing like endpoint security since November last year. I want to scream! It’s just too hard for them to change their organisation with a sales team that gets compensated on the perpetual licence or physical appliance. 

Guys, the world is changing and you need to change with it – otherwise you will be left in its wake. 

Without consumption models from the vendors, we are left with the same choice we have had for the past 10 years: capex it ourselves, take the risk and sell it monthly. Of course, there’s another solution: pick another product from a different vendor who gets it.

Finally, we are seeing more large global vendors not just talking the talk but actually walking the journey with us. Some are developing programs to help us not only create new routes to the market but are sharing in the funding and risk profile of this new model. They’re addressing their compensation plans and revising their enterprise sales teams to take this into account.

Don’t get me wrong, we love our vendors. I hope vendors don’t take this the wrong way. It is only because of the great products they create that we have the pieces and a framework to build and deliver great solutions. But our success will be your success. 

I appreciate that vendor organisations are big machines that need feeding and it can be notoriously hard to make wholesale change, but that’s what it takes in this rapidly changing environment.


Factfile: Service provider challenges

There are many challenges in the transition of a traditional technology business, integrator or reseller to become a service provider. The service provider business has a completely different DNA and a different set of challenges.

Funding

One challenge of taking technology to a service provider model is the funding, regardless of the size and scale of the organisation. For the last 10 years or more, we buy it, we capex it, we turn it into a service model and then we sell it as a consumption model. Up until now that has typically been contractually based, but more and more, we are getting demand for no-contract terms to compete with what is out there in the marketplace.

At the end of the day, it’s all about risk and we have taken it all to date. Vendors are slowly aligning and understand that for them to remain relevant and an integral part of the “as-a-service” world, they need to participate in this risk.

Tenancy

Another challenge is tenancy. The value of building service provider technology is to be able to build once and deploy to many. One of our biggest challenges has been the ability to deploy an infrastructure and then break it into pieces. That has been a very big stumbling block for us across compute, storage, security, monitoring and applications. 

Just because you can virtualise it, does not mean you can tenant it. Many vendors think that simply because it can run in a VM it is tenantable. Multiple instances of the same application is not tenancy and to some extent defeats the efficiency that tenancy offers.

The revenue cliff

Gone are the big capex deals. Big revenues have been exchanged for 1/36th of the revenue paid on a monthly basis. That’s actually a good thing, but the transition from a traditional business presents challenges both from funding and cash flow as well as the way we deliver sales incentives.

Consumption billing

The public cloud boys have this stuff down pat. Customers actually don’t want a bill shock every month. They want consistency and confidence that their IT systems will deliver the right outcomes and that their budgets will be met.

Lines of demarcation

Lines of demarcation and tight product disclosure statements about what is and is not included in a complex technical service is a considerable challenge, especially when you start talking about security-as-a-service and who’s responsible for what. 


Craig Somerville is managing director of Somerville ISNet, headquartered in Sydney. 

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