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Cloud computing has shaken up the IT channel as value-added resellers (VARs) and managed service providers (MSPs) see their hardware and software sales take a nosedive. But the truth is, cloud platforms like Microsoft's Office 365 present IT channel companies with lucrative opportunities if they recognize the market demand for the platforms and apply the old tenets of what it means to be an IT channel company to this new world.
"[Office 365] is the single greatest opportunity for MSPs and VARs to enter into the cloud. Of course it has its limitations, but it's a no-brainer for 99% of customers," said Terry Hedden, CEO of Cloud Guru, an advisory services firm based out of St. Petersburg, Florida.
Because Office 365 is a "no-brainer" for customers, it is a must-have offering for many IT channel companies. However, not all channel companies have embraced it. "There are two different categories of MSP and VAR when it comes to Office 365: one that embraces it and one that fights it. Within the fighting group, it's a losing battle … and it's a slow, paper-cut kind of death. They see it, but it's gradual. Their customers are getting picked off one at a time," Hedden said.
Terry HeddenCEO, Cloud Guru
According to Michael Cassady, director of operations for The VIA Group, a Woodlands, Texas-based unified communications solution provider, customers are taking a good hard look at Office 365 because of its many benefits. Among those benefits are the abilities to eliminate internal email management and ensure a consistent environment across a distributed infrastructure. "[Customers] like that [Office 365 is] continually updated. They don't have to do upgrades or patches, etc. It just comes to them in the latest and greatest edition," he said.
Bundle Office 365 with your expertise
Despite the ample customer demand for Office 365, not all IT channel companies are profiting from it. Those MSPs and VARs are taking what Hedden calls "an old-school mentality." He explained, "If there's not a black-and-white reason to charge for something, they don't. Those guys are hurting with Office 365, because they're not charging for their advice or ongoing management."
At his previous company, Hedden said he had more than 27 concurrent Office 365 migrations. The organization profited from architecting the solution, moving customers' data and providing customers with ongoing management. "It was a huge surge in project revenue and managed services revenue," he said. He admitted, "It reduced hardware and software revenue … but, overall, it was a huge win for the organization. We were up around 35% yearly."
Hedden advises IT channel companies to bundle in the cost of architecting the cloud solution with the proposal to implement it. Bundle in an ongoing management fee, as well. "The reality is, it doesn't take much to support Office 365, but it does take some time, talent and energy," he said.
New Signature, a Washington D.C.-based Microsoft systems integrator and managed services provider, uses a similar approach to successfully monetize Office 365. "We're often helping customers make a decision to move [to Office 365]. In many cases, we may help them move some of the data, but our services are around helping them plan, enable and adopt," said CEO Christopher Herz.
"It's an enormous area of our business from the sense that once you deploy Office 365, the way you achieve the highest ROI is essentially by driving user adoption and change management," he added. "That's not a onetime scenario. It's ongoing and requires expertise in terms of delivering education, and that's something we've built up on and plays well in the public cloud marketplace."
Profiting from the platform's weaknesses
Some IT channel companies take a different -- but profitable -- approach to monetizing Office 365: Identify a weakness in the platform and provide customers with a solution.
The VIA Group does just that. According to Cassady, Office 365's Lync provides most of the features available with Lync on-premises, but not all of the features. In other words, Office 365's Lync is not enterprise-ready. "We're really addressing the market right now from the standpoint of, 'If you want voice in your office environment, then we are your solution integrator to make that happen,'" Cassady said.
Cassady said The VIA Group offers three solutions for companies looking to leverage Lync in an enterprise capacity. The VIA Group can implement a server environment on the customers' premises, deliver Lync via an off-site multi-tenant platform or deliver Lync via a virtual dedicated environment. That last option essentially turns the solution provider into an MSP, in that The VIA Group provides transport piping, server infrastructure, data center infrastructure and Lync servers -- all in a bundled package -- and maintains those through a service-level agreement with the customer.
Hedden said this approach to Office 365 not only makes good business sense but is in line with the IT channel's original mission. "The original name for all the people who are solution providers was value-added resellers. Their job was architecting solutions from providers and making them work harmoniously and seamlessly in … customers' environment. That's the exact same thing with cloud. That's what we do. That's how we make a living."
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