Best practices for developing a cloud managed services business

No two cloud managed services strategies should be identical, but they often share common challenges. Find out what they are and how to overcome them in this podcast.

No two cloud managed services strategies should be identical, but they often share common challenges, such as the need for systems integration expertise and differentiated sales models. In this SearchCloudProvider.com podcast, Site Editor Jessica Scarpati asks Lauren Robinette, principal analyst at ACG Research, about one of her recent reports, the Cloud Case Study Handbook. This collection of case studies features the best practices developed by network operators, managed service providers (MSPs), value-added resellers (VARs) and independent software vendors (ISVs) that have succeeded in cloud managed services.

Robinette discusses the unique challenges and best practices for different types of cloud providers -- ranging from telecom cloud providers like France Telecom/Orange Business Services to Presidio Networked Solutions, a global systems integrator that found success reselling white label cloud services. Most important, the podcast addresses what you can learn from these success stories and how you can differentiate your cloud managed services.

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Developing a managed services strategy for the cloud

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The following is a transcript of the podcast.

Jessica Scarpati: Hello and welcome to the searchcloudprovider.com podcast, "Developing a managed services strategy for the cloud. I'm Jessica Scarpati, site editor of SearchCloudProvider.com. It's great to have you with us. I'm joined by Lauren Robinette, principal analyst at ACG Research and long-time channel maven. Thanks for being here today, Lauren.

Lauren Robinette: Thank you, Jessica.

Scarpati: Lauren recently published a report, the Cloud Case Study Handbook, which contains a series of case studies with cloud providers and managed service providers and resellers. In this podcast, we'll look at how some of the key players in the industry are getting a bite of the cloud services market and how you can apply some of their secrets to success to your own cloud strategy.

Lauren, you've obviously done a lot of outreach recently with all these service providers and their cloud strategies some of the issues that they faced in executing them. What are some of the common challenges you've heard about? Are there some issues that are specific to certain types of providers?

Robinette: Definitely, Jessica. For example, I do profile one, particular VAR, Presidio Networked Solutions. It's one of the ones I've profiled and looked at. They're remaking themselves. They're probably the number three, number five, at any one time of a standard reseller or top reseller for Cisco. They've really remade themselves. They've put together for a couple of years now a group that really focuses on managed service. They don't have a knock. They don't have a managed service themselves. They're a white label provider from level three. They also broker for about 35 providers.

Another one, for example, a managed service provider, application provider, YouSendIt, wanted to really expand their reach into the business customers. In their story, they had a different kind of interesting challenge. They originally were hosting with Rackspace. They moved to Internap. The whole profile of how they used Internap to really help them look at capacity management and outreach, in order for them to be successful, the challenges they were having with Rackspace that I don't profile in this success story is because they really needed more management, more systems integration support.

You'll see some things that are obviously omitted in this book of success stories, because I think that there's a trend happening. In one case, for example, hosting providers, Rackspace ... As those hosting providers get very mature, the little that they have in their portfolio to really focus on helping people with their installations, their managed services over the top providers like Google. That's great if you can do everything by yourself.

Where I see the big opportunities are is enterprise and SMB. Let me tell you a little bit about a couple of those. Getting into the real telcos, telcos have long provided SLAs to enterprise in small-medium business in connectivity both wireless and wire line. They're a big utility. They provide connectivity plus bundled up cells and those kind of things. Even the MSOs, the cable providers, do the same thing. The triple play gives way to the quad play. How do they really differentiate themselves? That's when you get into those common challenges you talked about.

The commonality that I'm seeing is in order for the telcos to really be positioned to do very well n providing a cloud offer is to be able to add systems integration. I think that's where the challenges are starting to show up.

You'll see in this book a group of success stories that really talk about the best practices. Some things are omitted, because I think self-help for most businesses is not where they are. They're gonna need more systems integration and migration.

Scarpati: I don't know if this is asking the same question a different way: From a broader market perspective, I wanted to ask where you see the providers coming up short in terms of their capabilities and resources or what gaps you're seeing in their portfolios?

Robinette: The reason acquisitions that take place or have taken place, Verizon with Terremark, CenturyLink with Savvis, NTT with OpSource. Those give the providers one thing. That gives them the ability to have virtualized expertise and data center which they critically need. That's one of the gaps. They're either filling that through building it themselves or acquisitions.

There's one that I think is a very good best practice: France Telecom back in 2006 has four soccer ball fields of servers that were going 20% year over year. What they did is they put together an ecocenter project to try and reduce their overall footprint and power consumption and that kind of thing and reduce their resources. They ended up with this amazing by-product, too much virtualized servers. They bought Equant, which became OBS, Orange Business Services. That's the systems integration arm that helps enterprise customers and business customers migrate to virtualized cloud offers.

Virtualization is the first step. If you look at these three acquisitions that just happened, interesting. They're taking the first step, which is virtualize.

The second step, how are you gonna take it to market now that you have so much virtualized infrastructure? I think the gaps are system integration, as I've mentioned. NTT purchased Di Data. That's interesting. It's kind of like the France Telecom success story because they have now the systems integration DNA.

Scarpati: Here's another thing I wanted to touch on. We hear so much about how service providers need to differentiate themselves in the cloud. Your address this in report, but what does that really mean in cloud services? People throw their word differentiation around a lot. How do some of the providers you've profiled differentiating themselves? What lessons do you think others out there could take away from that?

Robinette: Differentiation is key. Otherwise ,you are just gonna be a net commodity market, the quad play, triple play. Everybody's shopping on price and moving from the right to the left. It is all a business share shifting. In order to get really sticky, you really have to get into the application and get embedded into the application.

The first decision is you're taking a customer through a journey. They have to look at their subsistence and architectures and say, "What can be virtualized? What should be in public cloud vs. a private cloud situation? What goals do I have? Do I wanna reduce cost? Do I wanna increase productivity?"

Most of the IT departments of the providers, they're shrinking their budget every year in IT. They're trying to create an innovation group in their CIOs. Instead of these people being control freaks, they have to become innovation leaders. That means they're asking the provider, "Help me figure out what I virtualize and what I don't virtualize." That's gonna mean that the providers have to differentiate in some way that isn't just a cloud offer. It's gotta be the migration and then the business application.

That takes that -- How do you decide what priorities do you have, what's business critical in the IT of the company that you're working with? That takes a real different sales team than what they currently have. They currently have people who could sell connectivity. Connectivity plus bundle it with something else.

When you take a cloud service, you're talking about a Capex vs. an Opex decision that's going to take some business acumen. That's a different sales team from what they have today. I think that differentiation is really gonna come from offering a business service.

Scarpati: It will be interesting to see how that plays out. Clearly, cloud providers and their partners have a lot to think about here. Thank you again for your time, Lauren. We definitely appreciate it.

Robinette: Thank you.

Scarpati: To find out what else Lauren is tracking in the world of managed services, checkout some of her research at acgresearch.net. Thanks again for tuning in and be sure to visit searchcloudprovider.com for more cloud provider news, tips and resources, or send us an email at editor@searchcloudprovider.com.

This was first published in March 2012

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