Enterprises buy a variety of computing services from public to private along with VPS, hosting and everything in between. "It's easier for enterprises to develop, test, operate and migrate workloads across hybrid architectures when the CSP's public and private cloud code base is the same, or at least virtualized and functioning identically." However, they cannot procure this variety from Amazon or Google. They would to go to the likes of IBM, Microsoft and Oracle.
"Consumer tablet demand continues to shrink. Apple is the only manufacturer seeing an improvement in buying." Not good news for the cellcos.
"Future data centers will include technologies such as advanced data center management software, distributed resiliency, prefabricated modular (PFM) components and dexterous robots." Meanwhile Telcos are exiting the data center business (WIND, C-Link, VZ).
PE firms own many of the data center companies, including Peak 10 which acquired Via West from Shaw today for $1.7 Billion. In addition, Dupont Fabros merged with Digital Realty. That is along of transactions and consolidation in the space.
Upgrade those pipes!
Cisco's report on Internet traffic growth is out with many pretty graphs. "Globally, Internet traffic will grow 3.2-fold from 2016 to 2021, a compound annual growth rate of 26%. Globally, Internet traffic will reach 235.7 Exabytes per month in 2021, up from 73.1 Exabytes per month in 2016. Global Internet traffic will be 7.7 Exabytes per day in 2021, up from 2.4 Exabytes per day in 2016."
What is an Exabyte? "Global Internet traffic in 2021 will be equivalent to 707 billion DVDs per year, 59 billion DVDs per month, or 81 million DVDs per hour. In 2021, the gigabyte equivalent of all movies ever made will cross the Internet every 1 minutes."
According to Akamai, "Slow IPv6 adoption is a conundrum in light of IPv4 address exhaustion." Global Average Internet Connection Speed = 7.2 Mbps. Yet "U.S. speeds averaged 18.7 megabits per second compared with 28.6 Mbps for global leader South Korea." Most of that is cable modem download speeds since MSOs have the lion's share of broadband customers in the US. DSL is dragging us down.
The Duopoly is looking to strip Net Neutrality rules, claiming they stifled growth. OOPS! "Broadband speeds have soared under net neutrality rules, cable lobby says."
"Fiber is basically the nervous system of the networks of the future," Malady said and Verizon is making big investments in it." Good insight.
]]>The new Chief Marketing Officer was the one who announced to her 5500 employees that remote wasn't going to work for her. Michelle "Peluso, formerly the CEO of fashion startup Gilt, explained [to employees] the "only one recipe I know for success." Its ingredients included great people, the right tools, a mission, analysis of results, and one more thing: "really creative and inspiring locations,"" according to QZ.
IBM's CIO had made it his mission to make the company agile with a small team mindset. "A feature of Smith's particular "agile playbook" for IBM was that "the leaders have to be with the squads [his word for small teams] and the squads have to be in a location." [QZ]
IBM has had "19 consecutive quarters of declining sales!" IBM is facing tough competition. In cloud computing, Lotus/Notes, storage and product lines, they aren't in the top 3. They need to do something different to regain momentum and compete against the likes of Microsoft, Google and Amazon.
Here are a few of the reasons that this mandate might have been made.
Culture. You can't build (or re-build) culture remotely. Culture doesn't exist in a vacuum or on a virtual platform.
I understand the marketing teams need to be together since it is very hard to do creative work and brainstorming virtually, despite the cool new tools. It isn't people huddled in a room mashing it out. Remember that most communications are non visual.
"IBM's leadership believes that people working together stokes innovation." [WaPo] "IBM has research on their side. Studies have reinforced the so-called "water cooler effect," which indicates that employees who work in the same location communicate, collaborate, innovate better and perform better than if they were all working from their homes."
"Research suggests remote workers are more productive and log more hours than employees who work in the office, and for many companies, offering an option to work remotely helps recruit employees who are seeking better work-life balance or who want to live in a location where the company has no office." And IBM saved $100M annually in rent payments. However, they need more than productivity. They need a mind melt; dabble labs; skunk works; new blood with new ideas; and agility to fight off cloud providers and the big 5 GAFAM (Google, Apple, Facebook, Amazon, Microsoft). GAFA makes "around $2 million per employee (IBM makes about $200,000 for each employee)". Cost savings and productivity won't replace agility and innovation.
Yahoo famously did this. Other companies as well. QZ notes, "Famous tech office perks at Silicon Valley companies, like free food and laundry service, are at least partly designed to keep workers in the office, and the office designs themselves are sometimes created to optimize interaction." So this isn't unusual. It just goes against the trend. The trend toward remote workers is a cost savings one.
There is a reason that S&P 500 heavyweights used to spend 33 years on the list - and now less than 15 years!
]]>RC did have some wins last quarter: RC "closed six deals with TCV north of $1 million dollars up from five in Q4. One of these wins was at Hyatt Hotels Corporation. Hyatt will be replacing legacy Avaya system at their headquarters with RingCentral Office."
Some factors that are shaking things up: Avaya bankruptcy; 8x8 and Shoretel hiring bankers for strategy; and Toshiba leaving the North American market.
RC states: "For each dollar invested in sales and marketing, we continue to see $9 of revenue and $7 of gross profit over the projected life of an Office customer. " A number of UC providers should take note of that stat.
In the last 15 years, 52% of the S&P 500 have disappeared.
According to the CDC, "more than half of Americans have cut their traditional phone line and now only get wireless phone service." The other half is paying more and more for POTS service.
Verizon sold its data centers. It also sold its cloud services unit to IBM .
CenturyLink sold its data centers to a coalition of PE firms that also bought a collection of cyber-security firms. The new company will go by the name Cyxtera Technologies and it will be run by the former CEO of Terremark.
Gary Testa left Polycom last March to become President of Star2Star. That lasted 11 months, then he quietly exited telecom. Michelle Accardi has his position now. I am guessing the IPO is on hold.
John Oliver took on the new FCC Chair (former VZ lawyer btw) and net neutrality again. Want to comment on the FCC proceeding ironically named Restoring Internet Freedom (Docket 17-108) head over to the domain www.gofccyourself.com
I tried to explain this to several security people. Thankfully now there is a study. "More than 70 percent of SMB IT managers say budget considerations have forced them to compromise on security features when purchasing endpoint security," according to a survey by VIPRE.
All these Rapid Expansion press releases are funny. Yeah, you are following the Long Channel Strategy of signing up everyone you can. No idea how that pans out for most since it is a million dollar cash deal. Each of those master agencies will need co-marketing dollars just like the multitude of vendors that signed up with the likes of Jenne, Tech Data and other VADs. At some point, the cost to get a sale may be too high.
VZW has a co-sale model for One Talk. AT&T has co-selling. But RingCentral is taking this further. There is the partner, a channel manager and a SME from RC involved in each sale - from 1 seat to a million according to the release. All three getting 100% of commission. That will get expensive quick.
I would like to stop seeing ridiculous numbers in the press releases: "over 2,200 sales partners are now offering our services" and "we have more than 4,000 partners" and "300 Master Agents signed up" and the best: "8 Master Agents, providing 200,000 sub-agents". STOP!
]]>This year's Data Center Industry Survey from Uptime Institute seems to indicate that "It is moving slower than I'd have thought." That persuasion isn't enough to make the transition happen faster.
The legacy premise PBX sales have slowed down but have not been surpassed by cloud PBX yet [source and HERE].
No one is crushing it despite more vendors entering the cloud space every day. Well, actually, Amazon is crushing it with S3 and AWS.
"Many people don't seem to be willing to throw out their legacy systems but are still investing in diesel generators and backup power," says Matt Stansberry, Uptime Institute's Senior Director. Or they just can't. I have seen way too many businesses - especially telcos and cablecos - relying on spreadsheets and faxes!!!
"One statistic thrown up by the 2017 survey has changed very little over the last four years:
"It is probably because it's not easy to re-architect their legacy applications for a cloud environment." That is true. And not all software can port off AS400s and other legacy server boxes. In fact, COBOL Programmers are STILL in demand!
The providers only hear about clients that want to migrate or are thinking about cloud. Partners see businesses every day that will not be changing anything.
It appears we will be dragging businesses to the cloud kicking and screaming, but slowly.
Heck look how many businesses are still on TDM (POTS) and use faxes.
]]>On an agent webinar this morning, Windstream is beating the SD-WAN drum. I understand that SD-WAN is a boon to retail, restaurants, branch offices and rural locations. Not every business wants to pay over $500 for a pipe. They want to pay what they were paying for T1s. SD-WAN will be a boon for broadband providers - satellite, 4G/LTE, fixed wireless, DSL and cable modem. It swings the WAN back to IP-VPN. Is that a great idea in the age of Hacking?
There are other benefits for SD-WAN: ease of management; faster deployment; analytics; transparency; failover/redundancy; but the bell that most CIOs rang at the WAN Summit in NYC was cost savings.
We are going to see a bunch of locations move from dedicated Internet (DIA or MIS) to broadband. From a commission standpoint that will suck. From a vendor standpoint that will be a pain. However, if partners layer on SD-WAN from a provider plus two broadband providers, we might be able to keep the MRR close. This will become the standard configuration for many business locations.
That is the drum that is beating.
As an RLEC (rural ILEC), revenue streams heavily favored consumer services. The RLECs had USF and TDM transitions occur to shake up their business models. Also, cable starting eating their lunch. DSL didn't cut it. The RLECs had to spend to beef up the network for both better broadband and Telco TV. They just did it too late. Now they have to chase the business markets with HPBX, SD-WAN, cloud services and anything else to bring revenue in and margin back.
CLEC margins on resold network are thin. UC isn't killing it, for anyone. Managed services is where the margin is. SD-WAN is just another technology that needs to be deployed for the customer and managed (like managed router or a monitored Internet pipe).
That is why the drum is beating.
Viptela puts it nicely, "In today's fiercely competitive digital-driven marketplace, enterprises must remove complexity from the WAN. WANs need to be easier to manage, cost-efficient, more agile and available, and better aligned with an organization's computer and business needs. The SD-WAN is quickly becoming an essential component of enterprise digital transformation."
This makes it sound like WAN is complex. It isn't really. MPLS is not that hard or complicated. It is easier than IP-VPN and more secure. (Or at least it is for me.) With many network operators connected to cloud platforms (like AWS, Rackspace and Azure), adding a direct connection to a WAN is simple. (Or if the customer has a data center presence,he can tap into the cloud via a peering fabric.) There are ways to architect a secure, manageable WAN.
Partners will be selling SD-WAN, the flavor of the year. I just wish they had not all been calling it SD-WAN and had actually incorporated it into a branded service offering. That could have led to differentiation and some targeting so it doesn't become a commodity so fast. (Oops! Too late.)
]]>Cloud
Cloud adoption remains strong, with 60% of respondents indicating either Initial Implementation (31%) or Broad Implementation (29%) of production applications. Just over a quarter of the respondents are either Running Trials/Pilot Projects (15%) or Discovery and Evaluation (12%).
Respondents were asked to pick their top cloud computing related projects over the next 12 months and Cloud Security (37%) topped the list followed by SaaS for Application Modernization/Migration (33%) and Technology/Infrastructure Refresh (32%) was a close third.
"The [451] survey also asked if organizations are using professional services for their cloud enablement and it turns out that they are almost evenly split, with 41% indicating that they do use professional services - while the other 59% said they do not.
451 Research reports from HERE, HERE and HERE.
IOT
Compelling Business Need (52%) was the top driver for increases in IoT spending while another 48% cited Improved Daily Operational Efficiencies second, and Respond Faster to Customer Needs (43%) was third.
Currently for the vast majority of respondents, 87% said they did not have a dedicated budget for IoT, but rather it is part of their overall IT budget. In contrast, only 13% said they have a dedicated budget for IoT.
IoT presents new deployment challenges, so respondents were asked about their key IoT-related technology priorities. IoT Security (47%) tops the list, followed by Big Data Analytics for IoT (34%) and IoT Infrastructure Equipment (31%).
IT Pain Points
For those respondents that are adding dedicated staff in 2017, the top skillset they are looking for is Data/Analytics (70%). Security (55%) and Cloud Computing (55%) are tied for second and Network Edge/Perimeter (45%) is third.
According to 48% of respondents, Cost/Budget is the chief IT pain point, followed closely by Responding Effectively to Changing Business (45%) and Security Issues/Concerns (41%).
Data Center Priorities and Pain Points
Respondents were asked how they would address a shortage of floor space or power capacity within their data centers. An external fix, to Utilize Off-Premises Public Cloud Providers (37%) topped the list, followed by two internal initiatives: Consolidate IT Infrastructure to Accommodate Power and/or Space Availability (34%) and Expand an Existing Data Center (26%).
Respondents were asked about their highest-priority projects for data centers, and Improving Existing IT Asset Utilization (48%, up 4-pts) remains at the top of the list. Data Center Consolidation (28%, up 2-pts) is a second. Upgrading/Retrofitting an Existing Facility (20%, down 3-pts)is in third place.
]]>In the SpiceWorks IT Buyer guide, "IT pros at small companies are often both the business and IT decision makers." And no one reads your brochures. Interesting that IT buyers don't trust social media.
A CompTIA SMB study "identified the "sweet spot" of the SMB market to be companies with 10 to 99 employees. Those companies represent a 20% slice of the overall market. But it's a big slice in terms of sheer numbers: 1.8 million businesses fit the sweet spot description."
Another interesting point from CompTIA's study: "CompTIA breaks down the SMB market into three subcategories, the largest of which is "budget conscious" companies that represent 78% of the estimated nine million U.S. small businesses. Herbert said much of what that segment spends on IT boils down to break/fix services and other items such as web design."
"Healthcare IT professionals believe their data is safer in the cloud than on premises according to a survey released by Evolve IP." [source] They mean private cloud though. "Other key results of the survey showed that, on average, healthcare organizations have between two and three services (2.75 average) in the cloud." If you want to sell to healthcare, UCaaS, data backup and retrieval and hosted email (Exchange, Office365, whatever).
Bonus material from my friend at MOJO Marketing, whose CEO spoke at MSP World: Anatomy of a Wildly Successful Digital Marketing Campaign.
]]>Now we have a bunch of hype around Cloud Farming and cloud assessments. That sounds great, but buyer beware! Unless you have a Cloud Architect or Network Architect on staff to review these plans, are you sure you have the clients best interest at heart?
In cloud, the hard part is the MIGRATION. In data center world, a colocation migration for a Fortune 5000 firm is a two year plan. Two years to move a data center cage! The circuits, the boxes, the IP addresses, the mapping, the design, the physical move, the duplication, yadda, yadda.
I sat in meetings on software migration projects in the early 2000s that took over a year to plan. Yes, a year to plan before starting the migration, which took two-plus years.
'Verizon Communications Inc. announced that it has moved more than 150,000 employees to Google's productivity apps, called G Suite," Bloomberg reported. I'd like to know how long that took.
8x8 sold some big accounts in the last 15 months - "Announced new deal with Regus, the leading global workplace provider, to deploy 8x8 Enterprise Communications as a Service (ECaaS) solution at Regus worldwide business centers." And 8x8 "Announced 2,400-seat deployment across nine global locations for new enterprise customer NetSuite." Neither of these deployments happened quickly. Try a year of roll out. Global LNP is a bigger nut to crack than getting some RLEC to release a number.
I'm not against Cloud Farming. I think that agents have to practice going deep to get more wallet share from the customer. Not just get the network and the voice, but the email, the backup, the SaaS, etc. To do that takes some skill and training, being deliberate and confident.
I just don't know how that works with reality (in scale). The shortage of qualified Architects and talent to assist in planning and assessment are just the first bottleneck. The lack of a PMO department from most partners and providers to steer the migration and deployments will create some messy implementations as well as unhappy customers and partners. Lastly, we come to the compensation. When the sales cycle coupled with the deployment timeline is more than two years, how will that excite partners to sell it?
Certainly, there is a move to cloud occurring. It is NOT happening at the rate of change that analysts or cheerleaders are predicting or broadcasting. Most computing environments will remain Hybrid - some SaaS, some colo, some other. Much of the decisions on this matter consider such factors as flexibility, ROI, TCO and internal IT skills.
People forget that Hosted PBX/UCaaS deployments still suck. That LNP still takes up to 14 days (or longer with Birch!). That Internet pipes are on a 120 day construction delay. That even something as minor as turning up a port and a circuit between two lit data centers can fast approach 90 days longer than the two week install interval quoted. If we can't get these relatively simple things to work, you want to jump on Complex stuff?!! [This is me LMAO!]
NOTE:
There are experts out there. COLOTRAQ has partnered with some smart people for Cyber-Security and Cloud Readiness Assessments. Certainly, Microcorp has leveraged its TAP Program to put experts at the ready for partners. Acuity in Tampa has started building up its own managed services portfolio including wireless management and VoIP deployment testing. Other master agencies have brought on some cloud talent. They had to. It will be the engineers, the talent that can break it down and talk plainly about it one minute and delve into I/Os the next that win deals. Look for those.
]]>They are jumping on the bandwagon for a number of reasons.
One is Consolidation. The new landscape of Ethernet is cable and ILEC. The CLECs are mostly all gone. You have to expand the catalog beyond just network operators and VoIP.
The other reason is price pressure. Pricing across all telecom products - mobile, bandwidth, Ethernet, VoIP - has been declining about 3-10% year over year, creating a problem for the operators and partners. When pricing craters, you have to sell more and more and more to maintain the same commission level. At some point, just selling network isn't going to work because you can't close enough deals or even fill a funnel fast enough.
When 1GB pricing is less than what 10MB pipes were just six years ago, think about how much you have to sell and how fast.
Even the current price war in VoIP/UC isn't helping. Because there isn't enough Demand for UC - the demand is for POTS replacement and dial-tone - the price per seat has dropped. It hovers just below $20 right now.
I understand that the customer wants the cheapest price - and it is easier to take the order when you find the lowest price - but you have also just lowered your commission.
Providers are starting to cut commission points when they lower the price. Partners and Channel Managers aren't happy. Well, then sell it at rack rate.
So carriers consolidation means fewer vendors and pricing compression means less overall commission. More vendors are needed. Luckily over 600+ vendors have entered the space in the last three years while more than one-quarter of the partner channel have moved on. Retirement, M&A, and business shift/pivot have resulted in a lot less sales partners at a time when there are so many more vendors to choose from.But to be realistic choosing a UC vendor among the 2000+ available is like picking Red Delicious apples at the grocery store. They all look the same. How many do you want to smell and test for firmness before you pick one?
The cloud computing piece, as we found out two weeks ago, is owned by Amazon. AWS and S3 are hosting about one-third of the web!!!! Rackspace, CenturyLink, Azure, Google Compute, IBM/Soft Layer and the others haven't really stepped up their marketing game (even in the wake of Amazon's outage.)
Businesses are moving to SAAS, IAAS and other computing environments. Partners are in a position to offer assistance to businesses in this regard. It is uncharted territory for many, but the business model has shifted to wallet share. If you want to survive (and thrive), it is about getting more wallet share from the customer. That means selling them email, Office365, VoIP, colocation, security and more on top of the network and bandwidth that makes up the typical sale.
We have seen a number of press releases in the last 4 months about SD-WAN - mainly about SD-WAN providers signing up with carriers and with master agencies. SD-WAN the new UCaaS!!! This technology could be the next big thing, but they said the same think about IP Centrex (VoIP) over 15 years ago and about WebRTC.
Our biggest problem: We push Product. That's right. We are a bunch of Product Pushers. We would make ideal drug dealers because we don't create demand, we just push a product on someone who wants it.
We don't sell Solutions. We don't even offer Solutions. The vendors don't offer solutions either. They pimp products. It makes all of this really hard to sell.
]]>I sat down with an old colleague from ISPCON days, Tristan Barnum, and her co-founder at Tellient, Shawn Conahan. We talked about IoT, the Internet of Things, and its similarity to WebRTC. WebRTC was tech; VoIP is tech. Both needed a business plan wrapped around it to make sense. (The technology alone is not a business.) The technology has to be monetized. Tellient is in the business of monetizing IoT.
Conahan describes a marketplace as the place where data inputs into other data. All that data by itself means little. It takes analytics as well as understanding to give that data meaning. Then you can take that data and deliver it to a user in a fashion (or graphical form) that he/she can understand and utilize, in place of a terabyte of ones and zeroes.
"For companies wanting to embrace the Internet of Things to extract the greatest value from their products and customer relationships, the new value chain must include device analytics." [from the Tellient website]One example Conahan gave was over a NOAA buoy, which can be used to improve shipping routes from the same data that the NOAA collects (but doesn't use.) Another example came from GoGo (the satellite Internet provider to airlines) who will use data to help airlines avoid turbulence, which wears on both the passengers and the planes.
In a way Tellient is helping to build a mesh network to connect data from a number of connected sources, add analytics to it and provide a functional output (like graphs).
For me, Big Data, AI (artificial intelligence and bots), math (algorithms + analytics) are all coming together at the same time as sensors, computing and connectivity are all hitting mass market penetration. Look at the Raspberry Pi, a $5 computer! Sensors are under a dollar each. Smartphones can be had under $100. Connectivity is all you can eat. Data storage on AWS or S3 is pennies. All of this hardware is commodity. The smarts - the math - is where the business plan is. It is where the money is.
]]>Google Fiber stopped over-building fiber to the home (FTTH) to give fixed gigabit wireless a chance. This isn't even 5G. This is current non-millimeter tech.
AT&T is trying to get BPL (broadband over power lines) to work with Project AirGig. Will it work this time? The power infrastructure is still pretty old/antiquated, ut technology has gotten better.
API isn't talked about like that. Integrations are. UCaaS as a stand-alone platform is not that impactful to the employee work day. Integrated with CRM, email and other work day applications is. [All About API is at ITEXPO.]
Intelepeer just announced a platform that integrates with Cisco Spark. Hope they demo that at ITEXPO.
The IDEA Showcase is Thursday evening. I always get amped at startup events because there is great energy (hope, promise, excitement) that we kind of lack in telecom.
If you like startup stuff, the week of Feb. 13 is Startup Week! Techstars runs that globally.
Channel Vision Expo is collocated with ITEXPO again. This is the first channel partners event of the year. And it is collocated with MSP Expo. Should be interesting because more and more referrals and indirect sales are making a difference for cloud providers. 8x8 notes, "New monthly recurring revenue (MRR) sold to mid-market and enterprise customers and by channel sales teams accounted for 60% of total new MRR booked in the quarter."
I don't understand Blockchain. (There I said it!) Maybe I will get a chance to see what that is about on the show floor next week as well at the Blockchain Event.
WebRTC is still a thing, according to Andy Abramson. We'll see as Real Time Web Solutions has a section of the ITEXPO as well.
Most of the noise in my email is about HPBX/UCaaS, SD-WAN or IOT. The IOT Evolution is happening at the same time in Ft Lauderdale but it is a separate show. Verizon, Amazon, Gogo, Sprint, T-Mobile, Cisco (but no AT&T) are speaking and/or exhibiting.
That is a lot of tech to take in at one time, but it also in one place. Where can you get that much info/demo/prezo in one place?
Some interesting stats from 451 Research Group.
Overall IT Spending vs. Cloud Spending. Cloud spending remains strong, and the growth rate continues to outpace overall IT spending. A total of 44% of cloud users expect spending to increase over the next 90 days, while 4% expect a decrease. In comparison, 38% expect an increase in their overall IT spending vs. 11% expecting a decrease.
Cloud Adoption. SaaS (64%, up 1-pt) remains the most popular type of cloud computing in use, followed by Infrastructure as a Service (43%, up 4-pts) and On-Premises Private Cloud (34%, down 2-pts).
On-Premises Private Cloud Vendors. The most popular vendor for on-premises private cloud is VMware vCloud (65%), with Cisco (33%) and Microsoft Cloud OS (30%) a more distant second and third.
Key Attributes. The most important attributes for on-premises private cloud vendors are Platform Reliability (66%), followed by Value for Money/Cost (47%) and Technical Expertise (36%).
If you are in Ft Lauderdale next week, let's grab coffee! Or join us for dinner on 2/7 HERE.
]]>The one thing missing from this cloud strategy: business model.
For all the talk about monthly recurring revenue, the commissions off cloud services are tiny compared with the time it takes to sell and support.
Even with the drop in uptime for carriers, the amount of support for network services is small. The sale is easy. The commissions are fair. High ROI.
Microsoft Office365 is starts at $60 per seat per year. That is a commission of fifty cents! If the client calls with just one support call, all of your profit is gone.
In network, almost all carriers deliver services as advertised. There isn't really a big trust issue with the customers. It's plugged in and usually works. Stays up most of the time.
The same can be said of PRI. But SIP trunks? That gets tricky with inter-operability, with porting numbers, with quality of service. There are so many providers that it isn't even possible to do an apples to apples comparison. Easier to sell POTS lines, in my opinion.
UCaaS has been notorious for porting problems; QoS issues; lack of user training; and deployment mishaps. Also, too many features, not enough pain for the buyer to move to what looks like a complex system. At ARPU of about $350, that is a lot to overcome to make a little bit of money. The SPIFF War that pays out up to 6X MRC is getting attention, especially if the partner can just throw a lead over the fence, let the ITSP close it and collect his $200 after passing GO!
The big impact from cloud is the integration. But who is going to do that integration? Who is going to come in and add the Zaps or the IFTTT? Who is going to script together the various pieces of software to get data to flow without swivel chair?
On a client call recently, they mentioned that many IBM A/S-400s are still in service. Those applications don't easily port to the cloud for a number of reasons. There are a number of software applications that won't easily port to the cloud. That's why we have the Hybrid Cloud strategy, right? Which just means that some stuff stays as is, some stuff goes to AWS/MS/IBM/Rackspace, some stuff moves to a private data center. (SD-WAN plays the part of making that network optimized for a hybrid environment, or as I like to call it the usual system.)
I'm not saying cloud isn't here to stay (see here). I am saying that the Business Model for Partners to be Cloud First has not become mainstream yet.
A good Cloud Engineer/Cloud Architect or a knowledgeable Sales Engineer are expensive full time positions. It would take a lot of large deals to begin to offset that investment in talent. There is a new skill set needed for cloud services that wasn't needed for managed IT services. New sales skill set too as the sale transitions from transactional replacement of services (cable for T1 or Ethernet for T1) to consultative selling involving business needs and impact.
"What we've found working with clients who want to begin taking advantage of the cloud's cost and accessibility advantages is that they will start new projects in the cloud, but will leave their legacy systems intact." To find these deals, you would need to be proactive in marketing your firm as a cloud expert (and actually have the chops to pull it off without burning the client and your reputation, which is a real problem that vendors don't want to address.)
Personally, I wonder about the economics of cloud. VDI, UCaaS, CRM and Office 365 are going to cost you ($40+$30+$100+$5) roughly $175 per month per employee. At 99 employees that is $200K per year. Seems like a lot, but if you are the partner and you get most of that share that is $20K per year in commission.
]]>AT&T with its DirecTV buy and its grab for TW is basically following Comcast's playbook. Comcast bought NBCU, is becoming an MVNO (cellular reseller) and has a $6B Comcast Business division that is going to chase enterprise (much to the dismay of CenturyLink and Windstream).
Verizon is busy selling off wireline assets and buying up as much spectrum as its AMEX card will allow in a heavy bet that 5G and IOT will solve all of their revenue and cable issues. In a move bizarre move, VZ bought up AOL and Yahoo as content plays. This playbook is solely Lowell C. McAdam's.
Frontier, Fairpoint, CenturyLink and Windstream are RLECs looking to get out from under a heavy debt burden without cellular assets and without a content play. Each has its own playbook.
Windstream buying EarthLink almost makes sense especially at a $1.1 Billion all stock deal. (This move doesn't hurt the channel since both providers were pro-channel.)
CenturyLink buying Level3 is not only surprising; it is disheartening. Level3 has its problems certainly. Yet its management understood the business it was in and what it took to win business. For a partner, that is a plus.
To fuel that $34B deal (total value of stock, debt, etc), CenturyLink is selling its data center business (Qwest and Savvis) for $2.1B to a coalition of PE firms headed by the former CEO of Terremark. This coalition is also buying 4 cyber-security firms to build a global cyber security business. Partners are curious if they will still get paid on deals already sold. And what the future holds here.
FPL getting acquired by Crown Castle also makes partners worry about commissions, since CC doesn't have a channel and doesn't retail its fiber.
The CLEC industry is practically gone now. After nearly one trillion in investment money dating back to 1996 or so, most of the CLECs we have come to know and sell are pretty much gone.
What does that leave the Channel? IOT, Cloud, UCaaS, SD-WAN, security - basically selling managed services. Network is going to be tough to sell and make a living on as prices continue to erode. SD-WAN for the win!!!
Network is easy to sell and there is demand for it. You really can't say that for any other product in the portfolio.
Data center is still alive and well. Long live colocation!
]]>In 2008, C-Link bought Embarq, formerly Sprint/United.in $11.6B deal including assumed debt. In 2010, C-Link bought Qwest which included RBOC assets that flew the US West banner. "The valuation of CenturyLink's purchase was $22.4 billion, including the assumption of $11.8 billion of outstanding debt held by Qwest."
In 2011, CenturyLink begins to stray from grabbing fiber and POTS lines in favor of the data center business it acquired with Qwest. Much to the chagrin of the agent channel, Savvis was scooped up for $3.2B including debt. This started a series of acquisitions to beef up a cloud business that for all intents and purposes C-Link is mired in for no reason.
The ITO Business Division of Ciber (managed services), AppFrog (PAAS), Tier3 (IAAS), Cognilytics (analytics), DataGardens (DRaaS), Orchestrate (DBaaS), netAura LLC (security services) and ElasticBox (VPS) - all scooped up in the last 3 years to make a soup out of a cloud division that it is still trying to sell. The rumor today is that Savvis will be spun off. No word if that will be just data center or both data center and cloud. And that makes even less sense since Level3 actually knows how to sell colocation - unlike practically anyone in Monroe.
I understand that being rural and watching your CAF and USF subsidies slowly decrease makes you yearn for fatter and happier days. And when you look at Level3's $10B in NOLs, you start to think like Carl Icahn. However, have you seen what Icahn did to XO???? Have you seen what C-Link did to Qwest and Savvis??? That husk will next be Level3.
With debt this deal will be worth about $34B to get combined revenues to $25B.
Not a single merger in telecom in the last fifteen years resulted in anything good. Not one.
The integrations rarely go as planned. These two companies probably have 26 or more separate and different software systems in the BSS/OSS. These will NEVER be integrated. Orders, status and asset availability will be a nightmare. I know. I know. You think I am a pessimist. But truly this will suck especially for the channel.
Any agent that says this is good is either (a) looking for press or (b) is delusional.
There is now less choice. When VZ takes over XO, except for Zayo, who is left that isn't a LEC or cableco? What happened to the CLEC industry? Totally collapsed as its owners cashed out. Everyone got bigger and no one got better. One by one they have fallen.
It is why Cable is winning the broadband game. (Cable is single minded.) It is why businesses buy cloud services from OTT. (Bell-head mentality precludes anything but network and voice.)
This is the LEC problem: lack of focus; deficient long term strategy; and a missing willingness to win the customer. It's all about the creation of value without actually creating any value.
Since the Board will almost stay intact and the CEO remains, what new gen strategy or thinking do you think will occur with the combined entity? I get why the L3 CFO is staying: someone has to keep that debt at bay and play with the NOLs so that the stock doesn't crash when revenues start to slide.
I won't even get into the culture differences between the 2 companies. L3 and TWT had only slightly different cultures but most of the TWT people exited. This is a good payday for L3 CEO but he will go down as the guy who killed a good idea. The blood of thousands of employees and agents are on Story's head.
Hopefully, someone else will make a BID for Level3 as a white knight - Comcast, Zayo, or a PE firm*.
**Although STT owns about 13% of Level3, I don't see a PE firm wanting the company, except to do to it what Icahn did to XO. L3 doesn't throw off enough cash.
According to CenturyLink press release, the deal, which is expected to close by the end of the 3Q 2017, results in:
"Today's IT industry is dealing with data explosion. Therefore, companies need a data management system to manage the huge amount of generated data. Data centers are already under tremendous expansion mode in terms of storage and computing to accommodate the growing volumes of data and run computation on top of it," writes CIO Review. Data retention also factors into space. IOT will increase data stored and analyzed and retained. Private cloud, hybrid cloud and computing infrastructure have to be housed somewhere.
Space isn't really the limiting factor. Power is. Cooling is also becoming a limiting factor. Cooling to some degree affects the power. The US had not built a new power plant since 1996 -- until Wats Bar 2 came online in Tennessee this year.
Solar farms are starting to pop up. And there has been activity in wind farms. Amazon is turning up a wind farm in Texas. "Iron Mountain, a global storage and information management service firm, has agreed to purchase up to 100,000 MWh of power from the in-development Amazon Wind Farm Texas."
Google is working on a zero waste data center. " it takes a lot of power and resources to do all that data churn [from Google search, Docs, Drive, Music, YouTube, etc], which is potentially quite wasteful. Thankfully, however, the search giant has committed to a new initiative called Zero Waste to Landfills so that all of the waste from those data centers will be reused or diverted to a more sustainable route."
That is just the moves to make running data centers cheaper. But that means that data centers are going to be around a long time -- and there will be more of them.
Facebook's data center in Sweden made a social splash via a virtual tour. These giants - FB, GOOG, Amazon - are getting creative with data center builds, designs and usage.
The amount of M&A activity is high (compared to previous years and dollar values of the deals.) One example is Windstream selling its data center business to Tierpoint for a big profit. I mentioned some of this back in January. Since then, CenturyLink is taking bids for its data center business that it put together with Qwest Cyber Centers and Savvis.
Verizon is near a deal to sell its Terremark division, according to reports. That $3B will help VZ buy some more spectrum -- or just to pay off the debt on the AOL purchase.
Private equity firm Silver Lake Partners is exploring a sale of Vantage Data Centers, looking for a billion dollars.
ViaWest is expanding in Denver.
There are federal mandates for data center optimization that must be met by 2018.
Data centers play a huge part in IT - whether the company has public cloud or private cloud or a colo. The hybrid nature of IT infrastructure for the enterprise lends itself to a continued reliance on data centers in the US.
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