The Fight to Make a Living in Cloud

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

The Fight to Make a Living in Cloud

How many articles and keynotes have been about how channel partners aren't jumping into cloud? I find it funny that it is mainly vendors and "consultants" saying this. It's Microsoft. It's every booth at CP Expo. It is the channel magazines (like here) and the channel consultants.

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.

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