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Cloud Computing – good for clients, bad for IT companies?

Darkened CloudsI was in attendance at TCA Conference in Leicester in February. The event was a great success, as was the CompTIA Reseller Forum which took place before it. There were some interesting points of view and opinions on offer from the numerous IT Providers in attendance – ranging from Computer Repair Shop Owners, to one-man-band Consultants, all the way up to larger SMB Managed Services providers.

I noticed two recurring themes during the day – talk on the relationship between Vendors and Resellers, and Cloud Computing and it’s impact on the SMB IT industry.

I was also fortunate enough to be asked to be a speaker at the Conference, and Cloud Computing came up as a topic of discussion during that segment too, with a nod to the Vendor/Reseller relationship debate that I’ve mentioned. One of my fellow speakers talked about Microsoft Business Productivity Online Suite (BPOS) and gave his opinion, which mirrors the vast majority of resellers I’ve spoke to about BPOS, in that it’s an awful proposition that eliminates margins made on hardware sales and has low levels of recurring revenue for resellers, and effectively hands our clients to Microsoft to have a direct relationship with – cutting us out of the loop.

Whilst I understand these views, I disagree with them.

Here’s why.

Lower Barrier to Entry

For our clients, services such as Microsoft BPOS and other Cloud offerings means greater choice with lower barriers to entry. There are little or no Capital Expenditure costs involved with setting up a Cloud Infrastructure using a service such as BPOS, and they can be setup very quickly and easily.

Ask any of your clients whether they’d prefer to write a cheque for a typical £3000+ Microsoft Small Business Server installation as a Capital Expenditure or whether they’d prefer a few quid a month Operating Expenditure, and I’m going to take a good guess that they’ll for the monthly option.

You might think clients won’t understand what Cloud Computing is all about – but if they use Facebook, they’ll already get it.

Clients don’t care how services such as Microsoft BPOS work, they’ll just understand that it solves the same set of problems that an on-site server does, but with less of the headaches and a drastically reduced cost to them.

Microsoft BPOS and Cloud Computing for clients is definitely a good thing.

Losing Hardware and Software Margins

For us as IT Consultants and resellers, services such as Microsoft BPOS mean we’re no longer going to be selling big bits of tin with expensive Server Operating Systems and Client Access Licenses (CALS) attached. We’ll no longer make that 15-25% margin plus billable project time on installations. We can no longer sell Managed Services for ongoing maintenance and updating of those servers. Instead, we’ll be referring our clients to Microsoft, who’ll give us between 6-12% of the ongoing revenue they make as a referral fee.

That all sounds bad for us as Consultants and Value Added Resellers, right?

I for one don’t think so. Things are radically changing, for sure, and if change scares you, then you’re only human. But if you’re working in the IT industry and actively resist change – then I think you’re in the wrong industry entirely. The IT industry is built on the fact that technology and business models are *always* changing!

Cloud Computing is good for clients

I’d suggest that instead of looking at Microsoft BPOS and similar services as killing the industry as we know it, realise that cloud computing is a good thing for our clients and embrace it. Realise that whilst you probably won’t be installing and maintaining as much expensive tin, that clients will still need your expertise as they always have. Clients will (for now!) still need PC’s and the associated services that go with them. They’ll still need your help with those services. They’ll still need advice and guidance.

What’s more, realise that if you don’t offer them that expertise and those Cloud offerings, then competitors such as Google will. Often for free.

Don’t stick your head in the sand

Instead of sticking your head in the sand and hoping that Cloud Computing and solutions such as Microsoft BPOS will go away, I think you’re better off understanding it all and realising that by giving your clients and prospects a choice between Cloud and in-situ services, you’re more likely to be working with them for a long time to come. Look for the value-adds in the relationship, and understand that you may need to start viewing the value of the client in terms of the lifetime relationship rather than big-ticket Projects.

Clients might bring up objections to BPOS such as “Where is my data stored”, “Do Microsoft own the data or do I?” and “How can I be sure things are secure?”. If those are genuine concerns to the client and you’re offering both cloud and in-situ services, you’ll have all bases covered.

I think that 2010 into 2011 will be one of the last years that clients will be looking to upgrade their server hardware. After this set of Hardware refreshes, they’ll be looking to Cloud Solutions such as BPOS. Not in every case, as many clients will still need in-situ servers for Line of Business (LoB) applications and the like, but at the very least I think you’ll start to see more hybrid scenarios, where many services such as e-mail and collaborative tools are cloud based, and LoB apps are on local servers.

The long term role of the IT Consultant

Long term I see the role of the IT Consultant becoming more akin to that of a Business Consultant – we’ll help clients less and less with pipes and plumbing, servers and hardware, software and security, and more and more with business processes and understanding how technology can help their businesses become more efficient. In other words, less the “computer guy” and more the “go to guy”. If you’re concerned about simply becoming a reseller of other companies services, start looking to how you can add value to your clients businesses using your expertise in this way.

Of course I could be wrong, and Microsoft could steal all our clients with offerings such as BPOS. But I don’t think they will. Time will tell!

I’d be interested to hear what you think – please leave a comment, reach out to me on Twitter, or drop me an e-mail.

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Richard Tubb

I help IT companies grow their businesses in a scalable and sustainable way. My clients are business owners of small to medium sized IT firms.
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Comments

  1. As with everything, the predictions of intelligent industry thinkers tend to be correct, but way ahead of their time. Cloud computing IS the thing of the future, and the role of the IT Consultant WILL change as Richard has outlined – only it will take much longer than most people think.Most of our clients are owner-managed businesses (like our own). Many owners remain reluctant to entrust their critical business data to outside agencies – they don’t want it managed by an anonymous network administrator on the other side of the world who does not report directly to them. MY data on MY server on MY premises managed by MY staffers is a mantra we hear often.This objection will only be overcome when the internet is sufficiently regulated on a global basis that it is possible to seek effective recourse if data confidentiality is compromised. It will take a minimum of a decade for that to come about (by degrees) and then a generation will have to cycle, so that the people in charge of businesses have grown up in a culture where this is the norm.Until then – whilst some early adopters will go for the Cloud, and are already doing so – we will still find ourselves installing client / server applications in people’s offices, deployed, when appropriate, in thin client architectures to their remote users but managed from the central user site.Kind regardsMark CheckleyOperations DirectorQuintadena Ltdlandline: +44 121 669 1105fax: +44 121 210 0275http://www.quintadena.commark.checkley@quintadena.comQuintadena – the World’s No. 1 QuoteWerks solutions partner Registered in England No. 5444953 Registered Office 68 Goldieslie Road, Sutton Coldfield, West Midlands, B73 5PG

  2. I really latched on to one comment above: ..less the “computer guy” and more the “go to guy”.. ; this really resonates. We use a software solution as a foundation to build contact.Instead of being box-shifters, we spend time with our client, understand their business, understand their problems – all this leads to consultancy, ongoing support and a relationship. This has led to us, and it’s taken 5 years to get to this stage, as beginning to be known as ‘the QuoteWerks people’, this is not because of being the World’s leading ‘licence shifter’ (which we are) – it’s far more because users are happy to recommend us to their clients, who then recommend us to their clients…I don’t think this necessarily means one needs to become more narrow and specialised in a specific product / service.Be it questions on hardware, software, business management, their energy provider, making the office more green – and even further from your ‘core’ business than that (!) ; you become the person the customer thinks of; you’re their "go to guy".

  3. Juicy!I’ll pretty much agree with the comment above from James/MarkWhile I do agree the future is in the could and there are plenty of people ready to move to it NOW (as you said, those who are on Facebook are a prime example) I don’t entirely belive all of the small business market is quite as far foward as those vendors pushing cloud solutions would likeWhile I’m 100% ready to have the discussion there are still a large chunk of people I speak to who still want to do it the "old fashioned" way for a variety of reasonsRichard is quite right though in that there is still opportunity for us. At the moment there is still a need for some on premise stuff, whether that’s just PCs or even smaller specific servers (local authentication for example) However this pans out it’ll sure be interesting. We still need to be ready for change or stand by and watch it fly by!Andyandyparkes.co.uk/blog

  4. Rich,Thanks for sharing your thoughts. I still think Microsoft have some way to go catering for Partners who offer BPOS as a solution, but I totally agree with you that it’s an exciting opportunity for customers and resellers alike.Microsoft could certainly make it easier for partners to manage multiple BPOS accounts, and the current system of renumeration doesn’t lend itself well to bundling other value-add services (like migration or customisation). Having said that, the service is constantly being updated and improved and maybe we’ll see changes to address these shortcomings. Hopefully Microsoft will recognise the needs of their SME partners and not just end-users. The Partner ‘Manage on Behalf of’ feature is an example of something I’d like to see fast-tracked into the mainstream. At the moment, it’s only availble to a limited number of larger VARs.There are three things that I’d encourage resellers to consider before dismissing BPOS and continuing to sell on-prem solutions:1. There are great opportunities to make money from BPOS, just not in the same areas that you would with traditional server solutions. Use your imagination, and try not to see the 12-18% as the total value. It’s one small element of the overall opportunity.2. Sure, it takes some of the revenue away from deployment, configuration and even support. But if you turn this around, it means you can deploy more solutions faster, with less hassle and support, with a higher user/technician ratio. It costs *less* in terms of your time and money to deploy BPOS to a customer.3. If you want to continue selling expensive on-premise solutions, then bear in mind that there will be plenty of resellers offering BPOS and other hosted solutions as alternatives (including ourselves).Thanks again for sharing your insight, I look forward to reading other peoples’ arguments on the subject of Cloud Computing / BPOS (both for and against).Guy

  5. Cloud computing is here, the publicity by Microsoft has forced many vendors to equal that publicity and put their own offerings out there but am I the only one who isn’t getting the takeup Microsoft keep telling me everyone else is or am I being told porkies?My customers have told me they have no intention of going online. At least not while broadband is so poor and not while they still need to buy servers to host their bespoke software such as accounting packages or line of business apps. If they are buying a server anyway then whats the point in getting email hosted when they can do it themselves?I keep hearing from some IT people that this makes business sense to the small business? well I ask them are they using it themselves and have they got rid of their servers? I doubt it. In the last week alone I’ve had 3 clients who used BPOS who have approached me to buy an SBS server because they weren’t happy with the online facilities. Yes I also understand it will get better online but I’m not prepared to sell it to someone saying it’s not good enough yet but will be one day.For those IT businesses selling it, I ask you how many users do you need to sell just to match the profit from selling one SBS server? yes you have an ongoing revenue (for as long as Microsoft will give it to you) but if you run your business right you’ll be providing your client with a great service model with ongoing revenue to you now. And how much can you change the offering online in difference to the customisation you can do for your client on premise. one shoe certainly doesn’t fit all.Cloud computing is just one small option for businesses, for me it certainly fits an option for larger businesses who don’t want to employ their own staff just to look after exchange but not for the small business who wants their server to do so much more than just email.As for trusting Microsoft, they do a lot for me, I do a lot for them but would I say I trust them, no. Ask pretty much every competitor and lawsuits appear on every corner against Microsoft so tell me why should I as a very small partner trust them.And as for no server sales after 2011 Richard, have you told Dell and HP they are out of a job? Sorry mate but servers are always going to be on customers premises. No way will every customer be on the cloud ever but I do agree that the take up will increase as the solutions improve.Is there money in the cloud – definately, for some. will there still be money on premise – at least for the next 20 years. thats my prediction. For me, well I’m too old and tired to care past the next 5 years so I’m pretty safe in whatever I do.Andy TrishDirectorNCI Technologies

  6. As usual with Richard a thought-provoking blog that poses the serious questions our industry is facing, and gives some well-reasoned responses to these. As the MD of Accredit UK I am passionate about the issues beneath this post – where does the future of the ICT industry lie for suppliers? If we are going to help the fantastic ICT supply community out there to operate at the peak of professionalism, which in turn will help the businesses they support to operate at peak effectiveness, efficiency and margin we have to understand where technology is going – and more importantly influence it. I think therefore there are two different aspects to Richard’s question – firstly is Cloud Computing good or bad for ICT suppliers but secondly (and more importantly) how can we effectively influence the direction of our industry for the good of our customers?On the first point Richard hits upon the answer towards the end, amplified impressively by Matt in his reply. What our customers really need is help in operating more efficiently, not help in implementing and running technology. To build on Richard’s example of the company spending £3K on SBS – the company would have ended up in all probability with £3K worth of hardware/software which didn’t help drive new and efficient ways of delivering their own products/services but simply automated some elements of them, and maybe even added layers of complexity requiring revision of procedures and processes to fit the new ICT installation. Think of it as buying a Transit Van, because everyone has a Transit Van, when s/he really needed a flexible, responsive courier. What businesses are crying out for is the "Business Consultant" type thing Richard describes. They need someone who will go in, find out about their business, then – and this is where the skill and hence value comes in – apply their knowledge and expertise of technology available to improve the business by improving their processes. (In the old days it was called Business Process Re-engineering, and people thought it was dull and costly). They need their IT/Business consultant to help them implement the technology to improve the business, not implement the technology to run smoothly as technology. Having access to low monthly revenue cost services like BPOS should leave the customer to spend their capital on improving their business – driven by technology. We have recently moved from an in-house MS-Exchange installation to the full BPOS service and the big, big thing that was missing was expert advice on how we could use SharePoint Services etc to improve our business efficiency – that’s where ICT people should be earning their corn in the future.On the second point – I think Richard’s timeframe may be ambitious, and I actually think that’s a problem. You guys out there should be driving your customers to the Cloud now, but ensuring they understand that the spending gap between paying for the Cloud service and their previous spend is not ALL savings they should take. Help them to understand that by spending a proportion of their savings on you, now, they will be more efficient and make more money in the longer run. And I think I can be confident in stating that the vast majority of you will make more margin on consultancy than you ever did on re-selling tin & string and software licenses.Finally – don’t leave provision of Cloud services to the big, lumbering (?) incumbents – you’ll all have access to tons of server & switching equipment as your clients migrate away (and as you presumably are also moving your own systems to the Cloud). Use that equipment, combine your resources (people and kit) and look at offering Cloud services yourself, maybe in collaborative partnerships with other, like-minded small businesses. However, remember your primary purpose – to help your customers become more efficient by understanding and improving their actual business.For too long technology companies have tried to sell themselves on how good they are at making technology work – its now time to genuinely view it as an enabler in helping your customers to work better.Vaughan ShaylerManaging DirectorAccredit UK Ltd – helping ICT Small Businesses Be Brilliant … and Prove Ithttp://www.accredituk.com

  7. Really enjoying reading some of these comments.Andy,I’d really be interested to know the reasons for the 3 customers ditching BPOS in favour for SBS, was it the same reason in each case or were they each having different problems?With regard to the ‘no server sales after 2011′ point: I don’t think Dell and HP have too much to worry about with cloud computing threatening their server sales. They’ll still be selling just as much equipment, but they’ll be in datacentres, not at end-users’ sites.Vaughan,I’m sure that there will still be on-prem servers for the time being because certain tasks just work better on the local network (e.g. DHCP, File/Print Share, LoB Applications etc). For others, like (Exchange, SharePoint, CRM, etc.) it’s far easier to justify pushing these out to the cloud and let Microsoft manage the patching/upgrades/backups.While the on-prem servers won’t disappear completely overnight, I agree with Richard’s shorter timescale, but for *hybrid* solutions, where part(s) of the server roles will be managed by companies (like Microsoft/Google) who can offer huge economies of scale.

  8. Richard, great article. I am a biggest cloud adopter out there. My business runs entirely on Google. We use Google Mail for a whopping $50 per year for each user and also we run Google docs. Google Docs is a little clunky so we equal it out with OpenOffice. OO does 80% of what Office 2007 for $500 cheaper per user.The cloud is here to say, so much I stopped providing managed IT services and went purely to an Internet consulting role provide SEO, Social Media and online marketing services. And you know what I love about it….the conversations with the client are better, we are helping make money instead of taking it and we are welcome on every single call.The world is changing…Stuart R. CrawfordULISTIC Inc.http://www.ulistic.com

  9. Stuart you have done well and I admire where you have got in the cloud space. Unfortunately I think you are the exception rather than the rule. another person doing well is Vlad, but there is only so much space in the cloud to people who offer their services to thousands rather than hundreds so the rest of us may as well start looking for other jobs by all accounts.Guy the customers were advised by other suppliers to go BPOS, after a while one of them was fed up with the solution and felt it was a poor choice compared to on premise, the other two wanted a line of business App and wanted it in house so decided mail was better in house as well (they have tried both). As for Dell and HP, I still disagree, building servers that cope with many thousands of users and selling them to the big boys for low margin isn’t ever going to make the profit they used to make selling a server to many thousands of 5 user businesses – especially when they are being hit by virtualisation too.The cloud is here to stay, too much investment has been made to cut it now, and it is a great solution for some services such as anti spam/ filtering, office communications, live meeting. I would like a question answered by anyone, Microsoft or a partner. I keep hearing you can make as much money in BPOS by adding the service element on as you can with selling on premise. HOW? thats one hell of a service bill. I simply can’t understand why some partners in our space are trying hard to do themselves out of work.Look at the recent announcement regarding EBS. I and many others told them the business model of EBS was right but the way they were trying to get it to market was totally wrong. after 5 years of heavy investment they scrapped it just when they had developed the product into being the best solution out there for mid size businesses. The cloud won’t go away, I’m not stupid, but for those of you doing yourselves out of work and getting rid of your staff because you no longer need them or afford them can you point your BPOS clients my way when they get fed up with it?Andy

  10. RicOnce again, great article. I agree with some of the others here, I think that Cloud Services are here to stay. I think we need to embrace the new technology, and find ways to sell it profitablity to our clients. A lot of my clients are using cloud services , in some way, either on hosted exchange, or online backups so they already have an understanding of what cloud services are. As SME/SMB consultants, we need to "adapt or die", because as you say if we dont offer it our clients then someone else will.Heres to our future .. bring it on !!!

  11. Wow – we’ve really started a debate here haven’t we! :-)Some really great comments – here’s my thoughts in response.Andy Trish – you’re right in that many IT Consultancies are already "doing" Cloud services. Spam Filtering, Off-Site Backup are just two that spring to mind. Vaughan mentioned creating your own Cloud offerings and whilst I can see the future potential for "Private Clouds", as a company, we’ve little interest in creating our own Infrastructure to host such services, as it’s just another form of "Pipes and Plumbing". I’m happy for a 3rd party to manage the complex elements such as Maintenance, Bandwidth, Backups, Power Consumption and so on. I want to be selling our expertise around the whole structure – rather than looking to sell Hardware and Software licenses which are increasingly price sensitive.If a client approaches you and asks about Cloud Offerings – which would you prefer to do, give them the option, or send them straight to Google? If you embrace offering such as BPOS in parallel with traditional in-situ server offerings, you’ve got most bases covered. Client concerned about Data Security in the Cloud? Fine – talk to them about in-situ. Client concerned about CapEx Investment costs? No problem, let’s talk about Cloud.I’m not naive enough to think that server hardware will go away, Dell and HP need not worry just yet, but I do think that in our business space – 5 to 50 employee clients – that solutions such as BPOS will become the preferred over on-site servers within a very short space of time. I think those clients who need new servers in 2012 and beyond will be talking to you about BPOS and Cloud offerings rather than new tin.As for making money with BPOS – Guy made some great points.I’d add that rather than simply pointing the client to Microsoft, why not add the solution as part of a bundle offering? BPOS, Hosted Anti-Spam, Anti-Virus and All-You-Can-Eat IT Support via Managed Services. The client just sees BPOS as part of a solution then.Stuart – a superb point that should make people sit up. You’re not alone in being happy with low-cost "Good Enough" solutions such as Google Docs. People will accept limitations in both service and features if the solution is either ultra low cost or, gasp, free!Guy/Andy Parkes/Matt/Mark – great comments. I’d add that clients will still require in-situ servers for a variety of reasons for a long time to come, albeit in decreasing numbers. One of those reasons for in-situ is currently LoB applications. But that number will drop as those LoB providers start embracing Cloud services themselves. It’ll take a while, but when QuoteWerks, Sage, QuickBooks and co start offering cloud services, the need for in-situ will drop further.Mark made some thought provoking comments over Internet regulation, and I think Broadband fits into this category in the UK also. As fast reliable Broadband becomes the norm rather than the exception, people will just become used to living in the Cloud rather than storing data locally.Bottom line for me – if you’re in the business of selling solutions, then slotting BPOS into your portfolio shouldn’t be too difficult. If you’re in the business of simply selling technology – then it’s going to cause you a headache.This is a great debate, keep the comments coming!

  12. "Adapt or die", "You got to be in it to win it" and many more where those truisms came from :-)Personally, I am unconcerned and see only positives with the shift going on in our sector. Maybe my natural optimism helps but the old SBS model has pretty much died a death already. We haven’t sold an SBS for yonks. Any outfit that might have been a typical SBS prospect in the past can get just about most of the functionality they need via Hosted Services – and without the capital outlay.And we don’t need to be too worried by BPOS either. Microsoft is just going for volume here. There are other providers who are more small business focussed where we can make a resaonable margin and continue to provide all the other IT services such clients need. These clients more often than not in my experience are prepared to pay a small premium for this too.

  13. Sorry guys, I’m just going to throw one more stick in the fire. Richard why BPOS? why not Google Apps like Stuart recommends? Is this a "we have always sold Microsoft so lets help them sell this solution" or do you really think BPOS is better than Google’s offerings or anyone elses?As for Microsoft stealing our clients, of course they are otherwise they would give us a solution to sell BPOS through the partner model where we bill the client. We are the worlds largest free sales pipeline.And as for SBS being dead, we increased our profit by 40% in 2009 when the rest of the world was sufferring a recession and we did it on SBS 2008, there are new versions in the pipeline that are slicker and better so SBS won’t be dead for a while.Guys we all make choices, you can conclude your way, I’ll conclude mine and the chances are we will all make money at what we see the future to be. I’m not saying don’t sell BPOS, Google Apps or any other form of hosted cloud services, it’s not down to me to run your businesses for you. Maybe I’m just being the baddy in this conversation but we all have a right to direct our companies in the way we see fit, and it’s not do or die at all, it’s just another service on the market the same as every other. Adapt or die in this case is a bit like saying there is a really good antivirus come on the market – all the others should just give up.AndyPS. my last post, I don’t mean to hog the conversation.

  14. Andy – we chose BPOS because Microsoft have made a wealth of resources available to us to get on board with it. We’re taking our first steps into this area and we trust our relationship with Microsoft to guide us with it. It may be that down the road as we get more savvy, we look to other vendors – I’ve already checked out IBM and Google for instance. It’s just a learning experience for us.I don’t think it’s a case of saying SBS is dead, or servers are dead, or in-situ is dead – or even that cloud is "better" than in-situ – it’s just a case of being aware of the options and the industry trends and mastering the skills required, giving your clients a choice.Basically, being proactive rather than wait and see.Andy – please feel free to continue to contribute – you’re not hogging the conversation, you’re clearly just passionate about the topic. That’s a good thing! :-)

  15. Richard – been watching your blog for a while – so many thought provoking posts but this is the first time I’m commenting. I absolutely support your "Business Consultant" comment. Our company has run that way for more than 20 years. We try to stay in-tune with technology and help the client make the best decision. We network in the community and if the best solution isn’t something we can provide or deploy, then we find a company to partner with. Becoming a BPOS partner allowed us to add one more option into the mix and give our clients a choice.Kim WalkerFranklin Computer Services

  16. Richard – Great article. I for one am keeping the Cloud offering at arms length fo rthe time being. However i am watching the space with curiosity. I do honestly think that there are merits for customers (in some circumstances) to use the cloud. However and it’s a big however, all the time i can make more profit from selling onsite solutions I will continue to do so. I work hard for my customers and I want to keep them. I also dont like having to rely on anyone else when my customers have an issue. Take BT for example, when a Leased Line goes down. We get it in the neck and it’s totally out of our control, I can only imagine the grief if a customer lost their entire system and our hands were tied trying to do a fix. I have discussed Cloud computing with many customers and whilst there is interest out there they are very, very reluctant to put there data elsewhere. I guess they get that nice warm fuzzy feeling seeing their data sitting in the corner. There’s also the comms issue. Broadband in it’s manu guises is still prone to going down and BT are not the most efficient at resolving the issues. So you need to go Leased Line and thats expensive.We costed out the options of moving our exchange server into a cloud offering and over a three year period it worked out 15% more expensive than replacing our server (which is what we did).Virtualisation and offer our own Cloud service interests me much more. We keep control and can provide a high level, tailored service. This can be purchased monthly so it all goes as an Operating Expense and not a Capital Purchase. We are gradually selling more and more services this way whilst maintaing complete control.I could go on for hours on this topic and as i said at the start im still on the fence but with one foot firmly on the traditional "IT VAR" side for the time being.Jason FoordInfoTech Solutions (UK) Limited

  17. This is one of the best threads I have seen in a long while, with a specrum-wide breadth of opinion. Stuart’s all in and Andy is all out (sorta) and others are in-between.We have used the cloud for spam filtering for a long while since the on-prem solutions failed so miserably. We use the offsite backup features of Zenith BDR with no troubles. Our Kaseya and ConnectWise solution is on-premises at my office, but could just as well be hosted anywhere in the world. The effect would be the same. We use KES for AntiVirus with Kaseya and BUDR for the backups that aren’t using Zenith, so, actually we are pretty ‘cloudy’ and just didn’t realize it.I still am having a hard time seeing the cost/benefit analysis of hosting Exchange and apps such as Office. I know that Dave Sobel has eliminated his own data center, using hosted virtualization to achieve his results, but is this cloud computing? In all of the discussions I have read, I have yet to see a Column A/Column B look at hosted vs. on-prem from someone that has done a conversion. This before and after view would require not only the pre and post costs to the client for services, but also the effect the conversion had on the Service Provider… down to the bottom line (does a hosted environment require more or less labor hours from an MSP and how much did you increase/reduce your MRR?)As it pertains to most any new technology, we will be sliding into it, but not diving head first.RandyMERIT Solutions

  18. Susanne says:

    The range of comprehensive answers shown below from the professionals below show how important this technology is to understand. Regardless of how much you want to scale a ‘cloud’ solution into your business or not, it is critical to understand the technology first and how much of an opportunity it is for your business.This whole area is an iceberg and Microsoft and Google are easy to identify because of their size and general visability. The iceberg itself is still not completely known and it is you and I and the guys who contributed below who will determine its future.As per trend from peer-to-peer to a server(s) environment developed, there will be some who embrace this and others who will wait and see. There’s no harm in either tactic as long as it is an educated choice to stick your flag to either rather than simply because of ignorance.I attended a Microsoft event a few weeks back on their BPOS value proposition and there are many businesses right now who this is suitable for. However, I have read plenty of whitepapers and online resources that show in general, whilst most IT administrators in the SMB know that Cloud services will make a difference, they just don’t know how it fits into their businesses. Q: Who is going to be the one(s) that show them?And that’s the thing, Cloud may not be suitable for all of us and our clients, and Cloud should not be a technology in place just to enhance what is already in place. Cloud is an opportunity for new ways to allow technology to enhance businesses. Cloud is a reason to re-visit our existing clients and understand if it suits their overall business strategies; if it doesn’t, then you’ve had another chance to find out how else you can support them and re-enforce why you are there supporting them in the way you do.The big guys will be in for the big wins i.e. lots of seats and lots of ££/$$, which doesn’t (and never really has) fitted in within the realms of SMB. Those who I have met who have successfully implemented Cloud are focusing on approximately 40 seats – you know, those with the budget and the scale to really get the full advantage of Cloud. Too small and you find yourself fighting the ‘free’ proposition, too big and you may not have the capabilities allow yourself to scale.’Cloud’ sneaked up on us; Google, Hotmail, and YouTube have already been on this bandwagon for a while although most don’t realise the potential of this technology beyond what they use it for now.If you don’t have the clients who need Cloud and you are a business that has done all the necessary research to prove that this is a viable option, then you need to drastically rethink about who you are reaching out to. You may even have to contemplate releasing your clients to a business that would otherwise be a competitor; but, if that’s what will ensure your long-term success, then that’s what you do.However, if you want to stick with what you are currently very successful at, then so be it. Just be aware that if you do not have the knowledge transfer between you and your clients to keep them focused, then the big guys such as Google and Microsoft could distract them to the ‘new and shiny’ irrespective of whether they need it… hands up how many clients jumped at the chance for a Blackberry or iPhone without doing the necessary research to see if it was the right choice for them. "I told you so" t-shirts are available on request.Google, Microsoft, A N Other, will do what gives them the market share and revenue streams they need to survive in this industry. By being more aware of their activities you will be able to understand the trends and technologies that influence our customers. If you, like Microsoft is with Google, concerned that they are losing market share purely because of price, then you need to really have a long hard look at what your clients think about you and your products/services better. If a CFO can scratch an investment of £50,000 on Microsoft desktop applications purely because they see Google apps are cheaper, then a) you need to look at why they made the decision to spend £50k in the first place and b) do they understand the soft costs and ROI they get that may not necessarily affect the bottom line.Technology is objective until people are considered. IT will not stand still because of the few who chose not to understand how it fits into the future. Technology will be driven by those who realise their potential and it will diversify and support businesses as long as there are IT/Business consultants in place with the knowledge and know-how.Education is key.

  19. Top post matey :-)Having represented Microsoft at an event last year for BPOS, and operating in both SBS territory and medium-sized enterprise for the past 20 years (yep, I am *that* old), there is definitely a feeling that we are on the brink of some shifts to the advice that we give as IT consultants.Talking to Julian Lewis of Positive Computing last week on this very subject, we shared the view that the balanced angle just now is definitely the ‘it’s right for some but not for all’ viewpoint. As in other comments, everything from the client’s desire to keep it all inhouse to the integration with 3rd party LoB apps comes to bear on such advice.My main positive contribution to this, as a MS-networking consultant, is that BPOS gives me the opportunity to give wider ranging advice while staying within the MS product suite. BPOS also gives me – as a previous poster said – a quickly deliverable platform at minimal outlay to me or the client. What’s not to like about that? – if the client is right for that kind of basic solution.However, bandwidth will win the day – we need solid offerings from data comms providers if we are to advise BPOS with a straight face. Otherwise, I am basically giving my client a system that will be unavailable to them in its entirety if they miss a bill payment with BT, if the other users they contend the line with are downloading films or if there is a ‘problem at the exchange’. (Sorry BT, but I would expect in any given year to have 2 or 3 of these connectivity issues that are out of my control, and that translates as 2 or 3 occasions where my advice starts to look the wrong side of naff)In a corporate environment, where the connectivity is leased line etc., hosted application serving such as Citrix or TS works well. Translate that to smaller businesses with basic ADSL connections and I worry that the praise we’ll get at the outset for delivering a cost-effective (cheaper) solution will be followed by less favourable comments when our client’s business grinds to a halt due to a broadband issue for which they have no SLA as to when it will be resolved.As Ric says in his blog, cloud computing won’t go away, but use it only when it’s the absolute best solution for a client, and then encourage them to spend some of the money saved on capital outlay on more reliable connectivity…

  20. Ostrich says:

    Just like most industries, there will always be a need to grow, expand and move to where the next thing is. You only have to look at roles in other industries to see how they have had to evolve to survive. I.T is no different.Most of us in the industry have been using the Cloud for years. Most of us have used spam filtering, online backup and other services. We have just never seen them as a threat. Happy to recommend and take the commission for as long as the client use them. So what is so different now?I see additional revenue streams. Where I may miss out on replacing the server and licensing, I see opportunities to make sure their desktops and connectivity are as good as expected. Resell or whitelabel with an ISP? Why not?The big players will always be there and looking at ways to increase revenue. People moaned when Dell stopped being direct only and started to sell in stores. That only helped to make more people aware of the brand and make it easier for me to sell.I am not going to be jumping straight onto the global Cloud service, but where it is a good fit to my client, I am happy with the support and can make an income from it, then I would not hesitate to offer the service.Support and availability will make or break these services. From my clients that I have spoken to regarding moving to a cloud system, all have retained the services on site.Just like any new release, there will always be the trailblazers and the ones who want to wait. At the moment, my clients are happy to wait.Existing and future clients will always need guidance, How many of them buy direct? How many of them call Microsoft for support? Their point of trusted contact won’t change and your opportunity to make money won’t change either.Bring it on :)

  21. Thanks for bearing with me on this, and especially Susanne who always gives the most compelling reading material for us old IT people. If anyone needs fantastic advice Susanne is the person that can help you transform your IT business.After all my rants and raves I would like to add (despite what you may be led to believe by my previous posts) I’m not against the cloud as a whole. As I said earlier some solutions are ideally suited to be hosted. I am against being used. * Learn how our solutions work. * Spend time selling it to your customers * Give us those customers (we’ll take them off your hands because you won’t need them for long) * we’ll pay you 6% of next to naff all for all your hard work. * We’ll also change our prices – probably lower – so you’ll earn even less * if the customer decides they don’t want you anymore we’ll stop paying you and we’ll drop you quicker than a smelly sock. * oh and we probably won’t even say thanks for the effort – cheers mug.erm, did I say I did think the cloud was good for some things? I really do. BPOS is a solution that has potential but until it is worth my while selling it, I won’t. Let me bill MY customer, (you won’t Microsoft, tell me why not? you won’t do that either). As for other cloud services, I sell Microsoft EHS, I have no problems with that, the billing model allows me to bill my customer, it’s hosted by Microsoft, I can add the margin that I can sell on to my clients to make it worth it for me. I sell offsite backup, I sell other hosted services but on each of them I own MY customer, I’m not selling them to my supplier for a pittance.I’m not bitter, it’s late and I’m tired so sorry if it sounds that way. Please Microsoft, let your partners make their own future and you money but do it fairly – not the way you are doing it now.

  22. Hey Rich, what a hornet’s nest of opinion you’ve stirred up here. Great blog subject for all of us.

  23. Richard says:

    Wow – Hornets Nest is an understatement eh? :-)I appreciate all the comments – the reason I blogged on this topic is because I sensed it was something people were passionate about, I just didn’t realise how passionate!Andy – I’d add that whilst you’re clearly no fan of Microsoft BPOS, it is definitely a case of "one size doesn’t fit all" – there are alternatives to BPOS, but we’ve chosen to go down that road with a positive view on many of the objections you brought up. As I alluded to in an earlier comment, there may come a time when we outgrow that solution, but for as it stands we are working with a partner we trust (Microsoft) to take tentative footsteps into a new solution area.I think most of the comments here are along the lines of they are aware of Cloud Services, and have different levels of commitment to it. I think that’s the right move – as long as you are educated on the solutions available, you can advise your clients accordingly.One thing is certain – this is a topic that clearly has a *lot* of interest within our Community. Thanks to everyone who has contributed, and I’m certain, will continue to contribute, via comments to this blog, e-mails, or by taking the conversation off-line.

  24. I think this is an exciting time for the industry and I’m looking forward to evolving our business as more and more smb’s understand the advantages of cloud computing. I suspect those that do not want to embrace the move to the cloud or are actively pushing against it are doing so because they fear change rather than fear the idea of losing margin on a few bits of tin.Managing change is every bit as important as, and arguably more important than the change itself. How many IT projects do you hear of that fail not due to technical issues, but end users refusing to embrace new methodologies and programs? This is a failure in managing change. The problem is that Microsoft, Google and any other large corporates who push change forward do so with more of a sledgehammer rather than a softly softly approach and to be honest they have no choice. When a company such as Microsoft that relies solely on its partner eco-structure do this it is bound to cause disquiet.At BMS we have evolved and changed our business model in a major way at least twice in our 18 year history and continue to change the way we do business to reflect market trends. It wasn’t so long ago the Managed Services model was just something people talked about doing. Now it’s something that most forward thinking IT infrastructure support companies have adopted. The same will happen with cloud computing, it will be a gradual migration of software and services over a period of time. There isn’t a start and end date to the migration to the cloud, just a drift towards it. Those that embrace it and seize the opportunities it presents and work out how to evolve to maximise the revenue potential will go on, and those that don’t will fall by the way side. This is the way business has always been and why businesses come and go and some succeed and some fail.One thing that I’ve learned over the years is don’t sit back and wait for it all to happen before leaping in – otherwise you’ll be left picking up the crumbs. Now is the time to start working towards how to incorporate this exciting new technology into your business.Right now BPOS sucks or rather the way Microsoft has presented it to its partners suck. But don’t forget Microsoft isn’t the only player in the market and you can vote with your mouse and go sell someone else’s version. The point is you have the choice. Microsoft have a history of getting a product out in the market quickly when they need to but it doesn’t mean it’s a great product. Look at MS Dynamics CRM 1.0 – a truly appalling piece of software. Compare that with CRM 4.0 and you get the drift. BPOS is actually an excellent product, but the business model for partners is way off the mark but don’t expect that to always be the case. If there is one thing my role as Partner Area Lead has taught me it is that Microsoft really do listen to customer and partner feedback and I expect there to be significant improvements to the BPOS model in the future.Steve WrightBMS Digital Solutions Ltd

  25. Sorry for coming in a little late on this debate, but for my 2 pence worth here goes.As many before have said, the cloud is coming and it has been for the last 15+ years. It was only a matter of time before the types of services that we are seeing hosted today emerged. I remember writing web applications some 10 years ago for clients that later became their LOB applications, the fact is I don’t think that most of us saw this developing into what it is today.So what does this mean? Is this the end of on premise solutions? No, I don’t believe that it is. In the present day we all have clients that use services that are in the cloud, hopefully we provide these to them, such as spam filtering, offsite backups etc. These have not destroyed the onsite servers and desktops or any of our traditional revenue streams but have enhanced them. Will they in the future? I don’t know but anythings possible.From the people that I speak with each day many of them have huge concerns about handing over their data to someone else to look after and with the best assurances, contracts, agreements etc in the world they still do not trust them. Why? Because they do not know who they are, these hosting providers are the faceless masses and they just do not know them and I agree with them.I am not saying that I against the cloud, on the contrary it is coming and I can go kicking and screaming or I can walk at my own pace; I prefer my own pace. That said when these discussions start with a client I have to look at what solution is best for their business, what will help them grow and what will cause them the least problems. With an onsite solution I have control over how well the solution works. With a cloud solution my reputation is in the hands of at least two other parties; the cloud solution provider (BPOS, Google etc) and the broadband provider. The cloud provider would be a lower concern due to SLA’s etc but still a concern. However my primary concern is the broadband/connectivity provider. If some workman chops through a cable in the street my client could be left without internet access for days; that’s days without being able to use this cloud based solution without resorting to mobile broadband or some other method. Then since my solution relies on the broadband working my ass is then on the line. That is not even taking into account broadband speed and performance, which in this country are shocking to say the least.However, for a small micro-business (sub 5 users) a cloud based solution represents the opportunity for them to have enterprise software on a pay-as-you-go basis rather than a 2-3k investment. In this situation, with the client understanding the limitations, then this would be a *very* viable solution.I guess what I am getting at is that we need to understand all of the technologies that are out there both cloud and on premise so that we can advise our clients for the best solution that will fit in with how *their* business works. Then, and only then, work out where we can make our margins because I for one don’t make any money without my clients.Rob FranklinJPT Solutions

  26. WoW, lots of comment here, but in summary I agree that Cloud Solutions are the way forward for (currently) at least any sub 5 user busienss where the cost of entry is too high for onsite equipment and management. Businesses over this size and up to 10 users might go either way and above 10 the balance is back to onsite solutions. 10+ Hosted Exchange mailboxes as a small example would put a drain on a DSL connection + monthly costs and so may tip the balance to an SBS. We have many examples (http://j.mp/knvkw8) of how the Cloud has been deployed for smaller business and they all work well, but consider the options, the needs of the client and the business model first………….. then decide on the solution.

    Craig

  27. Seems to be a lot of interest in this post, but in essence I am in favour of Cloud Services or clients. The key is to make sure you sell your service(s) as well as your Cloud Solutions and so don;t sell Hosted Exchange mailbox’s at £5 per client and nothing else. Sell a ‘Communication Solution’ that includes hosted exchange, user support, helpdesk services and add-on solutions to create a package where the hosted Exchange mailbox is only a small part.

    With this approach you can become the Trusted Advisor that is often discussed in these Blog’s. We only need to look at a few examples of Abussi’s Case Studies (http://www.abussi.co.uk/case-studies/) to see how the sale of Cloud Services has enhanced our ability to work with clients, micro clients especially, rather than reduce opportunity.

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