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

Cloud Computing

Cloud ComputingI 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.

Comments

  • Richard Tubb2018-08-03 10:58:28

    Thanks for sharing!

  • Richard Tubb2018-08-03 10:43:50

    Thanks for the kind feedback!

  • Tech Bag2018-08-02 09:30:08

    It is an interesting post thanks to the writer . each and every aspect of cloud computing was detailed and it is in crystal clear format to understand. the comparison has the sense and the situations are in the synchronization order. thanks for this great article.

  • virtual reality ethical issues2018-07-13 13:18:03

    Very good post regarding Cloud Computing. This post will be helpful for both clients and companies. virtual reality ethical issues

  • Craig Sharp2012-05-08 19:48:22

    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.

  • Craig Sharp2012-05-02 17:13:08

    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

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  • Rob2010-03-09 09:55:44

    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

  • Steve2010-03-09 09:41:23

    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

  • Richard2010-03-09 09:01:45

    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.

  • Pensar2010-03-09 07:42:22

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

  • Andy2010-03-08 23:34:29

    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.

  • Ostrich2010-03-08 19:09:10

    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 :)

  • Rob2010-03-08 18:06:26

    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…

  • Susanne2010-03-08 16:00:45

    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.

  • Randy2010-03-08 15:45:41

    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

  • Jason2010-03-08 13:54:17

    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

  • Kim2010-03-08 13:16:36

    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

  • Richard2010-03-08 12:54:09

    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! :-)

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