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How can the Asian channel capitalise on cloud?
- 24 September, 2018 08:50
L-R: Andy Waroma (Cloud Comrade); Vijayan Haridas (Insight); Mark Johnston (Channel Asia); Melvin Lim (Datto); Sofiane Behraoui (SoftwareONE); Daniel Shaw (LogMeIn); Marion Ryan (SAP); Roger Siow (Syner-G Technologies); Daire O'Mochain (NTT Data); James Henderson (Channel AsIa) and Manu Khetan (Rolling Arrays Consulting)
With organisations across Southeast Asia now on board and now investing, cloud has moved past the hype and into the mainstream, creating new opportunities for the channel as a result.
Spanning public, private and hybrid, implementations will continue to accelerate as end-users seek to take advantage of increased levels of speed and scale.
But as cloud becomes default, a default cloud channel strategy still ceases to exist. In 2018, partners must re-evaluate business models and technology offerings, seeking new ways to add value in an ever-changing market.
“We’ve reached the stage in which conversations have moved away from ‘why cloud’ to focus more on how cloud can be deployment within an organisation,” observed Marion Ryan, vice president of SME ecosystems across Asia Pacific at SAP.
“Customers now want to know how they can maximise cloud and that represents a key shift in the market.”
In assessing the local and regional landscape, Ryan said businesses are currently motivated by two key triggers within the context of cloud, starting with business transformation.
“Customers are seeking business transformation and are using this concept to transform their technology stack,” Ryan explained. “This also impacts how they engage with partners and the resources that they will deploy inside the company.
“Also, customers are reaching hardware refresh cycles and are using this opportunity to make wider decisions about the technology they use. But whatever the trigger, customers today are starting conversations with the cloud - it’s top of mind for organisations today.”
Cloud - in whatever capacity or flavour - continues to dominate boardroom agendas, as businesses chase the common goals of cost reductions and greater efficiencies, backed up by an increased desire for innovation.
Irrespective of company size or sector, cloud is transforming business prospects throughout Asia, impacting customers but also back up the supply chain in the form of partners, distributors and vendors.
“We are currently going through our own cloud journey internally,” said Daniel Shaw, head of sales in Asia at LogMeIn. “For our business, it’s important that we don’t sit still because the market is changing rapidly.
“Our focus is centred around how we can become engaged long-term with the customer and partner so we can deliver on the potential of cloud technology.
“This is an area of the market that we are currently challenged in as we look to build out a deeper channel to service our growing base of customers on an ongoing basis.”
Likewise, Datto is also leveraging the cloud to trigger transformation both internally, and for the vendor’s growing base of managed service providers (MSPs) across Asia Pacific.
“Our solution is born in the cloud,” said Melvin Lim, territory channel sales manager at Datto. “We also provide back-up and disaster recovery offerings alongside a platform for MSPs to be able to manage the technologies and services they deliver to customers.
“But a challenge associated with managed services is having to be on-site to fix an issue, which is a regular occurrence for MSPs and traditional system integrators.
“In the context of Singapore, it could take a lot of travelling time through traffic to address these issues, which could be time better spent for the partner.
“Therefore, we believe it’s important to provide a solution in which you can support customers without having to leave the office. Automation is key in this scenario, providing MSPs with a way to manage customer problems without being on-site - this runs on a cloud platform.”
Furthermore, Lim also said partners are beginning to grasp the concept of changing consumption models, driven by as-a-service demand.
“There’s always going to be a difference in selling as a traditional system integrator, compared to selling a managed service,” he added. “Customers are asking for managed services because of cloud and asking to pay monthly or quarterly, rather than in one lump sum.
“Customers are no longer paying millions of dollars in one go, they are paying smaller chunks over a longer period. This is good for cash flow and partners are starting to understand the benefits of this shift in approach.”
Cloud creates new customers
Irrespective of industry, businesses are undergoing internal and external transformation fuelled by increased cloud adoption, creating new business processes and models in the process.
Yet as outlined via IDC research, another core change impacting the channel centres around the shift in technology spending from IT to the line of business (LOB).
According to findings, LOB decision makers will overtake technology spending by the IT department in 2019.
“We do not actually talk to the IT department like we used to talk to them before, based on what we have been experiencing here,” said Vijayan Haridas, head of cloud practice South Asia at Insight. “The decisions are not made at that level.
“They are actually made at a more senior level, what we call the business decision makers, especially in larger organisations. These business decision makers actually come from various business units.”
For Haridas, such a shift in buying behaviour has allowed Insight to engage with multiple stakeholders across the business, leveraging cloud technologies to tap into marketing and HR budgets.
“We talked with a marketing team and they wanted a digital solution capable of coping with high demand during peak hours, which could also scale back during normal operational hours,” Haridas explained.
“They did not want to know what was running at the back-end, the focus was on the service. The back-end capabilities are our call and we believe the cloud helps deliver rapid results.”
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In other cases, Haridas said the provider has engaged with HR around the deployment of a cloud-based solution, in a bid to improve business processes.
“They first asked whether it was possible to shift to the cloud, and then they wanted clarification on the security aspect of the solution,” Haridas added.
Adding to the conversation, Shaw of LogMeIn said conversations around risk in the context of the cloud is dwindling away, as customers realise the cost benefits and added protection such an approach offers.
“There’s less and less risk associated,” Shaw said. “The cost is so low and the implementation is generally easy so those challenges are going away.
“The perceived cost on a monthly or annual basis is low, alongside the increased levels of protection which is providing peace of mind for customers.”
Delving deeper, businesses are forecast to spend US$1.67 trillion on technology - spanning hardware, software, and services - in 2018.
According to IDC, roughly half of that spending (50.5 per cent) will come from the IT budget while the other half (49.5 per cent) will come from the budgets of technology buyers outside of IT.
The former includes IT-funded purchases as well as joint projects funded by IT, while the latter includes business-funded purchases as well as joint projects funded by LOB buyers and "shadow IT" projects funded by the LOB without IT involvement.
“The discussions we’re having with customers are different today,” observed Manu Khetan, founder and CEO at Rolling Arrays. “We’re no longer selling features and technical products, we’re outlining business outcomes and meeting the needs of the customer.
“We’re seen as a trusted advisor to our customers and that’s a role we take seriously.
“Our customers want to know the value we can provide and why we are different to the competition, which means we have to continually evolve our offerings to remain relevant.”
In assessing both local and global trends, LOB technology spending has been growing at a faster rate than IT spending for several years, with cloud a key component of such a shift.
“But it’s not always the same conversation outside of the enterprise,” cautioned Roger Siow, CEO at Syner-G Technologies. “We deal with a lot of smaller businesses and it is commonplace for us to usually deal with the owner or production manager running IT.
“They usually have one person in charge of everything and that’s a very different type of customer to a CIO in a large enterprise organisation.
“In the past, we started off with box selling but as the market has evolved, we’re now moving more into managed services and an OPEX, rather than CAPEX, approach.”
Purchasing cloud technologies at the smaller end of the market is becoming easier, according to Siow, driven largely by the lowering of costs and the ability to consume on-demand.
“Small businesses don’t want to pay up-front for expensive servers or invest in training up staff to manage them,” Siow added. “The cost of cloud is coming down and to put things in perspective, we first started selling G-Suite eight years ago and the sales cycle was long.
“In fact, it took our first customer six months to be convinced to purchase one licence but today, people are calling daily to move solutions and workloads to the cloud.
“This is also a popular approach from the start-up community because young entrepreneurs are really receptive to the cloud.”
In addition to investing US$178 billion in applications, the leading categories for LOB spending in 2018 will be business consulting services (US$104 billion), key horizontal business process outsourcing (BPO) (US$97 billion), and project-oriented services (US$90 billion).
The IT department will see its 2018 technology spending led by outsourcing (US$151 billion), project-oriented services (US$118 billion), and network equipment (US$91 billion).
Perhaps unsurprisingly, cloud will continue to represent an important investment area with LOB spending on infrastructure-as-a-service (IaaS) for example, growing at a 33.2 per cent while IT spending on IaaS will increase 30.7 per cent.
“The cloud conversation changes depending on the size of the business you’re dealing with,” said Daire O'Mochain, regional manager of SAP cloud solutions at NTT Data. “From a buyer perspective, the idea that you call someone up and the deal is done there and then is not the case.
“In large enterprise organisations, decision makers might tell you that they’re the decision maker, but in fact, they are far from being the decision maker.
“It’s down to the salesperson within a technology provider to qualify the opportunity properly because one department might tell you one thing, and the other might tell you something entirely different.”
While O'Mochain acknowledged that LOB leaders may carry control of the purse strings, irrespective of company size or scale, he believes the cloud conversation centres around one fundamental topic.
“Long-term value to the customer,” O'Mochain said. “This is absolutely crucial to ongoing success in the cloud.
“This requires a level of maturity in your own sales team to identify potential customers but to also deliver for the duration, rather than the short-term.”
But despite the direction of travel being clear - in terms of cloud creating new types of customers - the channel can ill afford to rest on traditional laurels as customers demand fresh thinking, emerging technologies and revamped consumption methods.
“As specialists, you must ensure that your sales team understands what they are selling and how to sell it,” said Sofiane Behraoui, sales director at SoftwareONE.
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“The sales cycle is the same regardless of the buyer and as vendors and channel partners, it’s crucial to have the correct business models in place.”
Cloud creates new competition
In a customer-centric market, the concept of end-users continually transforming is one commonly grasped by the wider technology channel.
Yet as Ryan of SAP cautioned, the entire supply chain of vendors, distributors and partners must also take note and reassess, in response to an influx of new-look competitors entering the market.
“We know customers need to digitally transform, and they are pursuing those strategies, but so must the vendors and our partners,” Ryan added. “We see the difference in our SAP ecosystem, between partners coming from an on-premises background moving to the cloud, compared to a born-in-the-cloud partner.
“A partner that is born-in-the-cloud is much more comfortable in the new climate of buying because they understand the cost of early customer acquisition in the cloud.
“They realise the process that is required for the ongoing subscription model to be profitable, and that process could realistically take a few years.”
On the flip side, Ryan said partners transitioning from more conventional backgrounds - without the luxury of a legacy-free environment - must operate in parallel to current practices, in a bid to responsibly transform business models.
“Partners that are seeing success are setting up separate teams within the organisation and adopting a cloud-only or a cloud-first approach,” Ryan explained. “Our partners are making that change and as a vendor, we have to support them on that journey.
“We’re helping with the customer acquisition aspect through packaging solutions and services, but also through benchmarking partners against KPIs in the cloud.”
For Ryan, this approach - which was initially rolled out in EMEA - allows partners to be scored on different areas of the business, allowing direct comparisons between themselves and successful cloud partners.
Such a compare and contrast approach is providing a platform to create tailored enablement programs to get partners up-to-speed, fast-tracking the channel through a series of self-assessment tools.
“The channel must take ownership of this change,” Ryan added. “Like all vendors, we do not believe that all our partners will go forward and make the transition to cloud, but for the ones that are committed, we will continue to make investments to ensure they are successful.”
Ryan’s observations echo that of IDC, which claim that cloud service demand due to digital transformation is changing the delivery of business-oriented solutions, in a market shift impacting the entire supply chain.
Such change has resulted in technology providers ramping up investments in new offerings to cater for changing customer requirements - not just for new infrastructure, but also applications, and managed and professional services delivered via cloud services.
As a result, research from IDC highlights that across Asia Pacific, providers are rapidly exiting traditional business models, with only two-thirds expected to have the same route to market by 2020.
“At the minute, there’s very few businesses in Singapore that offer what we offer to the market,” said Andy Waroma, founder at Cloud Comrade. “We’re capitalising on increased demand for cloud solutions across the industry through our unique offerings.
“We’re seeing interest coming from all parts of the world, and even bigger players such as Accenture are starting to move into this space.
“But if your revenue structure is geared towards large multimillion-dollar deals and then you’re in a meeting talking about much smaller numbers, it can become difficult to compete.”
The influx of new-look partners has prompted vendors to shift focus and strategies, in a bid to capture the new wave of specialists entering the market.
“When we talk about channel partners, the one area we have traditionally struggled with has been finding those embarking on change,” said Shaw of LogMeIn. “We’re on the road to change and we want to bring our channel along as well, but that can be difficult for some.
“We could come to the table and talk about a solution that is going to create smaller amounts of revenue each month, but for a longer time period with more stickiness.
“But getting buy-in from a partner that is used to selling million dollar one-off deals can be impossible at times, the excitement isn’t there.”
Yet opportunity can be found in traditional system integrators and value-added resellers dramatically shifting business models to capitalise on such change, with only two-thirds of service providers planning to adopt the same business model by 2020.
“We’re a new vendor to the space and we’re seeking new partners,” Shaw added. “We’re part of a solution for most partners and we’re seeing great traction in the market as demand is continuing to increase.
“We’re here for the long haul and want to build reliable and sustainable business models with our partners, to deliver value to customers across Asia.”
Despite cloud creating new competitors for the traditional channel, the need for collaboration continues to heighten as customers demand tailored solutions to specific business requirements.
Therefore, partners are partnering up in the pursuit of customer value through the cloud.
“Competition is part of the market but I don’t see this impacting our business too much,” said Jeremy Tay, director of data centre services at Genesis Networks. “We work very closely with Datto and we specialise in disaster recovery and business continuity.
“Our aim is to help as many small to medium-sized businesses as possible because they are a vulnerable group, it’s important to reach out to them and add value.
“The cloud is obviously a factor in this but what’s crucial is our ability to collaborate as a service provider, rather than just compete.”
This exclusive Channel Asia Roundtable was in association with Datto, LogMeIn and SAP.