Ingram Micro Cloud Boss: Time For VARs To Face The Cloud

Renee Bergeron, Ingram Micro's vice president of managed services and cloud computing Ingram's Cloud Marketplace

Ingram Micro's Cloud Services Summit 2011 in Phoenix

Cloud computing requires solution providers to dramatically change the way they do business. What is Ingram Micro doing to ease reseller and VAR transitions to the new cloud model and help them to continue to operate?

Renee Bergeron: The focus has been up to now on education and training. It's been four years now and the focus has all been on education. Recently with the launch of Ingram Micro Cloud.com we took the next step where we no longer just train on what is cloud or what are some of the solutions and how you can benefit from it. But we're taking them through what it means for you as a business owner, as a sales person, as a technical person and what to you need to do in order to transition your business.

We did a number of surveys last summer and overwhelmingly the customers told us that they weren't sure how to go about the cloud but they knew they had to do something about it; over 8- percent of them told us that they knew they had to offer cloud services as part of their portfolio but they were in different stages of knowledge and business planning. That resource is really helping but we're still seeing some resellers that are on the fence and I think some of this has to do with the impact of moving your business from a revenue standpoint from a one-time solution to an annuity model. With a one-time solution you'll make a certain amount of revenue but you'll make it in one to three months, whereas with annuity revenue you'll make the same amount but you'll make it in two or three years. That has an impact on them and requires careful planning. I think a lot of them are saying, 'maybe I can get one more year before I really need to move to this.'

Some of the things were looking to introduce and have started introducing and are thinking through are solutions that can help them absorb some of this change and get ahead of the curve to start building annuity revenue now so that they don't have an impact on their revenue stream.

Jason Bystrak: Another way to look at that is we're trying to help them focus on adjacent solution, incremental solutions. There are not a lot of resellers we work with that have a hosted unfired communications solution, for example, that's typically reserved for enterprise. By introducing that, this is something they weren't selling on the product side and now they can offer the cloud and kind of slowly move into it. That's definitely a strategy as well.

Bergeron: It allows them to build their annuity revenue and at the same time not see any impact to their traditional business. Another good example of that is disaster recovery. A lot of SMBs don't buy on-premise disaster recovery because it's not cost effective duplicating their infrastructure. But now that you can do it through the cloud and it's cost effective, there's additional revenue there.

Next: Highlighting Cloud Hang-Ups, Hiccups

With the financial transition required for cloud, what are some of the hang-ups and concerns that you're seeing resellers and solution providers face that could slow their move to the cloud?

Bergeron: There's a lot of anxiety over selecting the right partner. The reseller is going to have their company as the face to the customer and somebody else is going to deliver for them. There's hundreds of new solutions come out to the market every week. How do you know whether you and I just built this overnight versus having a solid enterprise architecture behind it that's actually going to scale, and we'll continue to innovate it and it will be a solution for the customer for a long time? Finding the right partner is key and there's a lot of anxiety over that. That's why we've put the program in place around due diligence and certification because we want to take that anxiety away from the reseller. We conduct full due diligence on any vendor solution that joins our Ingram Micro Cloud Marketplace. We look under the hood, kick the tires and make sure that we'll stand up for this vendor. That's an example of a program we're doing to help them get over this.

Bystrak: Another concern that can be seen as a blocker is operational considerations. When you think about cloud, once you pick you're vendors, every time you build your solution -- which no matter what a vendor might say there are three, four, five, six vendors in every solutions -- nobody has a full stack and if they did it would be commoditized quickly. The ability to operationally support that; are you as a VAR going to go and call or e-mail and use a site from four, five, six vendors every time you start service or want to increase or decrease the license count with that service. [The IngramMicroCloud.com portal] addressed all that. They can go to one pane of glass to be able to aggregate their entire cloud solution and easily create their own bundles.

Ingram Micro added a number of new solutions to the Cloud Marketplace at the event -- more than 15 offerings from eight vendors. What's missing? Is there a certain component that isn't there that will be necessary going forward?

Bergeron: There are some really critical point solutions that we're going after. Desktop virtualization is really high on our list. The other area that we're starting to focus a lot on is the business application layer. For business applications today we do messaging and collaboration, and we do professional services automation, but we really want to move into the CRM, ERP, e-learning and recruitment. These are all business applications that are horizontal across a number of industries. But then it gets to the next level which is driving into the industry and getting the real estate property management software. Once we get into the business application layer it's endless.

Bystrak: We image a lot of those will be partner-driven as well. Partners are the people that can develop those apps.

Next: The Cloud Money Is In The Services

How are VARs and resellers making money with this model, whether it's the Cloud Marketplace or the single portal?

Bergeron: They're making money in two different ways. First, they're making margin on the services they resell. That's one component of it. The other component represents a larger sum of money and that's the consulting that they do around it. The upfront consulting piece they do with their customers to do business process re-engineering, understanding business requirements, selecting the right solutions for the customer. And as part of the consulting I also include the integration of the cloud solution within the end-user's IT environment. The revenue stream from reselling the solution is the annuity business, but there still is this one-time upfront professional service fee that represents a greater deal of the margin for them because of the volume of the business.

Bystrak: Although they may leave with cloud as a great opportunity, there is still a lot of on-premise technology that is needed to support the cloud. That's going to keep the door open. The second thing is, maybe it's not an immediate income, but think of the valuation of the business when you have an annuity attached to it. It's pretty tough to look at an IT reseller today and say 'What's that worth?' If they sell the company and the relationships are broken it might not be worth anything. You see that a lot with different acquisitions over the years. But if you have an annuity business with contracts tied in, there's a period where nobody is going to cancel that service and it keeps going. Suddenly, there's an annuity tie to that business, there's equity in that business and its value is increasing because of it. It can help with exit strategy. It can help with capital investments, lines of credit and things like that that they might want to do.

Bergeron: It helps them to sustain difficult economic periods like we saw in 2008 and 2009. If you've got that base of annuity revenue you're not going to suffer as much as if you have a pure professional services business where through tough economic times customers cut consulting business first as they need to sustain their business operations and you've got that annuity revenue base.

Bystrak: The other thing we're doing too help them change their business model, we have a history of that. With Seismic, with managed services, we influenced and changed the business model for more than 2,000 of our partners that work with us every day. We helped them do that. This time, unlike with managed, we have great vendor partners like Level Platforms and others and now we've got Cisco, Symantec, IBM; there are some big names that are coming on board to work with us. The vendors didn't drive managed services, we did. Now the vendors and Ingram are going to be driving cloud.

Bergeron: We are seeing a lot of pull demands, not only just us out there pushing it.

Bystrak: This all started with the consumers, with social media, different applications and iPads, and they want that same experience in the workplace.

Next: Reflections On Cloud Outages, SLAs

A frequent topic is the cloud outages and security concerns in the cloud computing market. How are these issues affecting how partners and resellers move forward with the cloud?

Bergeron: There's been a lot of publicity. As soon as there is an outage it goes viral. We have not seen our resellers slow down adoption of cloud as a result of these outages. However, the resellers that are on the fence are listening to these stories and it could be slowing down or could be a reason for them not moving as quickly to the cloud. But those that have started to be in the cloud are not experiencing anxiety about it. Let's face it, an on-premise solution in an IT end-user company does go down. It doesn't get the same publicity because it was within the operations of one business, but it probably goes down a lot more actually on average than these large cloud providers like Amazon or Microsoft. Because this is new, the media pays a lot more attention to this. For those that are on the fence, they're listening to this. It's an excuse.

Bystrak: The SLAs and uptime for cloud solutions are better and when there is an issue it can be addressed more quickly because it's a centralized environment.

SLAs have been discussed a lot recently and outages and security concerns solidify the need to critically examine SLAs and really know who is responsible for what if something happens. Whose responsibility is it? Is it the reseller's? Is it the vendor's? Is it Ingram Micro's?

Bystrak: Part of that due diligence process is we understand and make sure that it's enterprise class and we communicate that through the contract process and the SLAs and statement of work portion of the contract so the expectation is set and the vendor is held accountable.

Bergeron: We view that as our role. That's our responsibility. We've got the expertise within our organization to go to vendors and say 'That's not good enough. We could go to market with your SLA, but we're not going to have the success. We know our customers. We need to offer more to our customers.' We very much take that responsibility. Certainly the partners are getting very, very aware of it … There's significant awareness over it. But we view it as our responsibility to represent our partner and negotiate the right SLAs with vendors. If vendors can't deliver, it's part of the due diligence process and we just won't bring those solutions to market.

Bystrak: We have a quality assurance team that monitors SLAs on a regular basis as part of the value proposition.

Bergeron: For the reseller it reduces the risk. They know that if there is a problem with the service delivery, if they go to the vendor directly they feel like they're a drop in the ocean, whereas if they work through Ingram and Ingram goes to the vendor with delivery issues then the vendor will pay attention.

We have a customer service organization, an incident tracking system and we've put in place best practice customer support.

Next: Looking Into The Cloud Crystal Ball

Where is Ingram Micro's cloud strategy going next? You've made IngramMicroCloud.com a single portal for partners. Where does it go from here?

Bergeron: The portal is just the cornerstone of our strategy. It's one thing to have a marketplace that provides a lot of information about the solution, but having the ability for a reseller to go to one place to procure all of their services -- it's been the success of Amazon and we view it the same way. It's going to increase cross selling significantly. The resellers are already telling us that they started working with some solution, they trained their sales force on it and now they're considering other solutions and need to train them again on the other solutions. The portal eliminates all of that overhead. It's the cornerstone of our strategy.

Bystrak: Also bundling. We have a team called the Vendor Acquisition and Solution Development Team. More if it focuses on vendor acquisition, but it's going to shift toward solution development: How do we create these compelling solutions, wrap in the applications, the hardware as a service and things like that so that the VAR can deliver a monthly payment process for all of the IT for their clients.

Bergeron: Initially, the focus is getting the building blocks in place, then bundling them together, pre-integrating the solutions, to make it easier for the partner to implement within the end-user environment.

Bystrak: There are two ways we approach bundling. One, we will recommend certain bundles and put them together. But the other is training with VARs to help them understand what's in the portfolio so they can create their own bundles. The portal allows that.

So it's along the lines of what Salesforce.com Vice President Peter Coffee said; VARs become almost like a personal shopper for their customers' cloud ecosystems?

Bergeron: He talked about the cloud being the CIO's super market. That's exactly what Ingram Micro Cloud is going to be for the partner. It's their supermarket where it's very easy; easier actually than starting to do some research on Google, finding the partners, checking out how they can perform. They go to this one environment, it's easy to procure and they've got the right partners in there.