Cirrity CEO On AWS' 'Arcane' Pricing, Carrier Turmoil And Helping Partners Crack The Cloud Code

Channel Dependent

Dr. Steven Vicinanza, who founded and built BlueWave Computing into one of the country's top MSPs, is using his channel smarts to build a channel-only cloud service provider – Cirrity – that is gaining traction with top solution providers.

Vicinanza says the simple secret to the company's success is the company's 100-percent channel commitment. "Because our success is dependent on our partner's success, we have to enable them to be successful," he says.

Cirrity only sells its cloud infrastructure, Desktop-as-a-Service, and disaster recovery services through managed service providers (MSPs), value-added resellers (VARs), and solution providers. Unlike public cloud behemoths, Cirrity does not allow customers to buy its cloud services direct via the web

The Cisco-powered Cirrity cloud services platform provides partners with the ability to earn Cisco VIP (Value Incentive Program) rebates directly from the networking market leader. The Cirrity service platform is located within data center operator QTS's facility in Atlanta, and in IO Data Centers' Phoenix facility.

Cirrity spoke with Vicinanza about the cloud service provider's channel-only model and the competitive landscape. Below is an excerpt from the discussion.

Who are Cirrity's competitors?

Our competitors range from the big guys, like Amazon Web Services [AWS] to smaller players like [cloud infrastructure service provider] Faction. It's a big range. Our niche focus -- and with so many competitors you have to pick your niche and where you want to play -- is to be 100-percent channel-focused, and to bring to our [partners] an enablement model that no one else has.

Because our success is dependent on our partner's success, we have to enable them to be successful. And we've developed a number of programs for resellers to help them transform their business and be successful.

What does Cirrity bring to the table that cloud market leaders don't?

If you look at the difference between us and the big guys, it’s the ease of doing business. [Carriers] for example, would anyone really say they are easy to work with? So that's the opportunity. It's really about making it easy for partners to procure cloud services. The AWS pricing model is crazy and arcane -- they have ten different types of servers you can buy and as an end user, how do you pick? It's very mysterious. You almost need a consultant to come in and help you buy cloud, but we do that for free.

If you can … take the mystery out of the pricing and help partners architect the right solution and put it up, there's a huge opportunity out there.

For partners considering selling AWS, why should these providers consider Cirrity instead?

The number one thing is, do you want to compete with [AWS]? Because if someone can buy direct or through me, it's hard to reconcile and the margins tend to be low.

End user pricing is fairly comparable between AWS and Cirrity. But with [AWS] there's a lot more overhead. We run lean, we run automated, and so we are able to give the reseller more margin. We're talking 20-percent margin on cloud services, which is great because your cost of sales is a one-time [payment], and then you keep getting that [recurring revenue]. On top that, [the partner] still has the opportunity to add services.

Will Cirrity go after the partners of some of the carriers that are exiting the data center market?

We are in it for the long haul. [The carriers] are getting out of the business because they aren't making money. For us, every incremental customer for us is profitable so we don't have that problem. We are running the same platform that these bigger guys are running, so I think if you do an apples-to-apples [comparison] in terms of price, performance and value, I think we are just as good, if not better than what they are getting from [the larger service providers.]

For us, it's about working with our partners and identifying who we think we can grow with over time.

Talk about Cirrity's financial status compared to the competition.

In contrast to many of our competitors we have been cash flow positive for many years. We started off with business. We started off inside an MSP and we [booked some] business. We put it on a platform. We built the platform as we grew the business. So it is not 'build it and they will come.' It is, have the business and then incrementally add resources to create the platform. We are on version 3.0 of our infrastructure.

We have evolved over time as opposed to throwing a big chunk of money, hiring a huge engineering team, building out in 20 locations. That is not our model. We have bootstrapped it. It has grown and we have gotten a lot of recognition. A day doesn't go by when I don't get calls from folks looking to give us money. It is a very attractive business. We are very focused on what we are doing and growing organically.

It's a really nice play to be in: To be able to be strategic and not have to make decisions based on what other people want you to do.

What cloud services are hot right now?

We see virtual private cloud as potentially bigger in our market space than some of the shared services are. In virtual private cloud, we are able to carve off a part of our architecture in a very defined way that gives the customer their own hardware, essentially. From a security perspective, you can set up your own networking so there's no shared traffic. It's their own slice of infrastructure that’s being expertly managed -- that’s the difference over buying your own equipment or renting co-location space.

Do partners prefer to sell white-labeled cloud offerings?

Some do, but you see both. A lot of times it's something like; "Joe's cloud service powered by Cirrity," so they get a combination of their own service with their value-add on top of it. They're often bundling managed services, monitoring, [etc.] on top of our services, and they are selling it under their own brand and product name, but underneath it could say 'powered by Cirrity' because a lot of [customers] want to know it is more than just "Joe" and his data centers.

Talk about the Cisco platform that you have used as the foundation of Cirrity.

We like the architecture. It works for us. That is the bottom line. When you talk about the relationship with Cisco, they are a great partner. Obviously they are one of the best channel organizations in the world. They have been very supportive of us in market development and with their events. They are very committed to the cloud and that partnership has really been fabulous for us.

What do you want partners to know who are just starting to sell cloud services?

It's hard work and you have to be committed to it. You also have to be patient. Find the partner that's going to help you be successful -- the one that isn't just going to sit back and expect you to sell and wait for the checks to come in. Someone that is going to be proactive in helping you hit your objective.

Right now, most VARs have about 80 percent product sales and maybe 20 percent services. Everybody knows in five years, companies are not going to be buying hardware at the rate they are buying it now, but yet some VARs are acting like their current business model is going to last forever.

What is the biggest reason solution providers aren't able to cross the cloud chasm with Cirrity?

I don't see it as their failure. I see it as our failure. If we are not able to help them along, then I say to our team: 'Guys what do we need to do better?' We see the opportunity is out there. It is crazy not to go after that. Either we are not being persuasive enough or talking to the right people. There is something that we should be doing better in order to get these folks to understand. We need to be successful regardless of what their attitudes are. We need to change their attitudes.

We have not seen anybody that has been a failure in terms of saying we are not going to do this. Certainly there has been faster adoption among some than others. Then the question becomes: Can you predict who is going to become a fast adopter and who is going to be a slow adopter? And then understand what intervention you can take for the guys that are slower to get them faster. What we have come up with is the cloud readiness assessment tool.

What is the cloud readiness assessment tool?

It involves a series of questions and metrics around the partner organization. We can go in and sit down with the CEO and the head of marketing and say 'Look, here is our assessment of your organization.' Here are the pieces you need to have in place. For example, sales compensation. You cannot be successful selling the cloud unless your salespeople feel they are going to make money selling it. They are driving the sales. You can tell a sales guy to sell more cloud and he is going to look at his compensation. If the sales rep sells a $250,000 EMC SAN and gets a $10,000 commission and then sells an equivalent backup solution that is $300 a month, where is the equity? You have got to get into the hearts of the salespeople and that starts with the compensation plan.

Talk about total lifetime opportunity of the cloud deals?

When you look at total lifetime value of a cloud opportunity that provides $10,000 a month, that is not a $10,000 sale. It is not even [a] $120,000 sale if you have a one-year term because cloud revenue tends to be very sticky. Maybe it is a five-year deal and it is [a] half million dollar opportunity. You sell it once but the net present value of that revenue stream is [one] half million dollars. How do I compensate the salesperson for bringing that value into the organization? You need a plan that allows you to finance some of that. You have to look at that revenue stream, have some faith in it and figure out how much can you provide up front. You have to have that golden nugget up front. That is what drives them. You have to have some portion of compensation so they get paid immediately and then, if you can work in a residual that helps your cash flow by paying them as the money comes in, that is great too. It is kind of the insurance model.

Talk about the benefit to the sales team when you have a residual model?

At BlueWave it was hard for people to recruit salespeople away because it wasn't just a base salary, it was a base plus a residual that was fairly significant. It also smoothed out the choppy month-to-month sales. It can be very effective. You have to get the compensation in place in order to be successful.

When you buy Cirrity you are buying a team of guys that have been there and done that from the technology side to the sales side to the business side. That is very powerful.

Do you believe the channel is ready to make business changes necessary in order to be successful selling cloud?

Human nature is inertia. What I did yesterday is what I'll probably do tomorrow … So you really have to want to make those changes and be able to overcome not only inertia, but as a leader, you have your entire organization and those people are set in their ways as well. It requires a certain amount of fearlessness to say; "We're not going to sit here and let the world change around us, we're going to be proactive in attacking that market."

We don't need 1,000 partners. We need a small number who believe what we believe -- that there's a huge market out there that we can go attack. [These partners have to be] ready and willing to make the changes to become a company that is very proficient in selling cloud. Because we have that channel-focused model, we can afford to spend that time with a small number of committed and very dedicated partners that want to go after that [cloud market].