How To Cloud

The past few weeks, I've been to multiple conferences with UC dealers - and the topic on their minds is the cloud. Many traditional premises equipment VARs are yet to get serious about the cloud, but they know that needs to change. The question is: how to cloud?

There are lots of factors to consider, starting with the core service model. These are the basic choices:

Self Host

Most VARs have a core competency around making systems work. In many cases VARs already have the equipment and customers to get things started. VARs considering this should gravitate toward a multi-tenant platform housed in a proper data center. However, self-hosting is not as easy as it may look because getting the core system up is the easy part. The hard part is in the operations. Service providers considering this route need to think hard about their core competencies - and if recurring services, colocation, billing, and at least three nines is not among them - stop, rethink.

The trick to self hosting lies in economies of scale. Even worse, as prices change, they will be declining, not increasing. The simplest arrangement is for the customer to provide dedicated carrier services. Bigger self-hosters should consider becoming a CLEC or a close partnership with one.

Wholesale

It might make more sense (cost less) to let someone else leverage their investment - and instead focus on building the revenue stream. Wholesaling offers the benefits of an instant infrastructure and mature service that the dealer can control including the branding, feature packs, and pricing. There are plenty of providers out there that allow rebranding. Billing services, one of the more complex aspects of hosted services, may or may not be provided by the wholesaler.

The risk here is that the asset (recurring revenue base) is only valuable if the service is good - and ultimately someone else is completely responsible for the service. This is critical to understand - most wholesalers will offer highly reliable services, but the investment and value built is ultimately associated with someone else's business. Switching wholesalers is possible, but not trivial. Plus, the new brand will never be as well known as any of the (20?) major brands out there. Building a brand is not a minor undertaking.

Agent

Unlike the premises gig where the VAR buys and resell equipment, cloud providers tend to favor an agent model and use the channel to broker new direct relationships between the provider and end user. It can be a bit scary to turn over customer relationships, but most VARs have done it for years with carrier arrangements. Ultimately the long term relationship between VAR/Agent and customer is up to the VAR.

Some agent models still allow the VAR to service the account, or at a minimum provide any related onsite equipment like POE switches and endpoints. Most of the premises vendors that now offer cloud services are pushing this approach, and are counting hosted services sales toward total purchases. Carriers are also frequently lumping the services into existing residual agreements.

Major Cloud Technologies

• Avaya: Newly announced - channel program details to follow.
• Cisco: Cloud services available through major partners such as Sprint and Verizon. Generally suitable for organizations with 100+ users. Also Webex for conferencing.
• Mitel: Mitel Anyware SaaS and IaaS.
• NEC: Newly announced 3C; GA later this summer.
• Aastra: Collaboration Cloud based on Broadsoft's iLinc services.
• Siemens Enterprise Communications: OpenScape cloud SaaS and wholesale
• ShoreTel: M5 SaaS
• Digium: Many ISPs use open source Asterisk to power their softswitch, also suitable for self hosting. Suitable and attractive for technically savvy organizations.
• Broadsoft: Broadsoft provides the softswitch technology used by numerous service providers - many of which offer wholesale and agent models. The actual service providers rename their services and bury the BroadSoft name. New Global Telecom, Simple Signal, Alteva, and many, many more.
• Non Broadsoft: There are some major providers that use their own technology including 8x8, Thinking Phone Networks, Fonality.

Those are the primary paths to a public cloud - there's also the option of specializing in private clouds - and most vendor solutions are now embracing some form of virtualization. Big differences exist in the depth of virtualization support, management, and integration. The private cloud option aligns best with the traditional premises-based business model, but VARs need to be careful as virtualization and hypervisor technologies and operations require specialized skills.

Chief Dealer Considerations

• Churn: customer churn is more common in hosted than premises - carefully evaluate the churn of the options under consideration
• Compatibility with current skill set
• Revenue model, payment timeliness, and cashflow
• Commitments - what happens to the service (cost) if a customer cancels?
• Managed WAN choices for QoS
• Customer Retention
• Up/Cross sell opportunities with other dealer products and services
• Service and reliability - SLAs
• Clear and timely invoicing
• Customer portals for self service
• Supported Endpoints
• FMC and wireless smartphone clients
• Voice vs. UC (ie. video, presence, mobility)
• Features
• Pricing and commitments
• Long term viability

It's a long list - VARs are more accustomed to their customers having a long list of criteria, but it's effectively the same thing - now the VAR must pick the right platform.

VARs need to be clear that technologies are moving quickly, and not assume that tomorrow's offers and choices will be the same as today's. That means careful consideration needs to be given to each option's trajectory, commitment, and past performance.

Dave Michels is a UC Expert and also blogs at TalkingPointz.com.