Storage roundtable: Hyperconvergence and channel opportunities

The storage world is changing both in terms of delivery, with a growth in managed services, and from a technology point of view with hyperconvergence growing in popularity. The main questions for the assembled vendors were around how they are supporting the growth in MSPs, helping get the hyperconvergence message out to customers and partners and finally what are they doing to strengthen the channel.

The starting place for the second part of the discussion was around the growth in managed service providers and just what impact that had on both channel relations and customers. A good starting place is to turn to Logicalis to get the view from the frontline.

SCOTT REYNOLDS:  Logicalis entered into the managed services market probably about 14 or 15 years ago with a focus on networking, but since then we've been building on that.   I think about five to six years ago we were looking to move into the outsourcing space and realised that market is completely different.  And unless you’re a big SI, you need to approach it differently, so that's the attitude that we now take. Rather than continually going for the big, wholesale kind of managed service contracts, we're saying; "Give us an element to manage, however small or discrete that piece is.  Is it just monitoring?  Is it just service desk?" So, we have revisited how we deliver managed services.   On the flipside of that, we also see a change in attitude when it comes to buying infrastructure because of how businesses consume.  So, how can we include a piece of infrastructure in a consumption model with additional managed services?  Well, at Logicalis, we've been doing this for years, but we've never made it repeatable.  We've always done it for clients but haven’t had a predefined, fixed, highly repeatable model. Instead, everything has been bespoke for each customer.  We want to turn that around so it’s a lot quicker and slicker and to make it easier for us to go to market. 

AAD DEKKERS:  This is definitely something we are seeing at the moment - there is a trend for everyone to offer multiple services. Smart partners need to listen to their customers and customize their offering to what they need and we as vendors need to facilitate that. 

SCOTT REYNOLDS:  I think more is being done by vendors to take some of the pain and challenges away from partners like us.  For example, if we’re going to embark on providing kit as well as managed services, the exposure to us is financial. Traditional finance models don't lend themselves to having a consumption-based offering for a customer.  Therefore, there's an element of risk that we have to take on board and we have to factor that in terms of additional margins in the model.  Nowadays, there are programs out there from vendors that do make our lives easier because we are able to de-risk the financial exposure through a flexible commercial model. 

ANDY BREWERTON:  If you think of your partners in the service provider world as your customers, then you avoid the mistake of treating them differently from your end user customers. It's important to understand how somebody's going to consume your product in order to offer a service, and even if that's an end user with an internal IT department - as we've seen with digital transformation -  it's all about providing a service to the business and delivering it as efficiently as possible. So, the model should be no different when you're selling to your partner, who is essentially your customer, or the end-user who is again your customer.  You should offer consumption models which best match their business model.  And do remember that not every service provider is adverse to CAPEX,   some like CAPEX.  It’s a case of this consumption being flexible to suit the need.  I think more and more vendors and most of us around the table realize that and that it's not simply about a price list. Instead, we should be addressing questions such as: "Here are some excellent solutions and products, how would you like to buy it from us?  How would you like to consume it from us?"  I truly think that's where the relationship will shift. We are all about choice, keen not to force anyone down a certain route.  We offer OPEX and CAPEX models, so we offer everything.   

JOHN ROLLASON: And some of these transitions take time. The idea that we stop doing traditional enterprise IT and the cloud takes over tomorrow, it’s just nonsense. But it does seem to be a trend, right? So, you meet plenty of enterprises run by service providers, but you never meet service provider that wants to look like an enterprise.

But there’s different people in different stages of the journey and for me, that’s a choice. It’s really important to think even if most organisations I think are moving to a consumption model naturally, organically, it’s going to take time. I mean, about 60 percent of applications into the cloud tomorrow again just doesn’t seem credible -- our research is that about 10 percent of applications have moved to the cloud. There’s a huge amount left to work out there to be done.

AAD DEKKERS:  So, the U.K. is quite advanced in the way they adopt these kinds of new technologies more than other more traditional countries. 

ANGELO APA:  To come back to the original question around VARs becoming MSPs. The shift in business models is so dramatic. It's very rare that I’ve seen a VAR become an MSP overnight or within a year. Normally, it's the setting up of a division. And the business model that an MSP has is fundamentally flawed because of the challenges around having to invest so much up front and deferring your profit by at least 18 months depending upon how successful you are. And without that anchor client, it’s even harder! So, the CAPEX/OPEX challenge which I guess as the accounting rules change will become more of a cash flow  impact only.  So, a difficult thing around that shift for all parties is that while software has a certain cost associated with development of software,  hardware has an immediate cost.   So, building a consumption model around hardware which is what MSPs actually need for the hardware side of their business, not the licensing side of their business. It's incredibly difficult because somebody somewhere has to take a risk. Somebody somewhere has to own the assets. Somebody somewhere has to make a loss for a period of time. And that's something that we've been wrestling with for a while, but we’ve now managed to overcome that as I'm sure other vendors would as well and help those organizations that want to become MSPs or perhaps are born as MSPs to move forward. 

STUART GILKS:  One of the developments around consumption model flexibility offerings is that we're also providing new architectures which more closely mirror the point in time demands of that infrastructure.   So you're seeing reduction in that pain of having to invest upfront. Compare that to 15 years ago where it was a huge risk, lots of infrastructure on the floor hoping and praying the demand was going to arrive and fill them up in a reasonable timeframe whilst all the time holding a huge financial exposure. HCI gives you a model where you can much more closely align the infrastructure costs to the point in time demand and hence revenues. 

SCOTT REYNOLDS:  But that will then actually create a slightly different challenge for us working with the client where we're going from old to new is that we need to completely validate that that is fit for purpose without actually giving them 50-60 per cent headroom.  We want to make sure we're right-sizing that as much as possible which it is in itself it's an opportunity for us to risk, you know, provide consulting services around that to size and get that accurate and then stand behind that particular design.  Q:  What is happening with hyper convered? There seems to be a lot of growth in the storage world with the technology. 

JOHN ROLLASON: We certainly see most hyperconverged infrastructure projects are not storage-driven. Server refresh is the number one trigger. I guess it’s about as we say cloud like simplicity that people are looking for. So and that sort of requirement to move where possible from the more complex traditional infrastructure to cloud-like architecture without public cloud or each of them on premise cloud. That’s what’s driving it with me. And it seems to be those two internal and external pressures. So the internal pressure of, you know, the next refresh cycle comes up. And I think certainly a lot of organisations are realising there are new options now. For example, I was at QCON, but I was asked to present – and literally there that compelling event was just how much it was going to take to move their traditional web app to the next-generation web app, and they went right at us and asking us if we’re going to do differently. We’ve got to properly transform. So there’s sort of that internal pressure. There’s also the external pressure. There was this concept of hyperconverged infrastructure not around a few years ago. And now there’s so many more options, I mean, just saying in the public cloud there are options, you know, from my point of view that didn’t exist yesterday. So there is so much choice now. Take all of that it seems like simplicity or the quest for simplicity seems to me what was driving it.

 ANDY BREWERTON:  We talk to our customers about applications and business outcomes; we very rarely talk about hyper-convergence on its own anymore.  We see that it’s the building block; your platform to build from.  When you look at what hyper convergence is about, it's about simplification, it's about more granular building blocks, it's about automation and it's about analytics. In the last 12 to 18 months, we've seen a shift to a demand-based market for hyper convergence instead of a push. Our partners are seeing more customers asking to see their hyper converge option. The triggers generally aren’t a storage refresh,  but a server refresh or more interestingly an application change or a philosophical change.  For example, in the Public Sector there's a real drive to “in-source”, so hyper convergence is the enabler for that type of transition.  JOHN  ROLLASON:  It’s not just a server refresh, that's only to track some of it but it's the application refresh in a way that's there going to be a key driver.  And I think that's certainly true. 

MARK SHAW:  HCI makes a lot of sense for many organizations, no company in a particular industry vertical wants to move away from what they are doing and not get a better service, they want something that is simpler to own and operate. They care about the service that runs on top of it, the ability to deliver the applications and services to the business in an agile, scalable and cost effective way.

ANDY BREWERTON:  We often get asked when we're talking to journalists or analysts in which sectors we’ll be most successful. The truth is, ‘all of them’ because everybody is working towards the same goal and wants to provide the best infrastructure.  

JOHN  ROLLASON:  Yes, we get asked that a lot, the sectors and the workloads and the geographies and there's like there isn't really, I mea it's like public cloud it's everywhere.  Not everybody is ready and they want to move then next refresh or other applications or whatever else, I think there's still a long way to go to the truth of enterprise scale big points.  But, yes, there's nobody, I think at least looking at a hyper converge infrastructure strategy.   

JAMES LOWE: I'm not an expert in HCI, but aren’t you more likely to see an HCI opportunity in the financial sector that's heavily regulated?

ANDY BREWERTON:  We see demand for HCI in all sectors, we have been very successful in the financial sector where compliance is just one of the decision factors. That’s the beauty of the on-prem HCI, it’s something to everyone really - efficiency, compliance, it's the ability to create a private cloud environment in the same way that the very large public cloud companies are building.  

JOHN  ROLLASON:  I think the reality is people are going to use both, you know, hybrid cloud, multi cloud sort of seeing peope on multiple clouds and wont' be locked into one. 

SCOTT REYNOLDS:  If we take financial services, an issue that is no longer on the table is the availability.  And most financial services need six, seven, plus nine per call critical data.  We've implemented solutions for higher education, small commercial businesses, and we've achieved 6 9’s And at a really, really small budget if you think about it.  And I remember the times offering that would cost eight plus nine million pounds storage (rays) into financial services because it was just to achieve (six nines), But now you can do it on a  250 and 350K budget, you know, such as how that technology works.  I think it's because of that it's growing in popularity for the enterprise customers.

AAD DEKKERS:  Yes, availability is always needed even if you are trying to move the customer to the cloud. It doesn't matter whether data is off-prem or on-prem. On prem IT always needs to be reliable.  

ANGELO APA:  The only thing that's involved in this is what does the customer need, who is it that you go to and who can help you with that. What it's called is irrelevant. There's still a bunch of customers out there who aren’t virtualised today. So there's a huge amount of opportunity for all vendors and all channel partners to be able to go out there and to grow their business, on the back of the fact there's some pretty archaic things going on out there. 

Q. Is it a challenge selling what can often sound like a marketing pitch rather than the old speeds and feeds approach? 

ANGELO APA: I don't think that's difficult for organizations who are very focused on what they do and they sell a particular set of products. Your question applies absolutely to Lenovo because we don't have any solution type of IP to sell. We sell hardware and we choose to partner with a number of solution vendors. The way we choose the solution vendors that we work with depends upon where we see the opportunity to grow. Now we are currently just under 10 per cent market sharing in the UK which is almost double where we were six months ago, and the reason that we're still seeing that kind of growth is in part due to the fact that we are working with two or three specific vendors. And we are going out talking customers and understanding which area are you going to see the most benefit when you look forward and how do you define the datacenter around what it is that you are going to be. And then we will choose one of those three or some of the others that we worked with to say we think this is the kind of approach that we need to work, and we are going to sit down with that particular vendor and go and have a conversation. So, yes, we have to go sell to something, what we have to go sell is hardware. We just choose who we then partner with to the individual in order to gain market share and make sure that we are at the same time addressing customer needs rather than having one thing to present.   

STUART GILKS: The consumption model flexibility is key - giving the customer that flexibility and knitting together multi-clouds and hybrid tooling allows you to optimize and arbitrage across those different platforms.  There's both products underpinning this flexibility but also huge importance in terms of consultancy, to assess, to design and potentially to operate either leveraging customer’s own skills, HPE consulting and with partners. 

Q:  What are you doing to helping the channel given the impact of digital transformation, the rise of SaaS and HCI? 

ANDY BREWERTON:  What we are recognizing is that,  if you create a channel program where you pigeon hole roles,  you pigeon hole the reseller, the distributor, the service provider, the system integrator. You end up creating a playground or environment that they have to operate in which doesn't align to their business models. So what we're doing, is  to completely invert the channel program, so that the power is with the partner, and that they engage with us how they want to engage with us. We don't worry about tiers based on revenue, we look at momentum, we look at aligning to a partner's purchasing needs and marketing needs.  As the vendor, we should be pleased that partners want to engage with us and so we should engage with them in their  business model.  That will of course be subtly different for every type of partner, and enables us to cope with these hybrid partners who are everything or who want to become everything or those transitioning.  It's an old adage, but essentially it’s about being easier to do business with, and to do that, you must be being flexible and give choice.  

MARK SHAW:At Rubrik, we deliver a message of simplification, customers see complexity is holding them back. We deliver a single data management platform across the enterprise no matter where that data lives - it’s at the heart of what we do. s

IT today is struggling with managing data silos, and more are created every day. Businesses need a platform that has visibility across all of those silos and grants them the ability to govern and bring back control of their data.

Simplifying the core infrastructure- that which is key to the business, but not transformational- is key. It reduces operational spend and frees up time and money for IT to go focus on how to make the business more successful at what it does, rather than being bogged down in IT engineering. It’s important to remove the complexity where we can- after all, there’s an awful lot out there in the market.

AAD DEKKERS:  So I think we all agree on what the benefits are of HCI are and where we fit - some play in the enterprise and some play in their install base. We play in the mid-market and distributed enterprise space. We try to focus on the things that matter to partners in this space, and each partner has different needs depending on which customers they support. One of the topics that I haven't seen here is Edge Computing. We see it happen everywhere, especially in the distributed enterprise. This is where we help our partners to be well positioned  - where we're having a more favorable product portfolio. The main thing is that partners can differentiate themselves in this space. If you look at the channel and traditional vendors, it's all about the same old technology and nothing is new or exciting. It's difficult to make money and it's difficult to differentiate yourself as a partner. This is where we as Scale Computing focus our efforts, to ensure we are working with partners who can differentiate themselves, whether they are small or large.  

JAMES LOWE:  So what resonated with me in the conversations particularly with the (MSP) conversation, and conversely to a Nutanix position, we take a segmented view of the partner environment. In playing to the simplification message,IBM has a view in working with the channel, that if we can simplify our portfolio and simplify the way that we incent our partners to go and sell those services and enable them to consume our services in an easier fashion (through new contracting models and that's sort of thing) then we are making progress. I think we're getting there.  We've got a long way to go in terms of taking it to the next step, I think we probably need to think about how clients will consume services from the likes of Logicalis who in turn will  be consuming  software/cloud offerings from IBM.  The way we construct services to be sold into a partner such as logicalis, to embed in their own offerings, an then be sold on needs further consideration concerning the possible commercial models  available. 

ANGELO APA:One of the most difficult things, if not the most difficult things for a VAR to do or any channel partners is to win new customers. And winning new customers costs a lot of money. So we have oriented ourselves around the model that the great majority of our businesses is going through a channel, but we have no profit pools to protect in our organization, and that's one of the advantages of having relatively low market share - nothing is sacred. And what that means is that we can work with these various different vendors to provide a customer with what it is that we think they are looking for and sometimes we will be wrong but at least we can then change our mind. And I think that is going to assist the VAR not only to differentiate themselves when going out to the market, but rather than trying to sell the same stuff that other people are selling and destroying the margin completely, go in with a slightly different message, which means that not only may they win more customers, but keep them too. 

STUART GILKS:  There's two things HPE is focusing on here... The first one is helping the channel with the consumption model flexibility that aligns to customer preferences, particularly for on-premise whether it's a managed service or more traditional. And then the second thing we've seen is the shift to providing  multi and hybrid cloud - it's simplifying IT while making it more sophisticated under the covers.  I think it maintains their [channel partners] relevance, whichever way the customers are going in those choices. 

JOHN ROLLASON:  I think from our point of view, I think everybody probably there's a huge amount of opportunity out there for partners. From a NetApp point of view it is about making sure that we can help those partners address the different types of (buyers), the different segments, some of those are modernizing traditional infrastructure and  it's still a huge market and it's still a huge opportunity. On premises, cloud, public cloud but I think generally shifting from that sort of traditional model to a cloud first model is where we're focused. 

JOACHIM MASON:  Many of the things we've talked about we would also echo in terms of our aspirations with partners. Our partners, from a Cisco point of view – they have a very established and mature way of going through market and it has been this way for decades. So we have to respect that and bring those things into play, and where I am trusted and relied upon is that I never assume that the skills base is there to begin with. You have to invest in time, training, enablement and risk share where possible– and have a reliable model that doesn’t contain too many surprises. 

SCOTT REYNOLDS:  Not all partners are the same. At Logicalis, we don’t have hundreds of sales people sat at desks, mining customer contacts day after day. So, the key thing for us, when we are engaging in a vendor opportunity is to recognise where we can bring new value to the table and support that value throughout the entire program.  Unfortunately, often it’s first come, first served and the person that gets there before anyone else secures the deal. That’s why it’s important for us to make it known that there are partners out there having higher value conversations with customers.