For IT services companies, cloud-based data protection services hold the promise of high margins, recurring revenue and new ways to add value. But making the transition from traditional services to cloud-based services is not simple. And sometimes the hardest part of the transition has nothing to do with technology.
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Chad M. Whaley, president and co-founder of EFS Backup Technologies in Indianapolis -- which was founded three years ago and became an Asigra Inc. partner about six months later -- can speak to the challenges of moving to a cloud data protection services model. EFS is currently in a growth phase that Whaley and co-founder and chief technology architect Dennis Smith attribute to their partnership with Asigra and involvement with the vendor's "engaged partnership" track, which is designed to encourage partners to optimize sales and marketing. Let's just say that EFS is in the midst of a serious marketing makeover.
"We didn't realize that our biggest challenge in this technology market was marketing, because we didn't know what we needed to do," said Whaley, whose background is in technology engineering.
Indeed, one of the biggest impediments to growth for partners in the cloud backup market is marketing, said Eran Farajun, executive vice president at Asigra. "Historically, partners marketed a vendor's brand and never had to promote their own brand. With managed services, the partner's service is the brand," he said.
In other words, for engineering-driven organizations to thrive in cloud data protection, they must evolve into marketing- and customer-driven organizations.
Heeding the advice of its vendor partner, EFS engaged a marketing firm for a marketing assessment and roadmap. The result? By the end of April, EFS will have a new name -- EchoPath -- and a new website, in addition to other marketing initiatives. "We're aligning our image with who we are and what we do," Whaley said.
OffsiteDataSync of Rochester, N.Y., has a story similar to that of EFS. "We're a rock-solid technology company, and it was a real learning curve on the marketing side," said Matthew Chesterton, CEO.
Twelve years ago, the company was a general IT services business. "Three years later, we saw the business value in backup and disaster recovery. It was a better business. We could earn more and scale more," Chesterton said.
Chesterton built up a customer base, kept it for the refocused backup and disaster recovery business, and sold off the IT services business. Two years ago, OffsiteDataSync partnered with Asigra for cloud backup services and soon after -- discovering that there was a gap in the technology services that it was offering -- added disaster recovery services.
The company differentiates itself from other providers by getting its name out in the market as a partner that does one thing very well, and that's data protection.
EFS noticed a similar unmet need. "We … changed our business focus to providing backup and Disaster recovery as a Service, because we noticed that most companies don't do backup well and for smaller companies, cost was a barrier to entry. And, we're still solution-oriented," Whaley said.
The company concentrates on providing cloud services. It has its own infrastructure and takes care of customer data via both public and private backup and disaster recovery services. It also works with channel partners that want to resell its services.
For Center for Business Innovation (CBI), an MSP in Lansing, Mich., transitioning the business to a managed services model also came with business-oriented hurdles. "The biggest challenge [was] moving beyond the psychology of the sales team, who are used to being one-hit wonders. It took a while to fine-tune the compensation plans," said Douglas Horne, technology director for CBI.
Another challenge was reconciling the operations side of the business -- how to staff, what to staff for -- which gets turned upside down when moving from project-based work to a recurring revenue model, according to Horne. A managed services model creates a workflow with technology that is more routine, reduces firefighting and is more stable and lucrative.
Value-add in the cloud
Once the transition to cloud data protection services is under way, solution providers can add value to a cloud backup offering by staying on top of their services and providing clients with daily and weekly reports, highlighting successful backups and the percentage of data recovered. They should also be managing service-level agreements and making sure that the customers' best interests are being looked after.
Aggregating cloud services is another value-add business opportunity for partners -- one that CBI's Horne understands.
"We branded our managed services solutions, including data backup, and bundle it in different packages," he said.
So, for example, CBI might offer a managed services bundle that includes desktop management, server/application management and cloud backup to a small health care clinic with two servers and 40 laptops running an electronic medical record application, and with the need for off-site daily backups of 500 GB of data.
"Customers can pick the services that they want, and we help them build a support system for those services," Horne said.
CBI's business strategy -- and particularly its cloud backup and data protection strategy, including assessment, implementation and management -- is a formula that has been successful for CBI for the past five years. The Barracuda Networks partner, with five locations, continues to find that businesses are thankful to pay a monthly fee to make the challenge of dealing with backup and recovery go away.
The company's portfolio includes a number of vendor solutions for data protection based on a variety of factors, such as the data center, compliance requirements and industry standards.
CBI has four core business disciplines: managed services, including local network management and managed print services; cloud computing; resale of Kyocera products; and traditional IT integration services.
As Barracuda -- which operates in the security, networking and data protection space -- sees more success among its MSPs, the company is considering putting more structure in place for partners, as well as more tools. In other words, Barracuda has plans to formalize an MSP program for cloud backup services, according to Andy Jensen, director of product management with Barracuda Storage.
One of the changes that the vendor is considering is allowing partners' customers to purchase a monthly cloud backup subscription that includes both the hardware and software, with the cost of the hardware able to be spread out over a longer term. By contrast, customers are currently required to buy an appliance, making an upfront capital investment, and pay the monthly fee for cloud backup services.
"This MSP model is something that we're rolling out for our firewall business. It makes sense to apply it to our cloud backup business as well," Jensen said.
Data protection services: Market outlook for solution providers