Cloud storage services offer both opportunity and risk to data storage resellers. And there's no one-size-fits-all way to approach the burgeoning sector of the market. So how does a storage reseller get involved? In this FAQ, Vijay Subramanian, cloud computing expert and practice manager for managed services at Laurus Technologies, an IT services and consulting company in the Midwest, explains how his company evaluated the idea of cloud storage services and gives advice for other VARs considering the same thing.
You can read a transcript of the interview below or download the MP3.
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SearchStorageChannel.com: There are a number of ways that VARs can get involved with cloud storage -- from acting as an agent for an existing cloud storage provider, to setting up their own cloud storage services business, to helping a customer set up a private cloud. With those possible approaches out there, how does a reseller, like Laurus Technologies, figure out exactly how they're going to plug in to cloud storage? In other words, what's that analysis process when you decide how to approach that market?
Subramanian: There's no short answer for that, but I'll try… . It's particularly requirements- and capabilities-driven, i.e., requirements of the customer, and the capabilities of the reseller. So let's look at the reseller capabilities first. You have to start with the strength of a reseller. You have to find out: "Will I be able to provide a value to the customer?" And, that's obviously why you are a value-added reseller. If the reseller has extensive engineering strength, they could easily translate that ability to architect and design private clouds for the customer's needs. So that's, pretty much, what Laurus has been doing all along. We have extensive storage experience based on our partnerships with Sun/Oracle, EMC, HP and Dell. Our engineers know the capabilities of commercial products, and we can compare that with the cloud capabilities. So that could be an easy translation, and that's how we help with setting up a private cloud with our customers. And some resellers might not have extensive engineering resources or they don't want the dedicated resources. So then, that would be a classic case where they can resell other products or other providers' storage services. And, essentially, that would be your scenario of acting like a pure agent.
SearchStorageChannel.com: So, you're looking at what your current capabilities are, and figuring out how you can leverage those to get cloud storage business?
Subramanian: Correct, and that is the first part of the equation, understanding your capabilities. But, regardless of what your capabilities are, if that does not match what the customer wants, it does not make any sense. So that's what you have to look at: what your customers are looking for. So you look at your customer base and what … the requirements [are]. If the customer is looking to do certain things, then you have different capabilities internally, and it's not going to match. So that's … the important thing for resellers to look for: Try to avoid the approach of a hammer looking for a nail. "I have the services to resell, and this is a service, and then these are the customer requirements; I don't care what yours are. Please try to fit in what I have." That's the approach that the reseller needs to avoid.
SearchStorageChannel.com: In terms of setting up a private cloud for customers, typically, what kinds of customers are you talking to about that? Are there, in terms of company size or vertical industry, any characteristics that are common among those customers?
Subramanian: I can't say with regards to size, but it depends on what kind of data [and] how much data they have to process and how much data they can afford to take outside their premise. That is the biggest factor here. For example, a big Fortune 1000 company might not have a big IT staff, [and] they might say, "I don't have any compliance requirements to keep the data in-house, and I can afford to go with a public cloud." On the other hand, a much smaller company might have huge amounts of data, and they will be regulated by compliance and they will have to go with the private cloud option.
SearchStorageChannel.com: When it comes to the idea of a reseller offering their own cloud storage services, is this always going to mean setting up their own data center, then building the cloud with all the cost and risk involved in that, or is there an easier way?
Subramanian: The first thing you have to look at is the business case. It's essentially a fundamental business case position. Is there a market for that? Can I be successful doing it? Do I have sales channels to bring in customers once I set it up? And then, what are the marketing capabilities that I possess, what's my technical support? All these things get taken into account and you essentially have to create a business case for it. But after that, there are no shortcuts. And I'm afraid to say that … the very nature [of] setting up an infrastructure and offering a service is risky. And that's when you weigh what the rewards are against the risk and look at the business case … and [ask], "What is my current potential?" And based on that, you have to go about it. And … you have to look at how commoditized that service is going to be. Am I going to provide a niche in this market? For example, if food is a commodity, why are there different restaurants? … If food is better in a gourmet restaurant, why are there fast-food [restaurants]? They provide a different set of values. Similarly, [the] value and niche that you're going to provide is something that you have to be very clear about. If you're going to be one more player in the market providing these services, it's going to be much more risky for you to do that.
SearchStorageChannel.com: There were some cloud storage software platform developers that talked about really huge margins for cloud storage services, like 70 percent. Based on what you have seen at Laurus, is that realistic?
Subramanian: I've not seen a 70 percent margin. If that was the case, a lot of people would have jumped on it. The cost of hardware [and] the cost of storage [are] reducing dramatically. But, what's not reducing is the maintenance and the administration of the storage. And that's, actually, the bulk of the cost. So, if the storage cost is reducing, it's reducing at the same rate … for the service provider as it is for a customer. If I can buy a $10 drive for $5 today, the same thing is applicable to both provider and customer. …. But what's different is, the administration cost, and that, you can never replace. That's always going to be the case. The only way you can reduce that is by economy of scale.
This was first published in September 2010