In part 1 of this Q&A with Luke Wignall, managing partner of Common Knowledge Technology, a Denver-based SMB services provider, we discussed Microsoft's upcoming plans for managed cloud services.
In part 2, Wignall discusses the future of SMB networking services as a whole -- how managed cloud services will affect the network and what SMB networking solution providers can expect from their customers during this recession.
Which major vendors have been making a push in the SMB solution provider area?
Juniper has been our hero for interacting with small business providers and giving us ammunition to fight the fight, but it's stopped and is now focusing on the enterprise. Then, out of the blue, Cisco, the SMB's former arch enemy, has launched this massive initiative into the SMB space. We've got a minimum of three reps in the Denver area now. We haven't been involved with Cisco for years, and out of the blue, we're getting hounded by a partner development rep who is asking us to get involved in their SMB partner programs? You're sending three people to work the Denver market? That's insane. Who woke up?
You mentioned in our previous Q&A that managed cloud services offerings affect bandwidth on customer networks. Are there any other aspects of the network that will be affected by SMB cloud services?
Security services will definitely take a front row seat. There are a lot of unanswered security questions at the enterprise level but even more at the SMB level. SMBs are always a struggle, in terms of getting them to understand that they are at as much risk -- if not more -- as a major corporation. And we're headed into a world where we're going to put a lot of important information in the cloud.
If you're on Quickbooks, I can put that in the cloud already. I can host it on a server in the cloud. But SQL server? Where do we put it? Do we leave it here? How do we secure it? We're going to have connections into the Internet going into the cloud that terminate outside the physical boundaries of the office that we're in -- how do I secure that? And what if any issues are there? Who owns and manages that data? Small businesses have credit card information, account information and, yes, all of that is much smaller than some 30,000-seat medical company in Chicago; but it's still a question, and an important one at that.
The economy appears to be making a comeback. Have you seen that in your SMB networking business?
Most customers appear to have been down with a two-year return. We've had the best quarter we've had in two and a half years. Q1 was awesome, and Q2 has been better, so we are seeing a recovery, and we've been pretty stagnant for two years. People stopped spending money at some point up to two years ago, and while those two years weren't great, we're reaching a point where they have to invest in technology again.
If you were sitting on a technology that was three years old, that is now five years old -- even a two-year-old technology needs updating, so there's a flood of decision making coming. That's what we're beginning to see. We're hitting a point where small business owners are coming with a simple question: Do I hire someone for IT with benefits and salary, a 60K-a-year expense? Do I hire that person, who's potentially unreliable and calls in sick, or do I spend a portion of that money to gain increased efficiency through technology? We're getting that time and time again.
People are not hiring. People are buying. We're seeing a tremendous amount of "bring your own computer" in companies. This bring-your-own-computer piece means that the customer can make an investment in new technology that is more efficient, won't have to replace technology, and won't care where people work, as long as they work. The customer then doesn't have to worry about infrastructure costs because the employees are bringing their own computers. SMBs are thinking this way.
How are these technologies saving customers money?
In our previous world, I would build a customer what used to be a really robust server. The average small business owner project, if done right, averages between $9,000 and $12,000. That's a hefty investment. And that might not include firewalls. If it were the whole nine yards, that would be maybe $16,000. Now, for much less, I can do a virtualized project and maybe some hardware. And when Microsoft starts offering servers in the cloud, the hardware costs go away. Now, all you're buying are subscriptions -- a monthly fee!
And so, once that's built with virtualization running, now I'm offering a desktop for my customer's users that's freshly rebuilt every time they log on. It's always fresh and fast; it doesn't matter what hardware you're hitting it on as long as there's a Web browser, or a Citrix client, and that can run on pretty old hardware. It will run on your five-year-old Dell, and it will spawn a remote desktop connection and boom, there's my Windows 7 desktop. I can see it, interact with it, and when I restart it, I get a fresh build and it rebuilds the desktop from scratch. It never gets slow, and I maintain a single gold image. And let's say I have 40 seats -- I maintain that gold image for all 40 seats at the same time. This is reasonably affordable, compared with what we used to charge for server projects. With virtualization, I can make do with a lot less hardware than before.