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Assessing the cloud computing market for solution providers

Cloud computing solutions offer business opportunities for solution providers, but they aren't a panacea. Before urging customers to enter the cloud, VARs need a solid strategy.

Many customers have started to warm to cloud concept. They've heard from peers and cloud vendors that cloud computing solutions are the best method to use resources and minimize costs. So providers need to be ready to meet these customers' needs for cloud-based services and to advise companies that may be interested but need education and guidance from resellers on the right cloud infrastructure and approach.

There are some drawbacks to selling customers on cloud computing solutions. Having a strategy in place for serving customers in the cloud computing market will help solution providers work around potential obstacles. Find out which types of businesses have adopted cloud computing in this interview with Pat Ouellette of and cloud-based services expert Gary Coben of Evolve IP.

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The cloud computing market seems has legs, but how much success have providers had with bringing cloud computing solutions to their customers?

Gary Coben: Well, I'll give you some real surprises that we've seen at Evolve IP. Our initial play was sort of a down market, SMB [small and medium-sized business] market. Much to our surprise, it's the really big enterprise customers that are buying into cloud services. This is because -- especially in a multiple-location environment -- trying to deploy traditional services from a location-by-location basis is extremely expensive.

For instance, our core businesses are selling hosted PBX and managed WAN [wide area network] services. What often happens is that we often have a prospect that is looking to replace their WAN and end up getting their PBX for free and not having to spend any capital on it.

There's no question about it: The cloud is here to stay. I would say -- and most industry experts would agree -- that the traditional ways of purchasing technology are probably yesterday's news and that everybody is deploying to the cloud now because it's more secure, it's safer and it's a better use of resources. The cloud is more secure and more stable because it's located in our [Evolve IP's] $7 million data center. This means data is not subject to fire, flood, theft, water damage, power outages and everything that can happen at the facility level. It's a safer investment for the same reason. You're not putting any capital out, or buying anything that could be damaged in the same series of events.

The other thing to add to that is that, if we were having this conversation 10 years ago, your IT department would've had 10 people in it. Today, your IT department has two people in it. So they've had the same amount of work that they've always had, but 80% less resources to get it done. Moving services into the cloud enables you to do a lot more with a lot less because all those solutions would've typically been managed on premise. Whether we're talking about the PBX, data backup, Exchange Server, CRN servers or Web servers, when they're in house, they're managed by the in-house people. When they're in the cloud, they're managed by the service provider.

Which factors might prevent a customer from entering the cloud computing market?

Coben: What ends up preventing customers from making a move to the cloud is when they have legacy relationships in place. We have a lot of clients that would say, "We want to engage in hosted PBX services but we have two years left on our contract with our competitive local exchange carrier (private companies that provide local, long distance, and Internet services) for our internet services and our primary-rate interface services."

There has to be a strategy developed between the service provider and the client that says "OK, we're going to get there over time. But we're going … to deploy in steps" because you don't want to break these existing contractual commitments. In addition, there are some requirements unaware of the premise. People have different levels of contractual requirements, so they can't necessarily deploy to the cloud all at once. That's why our [Evolve IP's] model is based more on the concept of selective outsourcing. You move things to the cloud when it's appropriate to move them to the cloud.

There are also some situations and some businesses that have so much data (multiple terabytes worth) that it would be too expensive to move it all to the cloud. More often than not, this isn't the case. But in some scenarios it might be more cost effective to have a local server to store the data on than to move it to the cloud. Having a solution on premise is the better way to go, especially when there are huge amounts of data that are being moved locally. Sometimes it's easier and more cost-effective not to move some of those services in the cloud.

That's an answer that I deliver to you today, but with the cost of processing power going down and the cost of storage and processing capacity continuing to be reduced as well, those answers might be different six months from now. The biggest issue that holds people up from moving services into the cloud is legacy contractual commitments.

In addition to contractual commitments, which other disadvantages to cloud computing business should solution providers be aware of?

Coben: Let's say I have a new car that I have decided to finance over five years. In theory, after that five-year period I now have an asset that I own. To a certain extent, especially as you get up to bigger customers, a line gets crossed. The cost of a cloud-based service that you basically lease on a monthly basis crosses the line from when you're purchasing something and you're making payments on it. Now, there's a lot of things that change the nature of that, because anything that you buy that goes on your books is considered a debt against the business, anything that you buy has to be installed, cared for and fed. In our world, that means that you have to buy the gear, pay somebody to install it, pay somebody to maintain it.

Going back to the car analogy, after I've paid for my car and diligently made 60 months of payments, by the time that I get the slip that says, "Congratulations; you own the car," it's outdated and I want a new one anyway. The unfortunate thing in the technology business is that cars and technology are very much different. Even if I have a car that's 5 years old, it still gets me from point A to point B. But when I have technology, whether it's a phone system or a server, five years from now that device is going to be severely outdated and more than likely in the computer world, especially with servers, five to seven years is about the overall life expectancy.

There would be some people that would say that one of the downsides to hosted cloud technologies is that you never really own anything and there could be a case that could be made for that. The other side to that is maybe you never really want to own it anyway because the minute you own it is the minute that it becomes obsolete.

About the expert:
Gary Coben has more than 25 years of sales, management and telephony experience in the channel. Prior to working at Evolve IP, Coben served as director of channel sales for deltathree, Inc., where he was responsible for the worldwide deployment of their private-label, hosted consumer VoIP platform. Coben previously held channel management positions with companies such as T-Mobile USA, MCI Worldcom, Sprint and ITT.

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