Techaisle Blog

On Wednesday this week, we attended a Channel Expert Hour webinar (sponsored by IBM) and produced by Nine Lives Media, Inc. It made our Pick of the Week for three reasons:

1. Very clear statement of IBM’s Addressed Market
2. Very clear statement of IBM’s Three Tier Mid-Market Cloud Offers
3. Very clear statement of IBM’S SMB Channel Partner’s Opportunity

The format of the webinar was informal, with ongoing Q&A by channel partners and users. We started off with an overview of the SMB move to the cloud by VP Joel Raper of Azaleos, Inc., a 300+ employee, Seattle-based Service Provider focused on Microsoft UC&C Stack Managed Services (Cloud, Design, Deployment and Lifecycle Management) to the Mid-Market.

This was followed by an overview of the IBM Mid-Market Cloud Partner Program, by Ed Bottini, a Cloud Ecosystem Program Director at IBM Global Services. As mentioned, within three or four slides, it was clear where IBM saw the opportunity, what offers were available to address it and what partners could do to take advantage of IBM’s resources to sell into the market.

IBM’s Addressed Market

In typical IBM fashion, this graph represents the big picture very well: They believe half the Opportunity is SaaS growing at a compounded 25% rate, three-quarters is XaaS, compounding at ~25% - IaaS is growing at 35%. The remaining is ~25% Private Cloud and Non XaaS, growing at 20%.

This is not an acknowledgement of the IBM estimates, the point is that they see huge opportunity growing very rapidly in their base and it comes through when they talk about it. This answers WHERE REVENUE opportunity is for SMB Channel Partners.

IBM’s Three Tier Mid-Market Cloud Offers

IBM’s Cloud Solution Stack includes the Foundation layer of Servers, Networking, Storage and Secure Data, using a virtualized environment of IBM hardware, software and networking including PureFlex and Bladecenter Foundations for Cloud, along with IBM Cast Iron to integrate different clouds and applications.

On top of the Foundation is the Infrastructure as a Service layer, SmartCloud Services, which includes Pay-as-you-go Managed Backup Services, Tivoli System Management and Cloud Automation “middleware”,  Managed Security Services, and IBM SmartCloud Enterprise, which according to IBM delivers "enterprise-class public cloud infrastructure-as-a-service (IaaS)—delivers secure and scalable hosted IT infrastructure with on-demand access to virtual server and storage resources."

The top layer is the Applications Tier, Software as a service (SaaS), SmartCloud Solutions,  "a software model with applications centrally hosted in a cloud computing environment and accessed by users over the Internet."  As described in the first section, IBM has identified SaaS as half the opportunity growing at 25% CAGR; this is where the rubber hits the road. IBM has never been known as an Application Software vendor, preferring to invest in Systems Software, Database Technology, Tools, Middleware, etc. – which they have done very successfully. In addition, acquisitions over time have steadily been used to both plug holes and repurpose for gaps in applications - Cognos, CoreMetrics, SPSS and Unica being examples in Analytics, along with Sterling for e-Commerce, Merchandising and Supply Chain Management. The bold decision  (at the time) to fully embrace the Open Source movement in the '90s and leverage it with their tools like Websphere to participate in the rapid growth in web-based computing has also had a positive impact (i.e., SugarCRM). This answers WHAT SOLUTIONS offer the opportunity for SMB Channel Partners.

IBM’s Five Mid-Market Cloud Options for Channel Partners

The approaches SMB Channel Partners can choose to work with IBM is next, and  is  evident in this chart. Ranging from Tools, to Infrastructure, to Cloud Building, to SaaS Application Providers, Partners have a variety of options from which to select. This chart is pretty self-explanatory, so we won’t go into redundant detail here. This third leg of the stool is a clear view of HOW the Opportunity can be addressed by Partners.

This is not meant to be an endorsement for IBM - they are not the only Systems Vendor that 1) has a strategy, 2) has an integrated solution stack and 3) has a Cloud Partner Program. As a firm that helps companies sell more effectively into the SMB space, what appealed to us was the simplicity of the message and the ease with which the story was communicated and re-enforced using  credible, robust and tested Enterprise-level offers. In our opinion, IBM sounded a lot more like a young SaaS start-up than a hundred-year-old East Coast manufacturing company.

Postscript: When thinking through how the industry has consolidated around a few major system vendors, we wonder whether Cloud Computing strategy and execution have impacted confidence in the company?

This is the second in a series of BI-related posts and it deals with what platforms are being selected and what objectives are being served with SMB Business Intelligence customers. Despite a much shorter history than packaged BI, our survey found a higher level of Cloud-based  than packaged BI applications within the SMB respondent base. You may want to open it up to full size as the charts are a little crowded.

As mentioned in a previous post on Marketing Automation, the adoption patterns and benefits of these applications and services differ by size of company.  In this post we will focus on the applications and functionality currently used and planned for purchase by Mid-Market companies, from 100-999 employees.

What we found in a recent SMB survey of just over 1,200 respondents is that typically, the larger the company the more likely they are to be using Marketing Automation Apps/Functions within their existing software solutions. By the time SMBs reach the 500-999 employee level, certain applications such as outsourced email and campaign management are used in 70%+ of the accounts surveyed, expected to reach 90%+ by this time next year. Other fast growing areas include Personalization, CRM Integration and Web Analytics, all expected to reach a  penetration level of at least 80% by 2013 in the upper segments of the SMB market.

Research also shows that adoption has been spurred by the changing characteristics of the market today; there is much less risk involved in adopting SaaS and/or Cloud-based software applications than there used to be - when internal groups were responsible for rolling out complex solutions involving purchase and configuration of hardware, software licenses and provisioning of datacenter services. Ability to take advantage of this Enterprise-level functionality based on a monthly subscription and minimal impact on HR requirements is a no-brainer for most SMBs.

In the coming few weeks, we will provide additional analysis from our latest including Virtualization, Mobility and Managed Services as well as Cloud Computing.

Davis Blair
Techaisle

It is becoming quite well-known that traditional channel relationships, which developed over a thirty period based on PC, LAN, PC Server and Client Server architecture are changing rapidly based on the characteristics of Cloud Computing  products and services.  And now we have data to prove it based on Techaisle surveys of SMBs.

It is in some ways analogous to how the industries where value could be digitized were essentially transformed by the Internet because the value could move instantly around the globe. On a worldwide network, even a relatively slow one, bits gained an advantage over molecules in advertising, banking, music and entertainment, travel,  insurance, and many others.

With Cloud Computing, Remote Managed Services, Virtualization and other emerging cloud-based technology applications such as marketing automation, business intelligence and vertical applications exploding in the SMB marketplace, distribution channels face new challenges; these solutions can be efficiently delivered directly to the SMB customer, can be downloaded from the Internet, can be configured by savvy SMB customers or remotely, can be maintained, updated and upgraded online - in many cases the value can be delivered online. To further stack the deck, vendors who do not need help delivering complex solutions don't really have an incentive to work with a partner; to the contrary, they are able to sell much more efficiently by using the web channel and an inbound sales force. If you doubt it, sign up for a free SaaS trial and if they don't call within two hours, you are the exception.

SMB Channel Preference by Cloud Technology

The survey data shows a cross-tab of SMB decision makers,  and shows that for the majority of new cloud-based applications and services Vendor Direct and VAR are the preferred sources of purchase.



At this point it makes sense to discuss the channels and why some are more suited to certain types of employee size businesses than others. We categorize Cloud Services into Infrastructure, Communications, Business Applications and Vertical Market categories.  Provisioning of infrastructure services, like adding remote storage and back up services, has been simplified through web based interfaces and is well within the reach of IT staff. Similarly, horizontal SaaS applications can be up and running in minutes and customized by business users in a matter of hours or less - think GoDaddy, Constant Contact, Central Desktop, GotoMeeting, Sherweb - why pay a channel partner to implement these services?

Adding Value to Self Service Applications

Value Added Services become necessary in relation to the level of solution complexity; in business applications like robust CRM and ERP solutions from companies like Salesforce.com and Netsuite. Even if configuration can be accomplished with Internal IT staff, it may be better to let a VAR  or specialist do it to save time and money, as with configuring Enterprise Applications like Siebel and SAP. Cloud Data, Network and Application Integration Services are also in high demand and capable Service Providers have no shortage of potential partners.

As discussed in an earlier post, these relatively easy-to-deploy solutions have also given rise to an  important new source of advice, recommendations and services - the independent IT consultant - which will be the subject of one of our next posts.

Davis Blair
Techaisle