During the broadcast, Steve Hilton, Principal Analyst at Analysys Mason, and Ellen Berlan, Director, Global Service Provider SMB at Cisco shared cloud trends and offered advice on how Service Providers can capitalize on the growing market within SMBs. Steve also offered several recommendations, from how Service Providers need to approach the growing cloud market, to the ways in which Service Providers can launch a cloud offering.
For those of you who prefer to read about the broadcast, we have a text summary below with timestamps to identify key topics. We also have Ellen and Steve’s answers to audience questions submitted via Twitter.
2:59 -- The enterprise cloud services market is large and is expected to grow to approximately $35.6 billion by 2015, and analysts believe 40% of that is SMBs. What are enterprise cloud services and can you give more detail on these figures?
According to Steve, enterprise cloud is the infrastructure or applications that are provided to businesses as a service. The business pays for the cloud services that they consume.
Today, there are approximately US $12 billion dollars of enterprise cloud services in the market, and that’s going to grow to approximately $35.6 billion by 2015. We’re seeing most of that growth in the developed markets of the world. There’s a unique role to play for Service Providers in offering cloud services.
Visit Analysys Mason for more information about their cloud forecast.
4:56 -- How do you think the Service Providers need to approach the market? What do you think they need to be offering?
Steve says that Service Providers need to start with their core communications offering and think about communications in the cloud. Then, Service Providers can add an infrastructure services layer around the communications offering. Finally, Service Providers can add another layer of classic business applications in the cloud.
They should also focus on key areas:
- Security: Service Provider offerings are very secure --they are known for that and that’s very important to large and small businesses.
- Communications Offerings: Service Providers must focus on their communications offerings that they have today. It’s a tremendous asset that they are able to bring to small and large businesses.
- Quality of Service: They should also focus on the Quality of Service,because these solutions are critical for businesses that need to be performing at an enterprise level.
6:24 -- Do you think the approach is consistent with Mid-market and Small? How do you differentiate between the two from a numbers perspective, and what are you seeing from an offer perspective?
Small and very small businesses are a group that includes all businesses that have up to 500 employees. Mid-market and medium sized businesses are larger than that.
Steve shares that if you look at the different countries worldwide, small and very small business with up to 100 employees account for 80-85% of all the businesses in any given country. Steve suggests that Service Providers should:
- Focus their solution around their core connectivity offering
- Layer in concepts of infrastructure (i.e. Security-as-a-Service, Disaster recovery-as-a-Service, and so on.)
- Build on top of that with other applications.
It would make sense for Service Providers to offer different types of solutions with different complexity levels, whether they are targeting very small businesses with 10 employees or one that had 50 -100 employees.
8:05 -- What are the customer needs that will drive cloud services?
According to Steve, there are four business needs that we see with businesses around the world:
- Businesses need to grow and change. Some businesses will want to add more employees and grow their revenues. Others will want to grow in their communities and improve the communities around them or grow educationally.
- Businesses need to protect themselves. Bad things can happen. This is why businesses have automobile or office insurance.
- Businesses need simplicity. The technology environment at SMBs are complex. Anything Service Providers can do to simplify their technology environment, save them costs, and allow them to focus on their core business is key.
- Businesses need support. Businesses never have enough employees to do everything that they want to do. This is why they turn to Service Providers for a lot of their technology support.
10:00 – Do you see a trend of where SMBs are buying from? And why?
As Steve mentioned, in the year 2015 Analysys Mason is forecasting that 24% of all of the enterprise cloud services will be sold by Service Providers. So, it’s in the hands of the Service Providers to offer in a new layer of solutions to the SMB communities.
He also suggests Service Providers can build on their trusted advisor role that they have today with SMBs by bundling in more services and solutions. Service Providers can also work with other application and IT solution vendors helping them differentiate their offerings in the market.
11:11 -- What are you seeing from an awareness perspective and does it differ by market size with propensity to use cloud services?
Analysys Mason sees increased awareness in the SMB communities. These are communities that don’t adopt services overnight. They’re also finding it very helpful for the Service Providers to start forging new relationships with technology vendors to start offering these new solutions.
11:54 – Are there any specific services you see them buying in the future?
Steve says that the best services that are relevant to SMBs are:
- Offerings around Unified Communications and other types of communications
- Offerings around secure backup storage integrated with mobile offerings, which would be especially valuable
12:37 -- What Advice would you give to Service Providers launching a Cloud Offering?
Steve’s advice is to:
- Partner: It’s important to forge business relationships with Value Added Resellers (VARs) in software and technology companies in order to play a larger role in offering advanced cloud services to SMBs.
- Bundle: It’s also important to explore bundled offers for SMBs because those businesses respond to offers that touch on their business needs. If you can address those needs, you’d be more likely to sell those services.
- Focus: Security, guarantees, and business impact are critical- those are the most important buying factors for purchasing cloud services.
Ellen expanded on this question and shared that Cisco’s Cloud Partner Program is great for partners wanting to launch a cloud offering. She explained that the program is broken into three categories:
- Cloud Resellers: These partners have strategic relationships with top-tier customers and key customer buying centers to sell cloud ready infrastructure. There may be a situation where a VAR partners with a Service Provider reselling that Service Provider’s service, but adding their special sauce.
- Cloud Builders: These partners have SI practices focusing on application layer migration and integration to build out Private Cloud services for end-users.
- Cloud Providers: These partners sell cloud as an OpEx service wrapped with a Service Legal Agreement, or SLA. This a a typical model for a Service Provider. The partners differentiate their service based on the integrated features of the service and on the robustness of the SLA.
Multiple partners can play in more than one of these roles depending on the capabilities they have. There are also Marketing Programs and Collateral associated with each of these. For more information, visit Partner Central, the Service Provider Strategy site, or the Managed Services for Service Providers site.
16: 18 -- What are your top 3 tips for working with Service Providers?
- Service Providers need to review the product roadmaps for legacy solutions today--what they have in place today may not be the right solutions for tomorrow.
- Service Providers need to rethink who will be the next-generation tech partners who will help them into the future
- Lastly, SPs need to rethink how to move SMBs forward by focusing on the business decisions and the business-critical issues associated with those SMB enterprises
Ellen’s top 3 tips:
- Understand the markets that you’re going after
- Utilize partnerships, they are critical
- Get engaged in the Cisco Cloud Partner Program
From there, Ellen and Steve dove into answering audience questions.
18:06 -- Do you see the demand for Cloud consistent Worldwide?
Steve says that most of the cloud demand is generated in developed markets, such asWestern Europe, developed APAC, and North America. Increasing demand and interest is building both in the SMB and Service Provider communities in emerging countries such as India, China, Brazil and Russia.
Ellen agreed, and noted that it’s interesting that the awareness of cloud is consistent for Service Providers worldwide. She says that many Service Providers know there’s a buzz, and want to know how to get into cloud, and how to differentiate their service for the enterprise market versus the SMB market.
19:25 -- Do you see services offered by Service Providers differentiating? If so, how?
Ellen says SPs differentiate by the market they are pursuing, and the partnerships they have. Whether they are partnering with an ISV or a reseller, there could be a different type of value-add that they bring to that market. It depends upon their segmentation and their partnership as far as what that service is going to look like.
Steve added that Service Providers differentiate by thinking about cloud services then going back to their core brand and messaging to review how they talk to their customers. Some Service Providers are a lot more aggressive in repositioning themselves and their brand in the business community by saying they are focused on technology and not just communications.
20:56 -- How do small businesses think about security differently than large businesses?
Steve says that small businesses think about security plenty but they don’t do anything about it. He offered the example of a company in the UK that backed up every month using a USB stick. He says that they do security differently but in their minds they think they are doing it correctly. This provides Service Providers the opportunity to teach small businesses there’s a better way to do it.
Ellen added that it differs by the size of the market within small. A larger small business may be more aware of security needs than a smaller sized small business. Some SMBs have a level of expectation that they’re not necessarily vulnerable, that they are protected.
23:07 -- What channels are the Service Providers using to sell cloud?
Ellen says that if you look at different types of Service Providers, they have a mixture of how they go to market. Some have VARs that go to market and resell their services both for enterprise and small. Some have inside sales teams that sell on their behalf, and some have their own direct sales force. As far as cloud services, she sees more of a drive around this partnership component. SPs should look at how they can partner with others to drive this service.
Steve says that of the Service Providers he’s talked to across the world about selling cloud, , they can either go indirect with their authorized agents and dealers and VARs, or they can go direct with telephone sales, online sales or their own sales force. He added that 20-55% of cloud sold through indirect channels.
25:13 -- How can I as a partner play in the Cloud space?
Ellen mentioned the several options available in the Cloud Partner Program. You should consider whether you want to offer private cloud or public cloud, and what kind of components around the cloud offering you want to have. All of these components are offered within the Cloud Partner Program to bring value to your end customer.
Steve sees SPs taking different tactics. If it’s really focused around a Service Provider’s core communications offerings, they want to take a much more direct role. As we move away from core communications offerings, they are more likely to want to participate as cloud partner resellers.
27:28 -- What is the biggest challenge for a Service Provider to sell cloud-based services?
According to Steve, the biggest challenge is how the SP positions itself in the market. They should address customers as a tech provider, not just a communications provider.
The broadcast ended there, but some audience-submitted questions remained unanswered. Luckily, we were able to follow up with Ellen and Steve to get the scoop.
How do small businesses think about security differently than large businesses?
Ellen says that small businesses don’t typically think of security in complex terms–the level of expectation is that security is embedded. For the upper end of small business, security is a key priority. Steve added that small businesses don’t want to think about security--they want a solution that will protect them, a solution they never have to worry about it. Essentially, they want to “set it and forget it.”
What are the different vital roles that cloud can play for small to midsize businesses?
Ellen and Steve say that SMBs are looking for back-up, communications (voice, data, email/messaging, etc.), Quality of Service, security, and simplicity.
What’s the best way to demystify the cloud?
Ellen says start with the basics to offer an understanding of what is public cloud, private cloud, and hybrid. You should also look to offer an understanding of what is best for the end-user and what functions the end-user is looking to provide versus just selling cloud concepts.
How do you convince an apprehensive SMB customer--what are cloud’s key selling points?
Ellen says that it depends on whether you’re offering a public or private cloud solution, but cloud provides OpEx efficiencies, security, and redundancy. Steve adds that you should consider the total cost of ownership of a cloud versus on-premises solution. You should compare security of a cloud solution to what the SMB is doing today, and lastly, discuss business continuity with the SMB. For example, if the SMB’s current on-premises solution goes down, what does the SMB do? You can compare that to a scenario in which the SMB’s cloud solution would go down. You can help the SMB get over the initial knee-jerk reaction to not having control of the situation if their infrastructure and applications are in the cloud.
So phew, that’s it! They certainly covered a lot of ground. Got any additional questions for Ellen and Steve? Please share in the comments.