IT and Business Insights for SMB Solution Providers

Selling Hybrid Cloud Solutions: The Best of Both Worlds

A mix of public and private clouds, hybrid clouds offer the benefits of both options--flexibility, affordability, security, and peace of mind. By Megan Santosus

For many SMBs, the compelling benefits of public cloud computing—namely, no initial hardware investments, pay-as-you-go fees, and quick time to value—are offset by worries about security, loss of data control, and vendor lock-in. Private clouds may promise ironclad security and control, yet the scale and economics are beyond the reach of typical SMBs. In the middle ground is the hybrid cloud, in which a mix of solutions provides the flexibility and affordability of the public cloud coupled with the security and peace of mind of a private cloud. Adding hybrid cloud solutions can enable channel partners to grow their businesses among SMBs that want the best of the public and private options.

But before venturing into the hybrid cloud landscape, channel partners should have a clear picture of what the hybrid cloud is and isn’t. In the broadest sense, the public cloud consists of shared services offered on public networks and available to all interested customers. Google and Amazon are among the flag bearers in the public cloud. Private cloud services are shared, but access to them is restricted to a defined set of users. Services delivered in the hybrid cloud encompass components of both public and private cloud models.

It’s the combination of public and private models that is particularly appealing to SMBs, analysts say. As software as a service (SaaS) becomes mainstream, “the hybrid cloud offers opportunities for channel partners to extend functionality to SMBs without adding significant costs,” says Helen Rosen, vice president at market research firm AMI-Partners Inc.

TYPICAL HYBRID SCENARIOS
Extending functionality via the hybrid cloud can come in many variations, but currently there are a few typical scenarios of hybrid services that appeal to SMBs. In one scenario, a dedicated appliance is installed on premises, and then data on that appliance is uploaded to a public cloud where something (it is archived, backed up, and the like) is done with it. Another hybrid cloud approach involves extending or augmenting on-premises software with SaaS offerings that integrate with legacy applications behind a firewall. In addition, some SMBs that have already invested in physical infrastructure may opt to connect to the public cloud for disaster recovery.

Other SMBs may want all of their infrastructure delivered via the cloud, but in a manner that includes both public and private options. StrataScale Inc. is a hosted service provider based in Sacramento, Calif., that has a hybrid cloud offering. Customers access a shared public cloud environment in StrataScale’s data center for resources such as memory, CPU, bandwidth, and storage. A dedicated private environment of bare-metal servers also located at StrataScale’s facility provides customers with resources that are restricted to their use, whether for security reasons, to run databases, or any other rationale that merits a hybrid approach.

And then there are hybrid cloud services that allow customers to dial up compute resources as needed. “We have customers that are deploying very high-end database solutions that are using the physical clustering that we provide on the back end, and are also connected to the cloud on the front-end Web or application tier for bursting purposes or peak usage times,” explains Jon Beck, senior vice president of field operations and business development at OpSource Inc., a provider of cloud and managed hosting services in Santa Clara, Calif.

Installing a dedicated appliance that links into the public cloud represents a low barrier of entry into hybrid services. These appliances typically are for mundane yet critical functions such as storage, backup, and disaster recovery, and data remains local. “An SMB retains control because the data is there on-site,” says Jeff Byrne, senior analyst and consultant with the Taneja Group, a storage industry analysis firm. Many appliance-based services are policy-based, allowing the SMB to decide what type of data gets replicated and when, and whether that data remains on local storage. Deploying these storage gateways can help SMBs transition to the cloud by addressing some of their misgivings about control and security. “This is a much more comfortable scenario than just throwing data up to the cloud and hoping for the best,” Byrne says.

In the storage and data protection arena, there are plenty of vendors that offer appliance-based services. Axcient Inc. and CTERA Networks are among the companies in this space that specifically target SMBs.

SaaS-BASED OPTIONS
Storage and backup is only one way to step into the hybrid cloud market. Another step: offering software and services that combine on-premises and cloud-based applications. “If SMBs have an application today for accounting, CRM, or other vertical area and it’s working for them, they will look in the near term to complement it rather than replace it,” says Laurie McCabe, a partner with the SMB Group Inc., a market research and analysis firm. One of the most attractive ways to complement existing legacy applications is with a SaaS-based product that can integrate from the cloud to an on-premises application. Two vendors that McCabe says are particularly interesting due to their channel-friendly models are Acumatica, a provider of ERP software, and Intacct Corp., a provider of financial management and accounting applications.

In addition to SaaS-only vendors, traditional packaged software vendors that have long targeted SMBs, such as Microsoft, Intuit, and Sage, are developing portfolios of SaaS solutions designed to work with on-premises software. And there are integration products from vendors including Cast Iron Systems (acquired by IBM) and Boomi that are designed to link together applications spanning the cloud and on premises.

“The SaaS integration space allows companies to take advantage of disparate software providers and integrate them into existing systems such as ERP,” says Ed Laczynski, vice president of cloud strategy and architecture at Datapipe Inc., a provider of managed IT and hosting services based in Jersey City, N.J. Previously, companies that invested in ERP systems tended to buy everything they needed from a single vendor or that vendor’s ecosystem. “The integration space is important because it changes the landscape,” he adds. “Now companies can plug in a CRM system from a completely different vendor.” In addition, one of the concerns many SMBs have about SaaS is the difficulty with integration; Laczynski says that integration platforms address these issues.

While SaaS-only vendors may have an advantage in that their channel partner programs have been specifically designed with the cloud in mind, McCabe advises channel partners venturing into the cloud for the first time to assess what their existing software partners are doing in terms of the cloud. “You should find out what their strategy [is] for hybrid solutions, and make sure you can augment and resell what they are offering to existing customers,” McCabe says. Another benefit of going with packaged software vendors, at least in the short term, is the ability to offer your customers a choice between SaaS and on-premises solutions.

Selling SaaS-based hybrid solutions can be a challenge for channel partners. For one thing, there is the concept of recurring, incremental revenue and monthly billing. Then there is the size of the typical deal, which is generally smaller than deals in which software is purchased outright. “In the SaaS model, the deal size is usually less, but so too is the time spent implementing and being at the customer premises,” McCabe says. To succeed, channel partners have to make a higher volume of sales, which often requires reaching new slews of customers.

On-premises appliances and SaaS-based integrations certainly extend the kind of functionality to SMBs that previously may have been cost-prohibitive. And analysts say such offerings are most palatable to SMBs that are still nervous about the cloud. For SMBs that are looking to take full advantage of the cloud’s flexibility and agility, there are plenty of service providers that are offering hybrid infrastructure services.

CEO Chris Grady founded service provider XaaS Inc. to enable organizations to take advantage of the public cloudÂ’s flexibility and yet still have the same kind of performance and security as an on-premises infrastructure. The Vienna, Va.-based company offers a hybrid cloud service that combines physical and virtual resources. “We physically take a piece of our data center and move it on premises to a customer,” Grady explains. “We then tie the public cloud in our data center into the on-premises private cloud in a unified way and integrate it directly into the current architecture.”

The benefit of this approach, says Grady, is that nothing changes in a customer’s IP or networking architecture; customers have the ability to spin up machines at the XaaS data center or on premises if the data has to remain on site. Applications and data, Grady adds, can be moved back and forth between the data center and on site, allaying any fears about vendor lock-in and the associated inability to bring applications back in house once they have been sent to the cloud.

Another advantage, says Grady, is agility. By taking a physical on-premises machine and porting it to a virtual machine, provisioning is no longer a time-consuming task. “Consultants and channel partners can offer more strategic services for their customers because they are not so mired in provisioning,” Grady says. “With hybrid cloud computing, if the business needs something in terms of applications or infrastructure, the business can have it within days or even minutes.”

IT PROS IN ON THE ACTION
For many channel partners, the benefits that the hybrid cloud promises customers—flexibility, adaptability, and the ability to respond quickly to business needs—can also be applied to their own businesses. Among Datapipe’s many customers are systems integrators and VARs whose core competency isn’t in providing and managing infrastructure, but in developing applications and business process outsourcing, according to Laczynski. “When I think of hybrid cloud, I think of combining different modes of delivery, whether a dedicated physical environment, in a public cloud environment like Amazon, or in an environment like one of our data centers,” Laczynski says. Datapipe’s Stratosphere cloud computing platform enables service providers, systems integrators, developers, as well as those end customers that are inclined to quickly build out hybrid cloud solutions that fit customer needs.

One of the challenges that channel partners may face is the sheer number of ways hybrid cloud solutions can be deployed; consequently, identifying those customers that would benefit most from hybrid cloud solutions is not always so clear. Ron Suchan, director of sales and marketing at StrataScale, says he finds the biggest resistance to his company’s co-location model of hybrid cloud solutions to be what he calls “server huggers”—those people “who need to physically see and touch their servers.”

Another challenge is selling the right solution at the right time. At iland, a cloud infrastructure provider based in Houston, the hybrid cloud offering involves physical infrastructure tied into virtual infrastructure. “Our message around hybrid cloud today is virtualizing a portion of a customer’s infrastructure at their premises and giving the customer the ability to have integration into a public cloud entity,” says Dante Orsini, ilandÂ’s vice president of business development. “Based on the market, we see some customers that are at the very end of life on their existing infrastructure, and depending on their line of business, that might dictate what they are looking to the cloud for,” he adds. Typically, customers that make good candidates for hybrid cloud services are seeking to grow, have seasonal computing requirements, or want cost-effective disaster recovery services.

The hybrid cloud offers plenty of opportunity for the channel, but it is incumbent upon channel partners to get to know their customers’ needs and then devise a hybrid strategy accordingly. “You have to take what is happening in cloud computing, and be able to bundle specific services and applications to customers depending on what their focus is,” says OpSource’s Beck. “The cloud is not going to solve all your customers’ business problems—it’s the VAR’s job to match specific applications, workloads, and processes to compute resources, whether it’s physical server or cloud.”

The process of developing a successful portfolio of hybrid cloud offerings requires a lot of legwork in terms of identifying customer needs and finding an appropriate service provider, but once a channel partner has devised a strategy, the payback can be immediate. Unlike the prospect of selling hardware with its longer sales cycle and implementation, “with the hybrid cloud, there is an ability for resellers to generate recurring revenue today,” says StrataScale’s Suchan.

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