As hardware biz shrinks, VARs build out cloud management services

“We will be able to put up as a service an instance that [customers] can consume on a per-device licensing basis,” said GreenPages CTO John Ross.

“Say you have 50 iPads in the field—management could buy 50 units of the management tool. We give you a portal so you can deploy yourself. We guarantee that the adapters to communicate with your storage switches etcetera will work, but you control the deployment, management and visibility unless you want us to, and that would be another service.”

The key is affordability and flexibility. Ross said GreenPages could do that for $20 per end-user device per year. Analogous instances for server management would cost more.

Because GreenPages is working with BMC and CA, it can provide a single portal for both management products, Ross told attendees of the GreenPages Solutions Summit 2011 here.   Between them, CA and BMC pretty much control management systems used by the big service providers, and that helped drive GreenPages’ decision.

“I use CA or BMC in the background to communicate natively with the service provider provisioning system,” Ross said. That means if the customer ends up moving all or part of its infrastructure to a third-party hoster, then interoperability and migration will be easier because of that shared technology base.

Many VARs with roots in hardware reselling are scrambling to make up in services what they are losing in overall hardware sales margin. In addition, as more data centers virtualize servers or move applications to the cloud, they’re buying fewer servers altogether.

“We believe the hardware business has begun its decline and [the decline] is going to accelerate over three to seven years,” said Ron Dupler, CEO of GreenPages, West Kittery, Maine.

In other words, Dupler said, if you make money just selling or integrating traditional hardware solutions, you’re in trouble.

That’s not really news to VARs that have given up selling low-end desktops and even laptops because the margin isn’t sufficient to sustain a business. But server virtualization adoption means that even big consumers of big iron are buying a lot less of it. The more services a VAR can sell to data center clients, the better.

GreenPages, a big VMware partner with deep experience in virtualization, is pushing hard into the cloud and is building remote management capabilities—including Management-as-a-Service offerings that could take the sting out of teetering product sales revenues.

Hedging bets as hardware sales teeter
If it’s any comfort, VARs are hardly alone in negotiating this tricky cloud transition. Big technology vendors are all trying to sort it out and stake their claims.

VMware, CA, BMC and other large software powers are betting big on management tools and software platforms that can help get IT out of the server babysitting business. The Amazon Web Services model is inevitable, and hosting companies should recognize their place as commodity players, Ross said. Then solution providers will be able to capitalize on bedrock of cheap, infinite compute and storage. “We’ll provide SLAs in a much more sophisticated fashion than a big telco can,” he said.

Other VARs agreed that there’s no future in hardware, although most of them will sell it if the customer wants to buy it that way.

“We basically got out of the hardware reselling business about three years ago. At this point, we only sell hardware if the customer is holding a weapon,” said George Brown, CEO of Database Solutions Inc., a Philadelphia area systems integrator.

Hardware: Not quite dead yet
Summit attendees agreed that many hardware decisions now come down to buy versus rent and that the cloud model attracts those who must cut their capital expenditures. But when push comes to shove, many of these customers still end up buying hardware for their data centers. But whether their servers end up on-site or in the cloud, management remains crucial.

We basically got out of the hardware reselling business about three years ago. At this point, we only sell hardware if the customer is holding a weapon.

George Brown, CEO of Database Solutions Inc.

And VARs see management and deployment smarts as the cloud’s silver lining. 

Asked where his company makes money, Brown’s answer was simple: “Services, services, services.”

Summit attendees agreed, too, that they should not waste budget dollars training internal IT people for an Exchange Server migration that happens once every four or five years. Instead they should hire outside expertise for that and train their personnel on the care and feeding of the system once it’s up and running, said the IT administrator for a Connecticut hospital.

Others in the channel said that while nearly every customer that’s heard about Google Apps or Apple iCloud asks about cloud deployment, the vast majority of them take baby steps once they understand what’s really involved in a migration.

Luke Wignall, vice president of field operations for Common Knowledge Technology LLC, an Englewood, Co.-based solution provider, said there are many hidden costs to consider. Once the customers realize the true impact of a cloud move, they end up keeping much of their IT in-house. 

He cited the analogy that likens on-premises IT to home ownership and cloud computing to a hotel stay. “A home carries expensive up-front costs but provides maximum freedom in what you can do. A hotel is a super predictable cost, but you can’t move the furniture. It’s a vanilla environment.”

The problem is that no one runs a vanilla IT environment. “Once you talk to a customer about the cloud, the next question is what’ll it take to migrate,” said Wignall.  “And the answer is, ’I don’t know.’ No one knows because the idiosyncrasies of your environment mean no one’s done it before.”

For that reason, many companies start out moving some apps to a SaaS provider like Salesforce.com but end up keeping legacy and tricky homegrown applications inside.

“I agree that some hardware is dead. That’s old news. The desktop died something like 18 months ago when laptop sales surpassed it. Now it’s the laptops taking a hit from tablets. But at the end of the day, most people put their iPads away to fire up Word on a laptop,” Wignall said. Someone still has to deploy and service those machines even if they’re bought online.

Many discussions Wignall has with IT execs that don’t want to buy new servers end up with them doing exactly that because it would be impractical to move homegrown apps to the cloud.

Or, they end up virtualizing more of their existing infrastructure, even desktops, to wring additional life out of it. 

The irony, Wignall said, is that many of these customers might be better off simply buying – you guessed it — new hardware.

“We have a CPA firm that has 47 apps at last count in a virtual desktop environment. It’s not that big—maybe 20 users on VDI. Their aging desktops now all run Windows 7 fast, plus they have all their apps and they’re all virtualized. They spent no money on new PCs, but they spent $40,000 on infrastructure, and I’m not sure they saved a dime.”