Author: Ben Hodge

More than a century ago, the Russian mathematician, Andrey Andreyevich Markov laid the foundations for much of the machine learning used in today’s driver-less cars and chatbot technology. He studied 20,000 letters in Evgeny Onegin, a poem by the grandfather of Russian classical literature, Aleksandr Pushkin, to predict the probability of vowels and consonants occurring in the text.

It’s a pity he had not been around a 100 years earlier to advise Pushkin on the probability of serious harm if you challenge your love rival to a duel!

To understand if Markov’s Models are relevant to the success of your MSP practice, try answering the following question?

How many times has your customer service desk received a support ticket for a problem solved in the past?

The chances are, if you have been successful for any length of time, the answer is many, many times.

The Problem

As the service provider grows it can face the following problems:

• Repetitive tasks can lead to boredom and lack of employee engagement
• Simple tasks repeated over and over again can be costly to service
• It can be time consuming and expensive to capture and recycle knowledge

The Promise of Artificial Intelligence (AI)

The market opportunity for service providers is expected to grow but increasingly there will be greater competition for profitable customers.

AI can help stave off commoditisation and margin erosion with the following benefits:

• Done right, AI can improve the customer service experience
• Reduce the time spent fixing problems
• Allow expensive resources to be re-allocated to higher level processes
• Improve profit margins
• Give you a competitive advantage

What do you need to get started?

First of all you need a lot of data to train your machine learning engine. The second thing you need is an easy-to-use interface to your new features and services. This requirement has driven an explosion in the development of chatbot technology and programming languages such as Python.

There are two types of chatbot. Bots that risk trying to parse anything you type at them, and bots that limit your input to a few safe buttons or keywords.  In the former, Natural Language Processing (NLP) is not looking for keywords in your text, like a search engine. Instead, it uses machine-learned pattern recognition to match what you say to an “intent” which has been “classified”, which means the bot has been trained to look for certain things.

Acquiring the training data and the time to program your chatbot may not be possible for every MSP but not to worry, the Predatar team has been busy working on a solution, for the benefit of our partners.

The Predatar Service Chatbot

It’s long been known that men don’t like asking for directions when lost. This is probably also true for IT experts when faced with a support issue. That’s why we have built up an extensive knowledge base so that he (or she) can ask the chatbot for help without fear of loss of face.

For every knowledge base article we have had to think “what question is this article helping to answer?”. We wrote multiple questions for each of the 2000+ articles. All the questions, answers and topics created the data set which was fed into our NLP engine to build a chatbot that can understand questions, rather than just keywords, and reply with the relevant knowledge base article(s).

NLP means that if the user does not input the exact question, the bot will still return the right answer.

Once launched, we will retrain the chatbot by studying the questions users are asking on a daily basis and storing this information in the database.

Finally

If you have been researching AI to grow your business, we would love to hear from you. Drop us a note at info@predatar.com or why not make an appointment to meet the team at IBM Think 2018 in Las Vegas from 19th – 22nd March.

Most people know the story about NASA’s “Anti-Gravity” Pen from the 1960’s. The story is part myth but supposedly NASA spent $1 million attempting to build a pen that would work in outer space whereas the Russians simply handed their cosmonauts pencils.

True or not, I think about this story when marvelling at the success of Amazon Web Services, the public cloud pioneer. When most of the tech titans were navel-gazing, myopically focused on technology, Amazon focused on what the customer actually wanted – better business outcomes.

I am worried for many IT channel businesses. Despite Amazon showing them the way, most are still obsessed by technology. Why do some of us do this and why is it a problem?

Part of the reason is because an obsession with technology is what worked in the past. In the halcyon days of the channel, technology was not sold to line of business, it was owned and operated by the IT department. Today however, the digital transformation imperative is blowing up not just traditional architectures but also relationships and processes. Business leaders are looking to IT to be an agile provider of service outcomes rather than simply the owner of the infrastructure. To add value in this new model, channel players must get out of their technology bubbles and comfort zones and start obsessing about service design.

Sooner or later, if left unanswered, these trends will impact the balance sheets of today’s VARs (see CRN’s VAR 2017 profit analysis). When business leaders think of cloud they imagine lower IT costs, more funds for innovation, better customer insights and fewer data centres, not more irrelevant technology. Gartner predicts that 41% of workloads will be in the public cloud by 2020, driven by the desire of companies to focus on outcomes not technology.

Despite this, the trend in recent years for the IT channel has been to expand the number of technology partners in their portfolio. Globalisation combined with an abundance of private equity and venture capital has caused commoditised markets to become even more fractured, reducing the marginal gains available for the channel. The channel’s constant search for the next breakthrough start-up can be a big distraction since it is often motivated by the pursuit of short-term profits, rather than the needs and wants of customers.

Instead of searching for monopolistic positions or obsessing over technology, VARs who want to evolve their business models, should focus instead on delivering the right outcomes for their customers, with great service, for a fair price. In this hyper competitive and commoditised market, the only way for a VAR or MSP to differentiate is through service.

So ask yourself this question – “how much of our time, money and resources goes into improving our service in comparison to obsessing over the technology of our suppliers?”

Most channel CEOs know this, which is why most of their web sites are full of such statements around the great people they employ, or the great customer service they deliver, being their unique selling proposition. What customers really want to know is can you prove your words with clear outcomes and metrics?

Take Backup-as-a-service (BaaS) as an example. Nearly every IT hosting company or service provider has BaaS in their portfolio of offerings and so they should. Customers loss aversion bias towards their data, now more tightly linked to revenues than ever, has fostered a global business worth more than $65 billion per year. The emergence of ransomware, added to ever more punitive regulation (e.g. GDPR) will keep Optimism Bias (the tendency to think it won’t happen to you) in check and expenditure in this sector high for years to come.

What’s surprising is the poor service offered by so many “service” providers. One cause of this poor service is the tendency to measure and track the wrong metrics. If we want to focus on good outcomes the only good outcome for a backup service is a timely and completely successful restore of a piece of data, or application. Yet 99% of service providers track only the “backup success rate” metric which has only a partial correlation to the desired outcome and I think I know why. They default to the easy to measure, quantitative elements, not what’s most closely linked to ensuring good outcomes. If regular testing is required to ensure RPO and RTO metrics are the standard, even though it’s harder to do, then find a way to automate it.

Technology cycles are speeding up and using technology alone as a point of differentiation is not sustainable in the long-term. If you want to accelerate your evolution from VAR to MSP, my advice is to take a leaf out of the Russians 1960’s space manual and focus on service outcomes, not technology.

As a next step, to compliment the technology metrics your CTO needs, the commercial metrics your CFO needs, take the time to craft the metrics that align to the desired outcomes of your most important stakeholders, your customers.

Sales is the 2nd oldest profession but lately it feels more like the 1st. The professional salesperson is still the primary link between most IT channel companies and their customers – and one of the most expensive. Being so essential to the primary purpose of the business; to acquire and retain customers, the seller has always been under intense pressure to perform.

I would never want to make excuses for lazy, unskilled or under-performing sales people but it seems to me they are taking all the flak, when often the blame lies elsewhere.

Everyone from social media evangelists to Harvard professors seem ready to write off sales people, citing new forms of communication to artificial intelligence, as reasons for making the traditional sales process obsolete. Within the VAR (Value Added Reseller) business itself, executive managers, frustrated by the slow pace of evolution to an MSP (Managed Service Provider), have been quick to state that successful infrastructure sellers are unable to make the switch to selling managed services.

I don’t share this view. Good sales people are good salespeople, no matter what they are selling. Most sales transactions are a transference of feeling as much as an exchange of cold cash for product and humans are still better at this than robots. Same as with the world’s oldest profession (so I’ve been told)!

I am biased. At heart I am a salesperson and I love selling, but why are salespeople today under so much pressure and what can be done to alleviate their plight?

In their defence

Back in 1995 when I started in sales, according to the OECD, the IT market was worth $527.9 billion, far less than today’s estimated value of $3.7 trillion. Smaller yes, but it was growing at 9.5%, twice the GDP rate, and the supply to demand ratio was skewed in favour of the seller. In July of this year Gartner cut IT spending growth projections to 2.4% from 3% and data centre systems, the mainstay of the traditional VAR, essentially flat at 0.3%.

If the total IT market in 2018 is still below the $3.8 trillion level it reached in 2014, it stands to reason that today’s IT sales professional is trading in a more competitive market than twenty years ago.

Fighting for a share of that market are a lot of other experienced sales professionals. In the USA alone in 2016 there were an estimated 133,114 IT channel companies as well as 200,000+ self-employed contractors who could be related to the channel.

All but the biggest VARs are owner managed so they need to make cash and profit to continue to trade. In a world awash with credit, fuelled by the easy monetary policies of the world’s central banks, your typical VAR is competing with venture capital backed start-ups where huge losses are tolerated as long as their revenues increase.

It’s like bringing a knife to a gun fight.

While the VAR seller vainly leaves their pitch on voicemail systems, the “hot” start-ups invest millions in coordinated marketing and PR campaigns. The disparity will continue until policy makers tighten liquidity and low yield bond holders stop looking to put their money in riskier assets.

So what’s to be done?

In a nod to Jerome McCarthy’s 4Ps of the marketing mix, here are my 4Ps for CEOs of your typical IT value added reseller.

Purpose

Decide what you want to be. I know some very successful resellers who throw off a lot of cash and have no appetite to evolve their business from a VAR to an MSP. You might decide that you are a few short years from retirement and therefore lack the desire for a transformation journey lasting several years. Conversely, I know other owners who are very much drawn to the high valuations which come with growing sustainable recurring revenues. If you decide on the latter, you need a good plan in order to protect your cash balance while you make the transition. It can be hard to run one model well, running two is doubly difficult.

Portfolio

If your client offerings are “me too” then prospects are unlikely to walk through your door for any other reason than price. Your sales people will find it difficult to book meetings and no amount of spam content or email promotion is going to change that. As the CEO, it’s your job to set the vision and strategy and to build products people want to buy. I see a lot of VARs broaden their portfolio with more technology vendors or they latch onto the previously mentioned “hot” start-ups which promise the next big thing. This is a perfectly good tactic but without exclusive distribution agreements any competitive advantage will be fleeting.

If you want to evolve, you need to focus more on your organisation’s value, not that of your technology partners.

Positioning

Salespeople are always hungry for a good story to tell. Lame slogans like “we put our customers first” or “we care about your business” are not going to cut it in today’s highly competitive sales landscape. How much time are you spending on positioning rather than simply vomiting “creative” content on your client and prospect base? Teach your sales people to have a perspective, or a point of view, which is relevant and will engage your carefully targeted audience.

Pay

It is around the subject of pay where I see the biggest discrepancy between what CEOs say they want and their actions. All too often the big transaction deal gets the rewards whilst the multi-year service contract gets a measly commission pay-out. Often the reason your sellers are not winning managed services deals is not because they can’t, but because they don’t want to.

Here are a few likely causes:

It’s not as profitable for them in the short term.

Often commission plans only pay out on invoice value, so for a seller they are far more motivated to sell upfront transactions. To compensate why not think about extending “credit” to your seller, just like a bank or investor might? If you can pay out, up front, on the annual contract value or even the total contract value, you will motivate the salesperson to change their habits. But wait, I hear you cry. What if the contract fails or the salesperson leaves the company? My response to the former is, make sure your delivery engine gives such great service that your customers have no reason to leave. For the latter, if you have a sales leaver, no problem, the business still owns the “asset” (contract) and that asset has shareholder value. You have also reduced the risk of business walking out the door with the “absconder”.

One could argue that if a customer cancels a contract, it is a bit like a debt default. In which case either the creditor (the business) takes a haircut or forces the debtor (account manager/seller) to repay all or some of the outstanding debt.

They don’t trust your delivery capability.

The mindset of most salespeople is often, quite rightly, about protecting their personal brand and integrity, not yours. On the whole, as a tribe, they can be very reticent to sell solutions that will fail or disappoint their customer. Contrary to popular myth, they have a long-term approach to build customer relationships and customer value. I’ve seen salespeople refuse to sell a new managed service offering, not overtly but quietly, simply by not promoting it or coming up with a convenient excuse because they don’t believe the business can execute.

Fear of loss of account control.

Never said out loud but always lurking under the surface. There exists a fear in the mind of the seller that their services will be superfluous if he or she sells a multi-year managed contract. In my experience, a salesperson still has plenty of value to add after the ink is dry. Furthermore, the customer relationship is more strategically managed, creating opportunities that under the previous model would not have transpired. Ultimately though this is about the trust between the seller and their organisation’s management team.

In short changing your business operating model is always going to be hard. However, not having your sales team aligned with the change just makes things even harder. I’ve seen that taking the time to understand their challenges and motivations can often make the difference between success and failure.

Your journey from VAR to MSP needs to be carefully controlled. For many, the traditional product business still pays the bills whilst the MSP division could be just getting started. In having to balance these two models, business owners face a challenge in the mental shift required to be successful at both.

I see too many IT channel players act like MPPs (managed product providers) not MSPs (managed service providers). The emphasis needs to switch from thinking about the technology product which powers your service offering, to the actual service provided.

Your customer or prospect can most likely get the “product” from dozens of other suppliers but they can only get your service from you. As a result you should focus on engineering the best service possible.

I’m not saying you don’t need to know the technology, you absolutely do. In fact, its assumed that you know the technology better than your customers, otherwise what’s the point. All I’m saying is it’s not sufficient to win consistently over the long term. A few early wins are easy, the problems come with success and as you start to scale your MSP business.

Service Design

There is a scene in “The Founder”, a film about Ray Kroc and the McDonald brothers, when the two brothers shut down their first restaurant even though its making money and literally go back to the drawing board. They go to a tennis court and chalk out a design for a kitchen, then choreograph the process required to deliver food and drink in less than 30 seconds. They knew their system was a lot harder for their competitors to copy then their recipes, or their ingredients. Mainly though, they understood what the customer really wanted.

The other lesson I learnt was the importance of simplicity and standards. The McDonald brothers knew they could not deliver both a broad menu and an excellent customer service. As a VAR it is tempting to take the broad portfolio of products you currently carry and build services for each one. This is possible but it’s a lot of work and how can you guarantee customer service excellence for all of them? Is it not better to design your service around one or two vendors and spend the time fine tuning your process?

Automation In the cloud era, automation is seen as critical. I believe automation is important, it can help drive your process but ultimately good service is about people, not products or processes.

Companies are rapidly moving to a utility model of IT explaining why many more VARs are building managed services divisions. Running a managed services practice within a VAR is a challenge which requires the full commitment of the management team. My previously published article went into more detail on the disruption driving IT channel transformation.

It is difficult for an MSP to provide a differentiated level of service which stays profitable whilst growing the practice – but it’s not impossible. As intermediaries, VARs have always had to focus on customer service in order to win contracts for technology manufactured by a third party. As there is increasingly less to differentiate between the vendors’ technology, VARs will need to draw deep on these skills if they want to compete in a crowded MSP market.

This article discusses two common customer service challenges and then lists ten ways to raise your game.

Being a “Prisoner of the Past”

Do you remember when you bought the home you are living in now or the car you are driving? Do you recall how quickly the excitement wore off and boredom set in? It’s the same for your customers. Typically, the value of your service is driven down as they start to take you for granted.

It’s in the early stages of the service when you make the most improvements. For example, in data protection it’s not hard to improve the percentage backup success rate from say 90% to 98%. Achieving perfection however is not only resource intensive and costly for you but could also be boring for your client causing them to disengage.

The early stage of any service encounter benefits from the “Halo Effect” which is why it’s important to focus especially hard on the first 90 to 180 days of the service.

Murphy’s Law #7 – “It is impossible to make anything foolproof because fools are so ingenious”

Anyone who has worked in IT for any length of time knows that “stuff” happens. My experience in data protection services (backup and recovery) is that 99% of the graft you put in goes unnoticed. Then a big restore is required and suddenly your whole customer service score is measured by that one moment of truth. How should an MSP resource for this whilst still remaining profitable?

Ten tips for customer satisfaction nirvana

1. Make your best resources available

I see too many VARs penny pinch their fledgling MSP business by not making their star technical people available to the managed service team. Those that are serious about the MSP practice will have a process in place to escalate level 3 incidents to their top technical people. Level 3 incidents, like the system recovery “moment of truth”, should not be an everyday occurrence and hence manageable.

2. Use old fashioned communication techniques

If you want to be profitable you should train your customers to raise “calls” via a portal or if you don’t have a portal, via email. It saves time and it creates an audit trail. That said, studies have proven that people rate customer satisfaction higher with people they like. It’s hard to build a relationship via email so try picking up the phone when you close an incident to check their experience. As your business grows consider hiring someone who can visit the customer’s premises on a scheduled basis.

3. Be proactive

If you have good monitoring systems in place you should know bad news before your client does. Make sure you’re the first to tell them.

4. Set expectations

Customers can have fuzzy or sometimes unrealistic expectations and often assume you know what they want. As a good MSP you need to actively shape or at least agree your customer’s expectations.

5. Tell the customer something they don’t know

When you deal with a large client base it can be time consuming to know each business intimately. That said, you will be more competitive if you can tailor your offering to the needs of the client or a specific industry. In dealing with many customers you will have experience of more best practices, so make sure you pass them on. Have a process in place which distributes, either via your portal or a simple newsletter, interesting bits of information or articles.

6. Do something unexpected

As the “Halo Effect” wears off and the routine of providing a managed service sets in, offer something of value which is not in your statement of work or service agreement. A VAR / MSP which decides to show the customer how they can avoid a hardware expenditure, especially if this delays a transaction for the VAR, is one example of an unexpected act and will certainly build trust.

7. Remind the customer of your value

I see a lot of MSPs share key performance indicator (KPI) reports with customers but with little historical context. If you provide good services, then the performance of the system should have improved. If this is the case, make sure to remind your customer and reset performance goals together with them so that you cannot be found guilty of simply maintaining the status quo.

8. Consider using a cool customer facing portal

A big fear of potential clients is the fear of losing control. A portal which provides transparency, insight and a connection to your service desk helps to build customer confidence and trust in you.

9. Run a service improvement programme

This needs no explanation. The MSP market is competitive and getting ever more so. I don’t care if you use Six Sigma, ISO or an excel spreadsheet, but do something and make sure it has board level visibility.

10. Build your brand

For a VAR the focus on marketing is typically one of sales lead generation whereas an MSP requires much more in the way of brand development.

People pay more for a recognisable brand – even in IT services.

It might pay you to seek out the skills necessary to build your managed services brand.

It can sometimes feel that the speed of change is unprecedented and that we live in an age of accelerating disruption. Sure it feels that way but how much is down to the way news is disseminated through commercial and social media? Impatience and greed spur on Davidianesque cult-like followers who broadcast how the latest technology will transform businesses. Business ideas which maintain the status quo are sidelined as boring and are not given the same level of exposure.

Whether we are living in the fourth industrial revolution or in the age of acceleration; one could argue there was more technological change in 1903 when the Wright Brothers had their first flight, or when man first stepped on the moon in July 1969. When framed against those achievements where would you place that great disruption – Cloud Computing?

Motivated to make sense of my own, often conflicting ideas, my aim is to debate the changes taking place in the IT channel. Through my work helping partners, many of my peers are asking the same questions about how to thrive, and not just survive, the next five, ten or twenty years in business.

7 Channel Forces

Cloud Computing

The rental of infrastructure by a relatively small number of large suppliers such as Amazon, Microsoft and IBM, is one such force. This rising IT oligarchy and it’s impact on the channel has been talked about extensively but there are many other factors in play.

Business investment

Levels of business investment in the Western world have been in decline despite companies generating record levels of cash. In the UK, according to the Office for National Statistics (ONS), from 2010 to 2015 the average growth in investment was 5%. In 2016 it fell by 1.5%, the first annual decline since the financial crisis. Business investment consists primarily of buildings, IT, plant and machinery and in a heavily services based economy, such as the UK, IT spend represents a large percentage of the total.

Businesses will invest capital if they feel it can deliver a better return than leaving it to accrue interest but investment is clearly important to improve productivity and drive wage growth. Productivity, as measured by GDP per hour worked is 22% lower in the UK when compared with the USA which has seen higher levels of business investment in recent years.

With base interest rates at historic lows (0.25% in the UK) you would think investment would pick up unless perhaps leaders’ compensation plans make it personally more beneficial to inflate the stock price, through cash buy backs and/or increased dividends.The EY Item Club forecast for business investment in the UK, shown below, does not make for especially happy reading.

Technology Slowdown

This may seem contradictory to the prevailing sentiment about digital acceleration and transformation however from a hardware perspective, there is evidence to suggest this is the case for IT infrastructure. A report by MIT in 2016 suggested chip maker Intel had put the brakes on Moore’s Law citing delays to the new 10nm silicon. It appears the reduction from 14nm is testing the laws of physics. So while some pundits have talked about “entering the second half of the chess board” around 2007, until Quantum computing becomes practical (and that may still be a decade or more away) we may not be going too far, or as fast, into the second half of that chess board.

Enter the Dragon

In China, over seventy million manufacturing jobs have been created since 2000 – vastly more than the combined total of forty-two million manufacturing jobs recorded in Europe and the USA in 2012. Leaving aside Foxconn’s meteoric rise, another company which has risen from #46 in the world’s largest hardware companies in 2009 to #12 today, is Huawei. Its revenues have grown organically from $6B to over $60B in less than ten years. The figures do not state the percentage of revenue generated outside of China but when you consider IBM’s published revenues in the UK fell by 8% between 2013 and 2015, it could be a contributory factor.

Despite the EU’s protectionist stance, will China’s new “Belt and Road” initiative make it more or less likely, we will see Chinese companies take more market share in western markets, that for so long have been dominated by US tech giants?

Do you feel old yet?

According to a research report published by CompTIA in January this year, 40% of traditional IT channel people are expected to retire over the next ten years. When you last attended a big vendor’s conference, what did you see looking around? Even a recent Blockchain expo I attended in London felt like “daddy dancing” with a sea of grey haired people trying to hang out with the cool kids.

Software is eating the world

From software defined everything to software as a service (SaaS) there is a big shift away from commoditised hardware. When software is either a piece of paper or an online licence, is some part of the channel’s role reduced? It is a changing picture but for the traditional vendors IBM and HP, the percentage of software sold via their channels have been significantly less than their equivalent hardware businesses. Fortunately the impact of this force can be offset by the higher margins available.

New kids on the block

There are a new breed of channel players arriving to take your business. Non traditional partner types with SaaS only business models or “cloud-only” solutions, are on the march. In 2016 over 100,000 partners attended Dreamforce, the conference representing Salesforce. Many of these partners are small but they are nibbling around the edges of your business and they are growing in size and volume.

Channel Symptoms

What is the impact of these forces? An analogy is to compare it to the debate about climate change. For some people, there is no evidence of significant impact, for others massive. I know resellers that are having record years selling hardware infrastructure. Like climate change the forces at work are varied in their impact. They can be resisted by great execution or sheltered from by geography.

1. Squeezed margins. Predominantly hardware-based resellers seem to be making net margins in the low single digit figures, 2-3% being typical for a well run company. There are very few pure hardware resellers still around so I suspect some of the margin created is boosted by professional services revenue. When talking to channel players the talk is often of having to run harder to stand still with evidence of a greater number of transactions required for the same level of revenue. I’m also hearing of longer sales cycles which although not immediately apparent, have a negative bearing on the bottom line.

2. Slower revenue growth. With supply outstripping demand the channel in the last few years has started to get serious about marketing. There has been a boom in marketing agencies and marketing roles within the channel. Countless magazine pages and blog posts have extolled the virtues of generating demand through marketing led campaigns with less emphasis on the sales process. Suffice to say many of the business owners I have spoken to, have been left frustrated by the lack of measurable results.

3. Higher staff turnover. This one is harder to measure and single out for the IT channel since there are macro trends which are changing the world of paid work, everything from the “gig economy” to changing employment laws.

4. Business consolidation. In 2016 we saw one of tech industry’s largest acquisitions, that of EMC Corporation by Dell Inc. It is the subject of debate how this will impact the channel but surely any competition upstream is likely to increase competitive pressures in the channel.

Evolutionary Responses

Darkling beetles of the Namib Desert, located on the southwest coast of Africa, live in one of the driest habitats in the world. But some species of Darkling beetle evolved to get the water they need from dew and ocean fog, using their very own body surfaces. Early humans who started farming domesticated animals evolved the ability to digest milk beyond infancy; pretty useful when you have a ready supply of food literally on-tap. The IT channel when faced with the disruptive forces discussed earlier, need to evolve a a little bit quicker than the Namib beetle, or early human settlers.

For those wanting to accelerate the Darwinian process the possible responses are many and can depend on such factors as:

• What is the core competence or even DNA of the business?
• Personal preference or interest; what do you like doing with your money and time?
• Available resources and skills
• Life cycle of the business and exit plans

In another article I will be delving more into the evolutionary responses taken by partners. It is worthy of more coverage than I can give it here.

To leave you all on a positive note we at Predatar believe the rise of cloud computing presents more opportunities to the channel than it takes away. My twelve year son, who clearly demonstrates far more aptitude for technology than I, is able to build his own unique creations using game engines that I could hardly imagine with my junior Lego set #BITD.

The cloud with its open source software and freely available APIs, allows channel players to create something truly unique to them. The opportunity to build sustainable competitive advantage, not based on labour arbitrage or size but on how quickly a business evolves and adapts to market demands, is at the heart of this debate.

We’ve talked about licensing on the blog before, but that was way back in 2013, so it’s about time we revisited it. Why are there 10+ ways to license Storage Protect and what are the benefits and pitfalls of each?

Storage Protect has evolved a long way from its roots, to what has been rebranded to Storage Protect and brought into the wider Spectrum brand or bundle of software defined offerings from IBM.

So let’s list the different ways to license Storage Protect:

• Processor Value Unit (PVU)
• Processor Value Unit (PVU) Sub Capacity
• Capacity Bundle (backend)
• Capacity Bundle (frontend)
• Spectrum Suite
• ASL Capacity backend
• ASL Capacity frontend
• Enterprise License Agreement (ELA)
• Storage Protect Archive
• Storage Protect for Protectier
• Storage Protect Device License

There are simply too many to cover in detail here. The important thing is that each has positive and negatives dependent upon the characteristics of the environment in which they are deployed.

Clearing the complexity

Let’s try to demystify these and give some insight into them and when you might use them.

From experience I hear people complaining about Storage Protect as being complicated and too big a challenge to master. It’s not and it doesn’t have to be.

The best way to approach licensing is to start by asking a few questions:

Do I store a lot of data? Do I have a small number of servers or a large number? And one very important one. Am I using the features of Storage Protect that make life easier?

It boils down to this: a ratio between servers and capacity. If I have lots of data and only a few servers I need to license the server. If you have a small amount of data and a large amount of servers, you need to license the capacity.

That then steers you in the direction of one model or another. It’s a steer, but not the final destination.

Customers tell me that one of the biggest issues is compliance. IBM are auditing more and more and if you are using PVU’s, tracking, controlling and governance is not simple. I’ve lost count of the number of customers’ who upgrade their server estate and forget about buying more software to cover the new, bigger, faster processors. Customers’ deploy VMware clusters and get caught out by spiralling PVU counts. Customers’ who forget to install ILMT and if you don’t know what ILMT is, it’s painful.

For some, even if PVU’s are cheaper, they still convert to a capacity model to do away with the management overhead.

When you are on a capacity model you need to think in a different way. It’s easy, it’s great but now you have a new set of concerns. You no longer care about software deployment, you are entitled to install and use every Storage Protect tool, as detailed here. You can install wherever and whenever you want without the need to track servers or how many cores of what type is in every server. And no more ILMT. The only thing you care about is that all important number of TB in the Primary Pool: simple.

Oh and data growth!

You can manage this effectively. Things to think about are

• Am I using dedupe?
• Have I switched on compression?
• Have I cleaned house and removed all the stuff I don’t need?
• Can I put more data on disk?
• With access to all the TDP’s have I setup incremental’s on VMWare?

As a business partner who has deployed container pools and tracked the result via our management and automation solution, Predatar, we see an average of 4:1 data reduction. It is possible to get even better reductions, but each account is different and we want to set expectations correctly. The key point here is that Storage Protect is licensed post the data reduction. This can flip the PVU vs Backend Capacity model debate firmly in the favour of a capacity model.

It’s fair to say that I favour capacity models over PVU.

Now I have nailed my flag to the mast it’s worth focusing on two of the most common capacity models: IBM’s Suite for Unified Recovery (SUR) Backend Capacity and ASL.

The first thing to be clear about is that the software code is exactly the same. These are two different ways to access the same software.

What is the difference? The quick answer is that ASL is Opex and SUR is Capex. One is via IBM PA and one is via an IBM Business Partner.

Do you want to rent or to buy?

Buying is nice, we are all used to this, but buying IBM software isn’t a one off fee. Although you buy the software once, after the initial (normally) three-year period, every year IBM asks you to pay for support on the software. This enables you to keep up to date with the software and access support, if you need.

What if the cost of that software support was the same cost as the ASL rental? In my experience the ASL rental can be cheaper. You avoid the upfront Capex expenditure and get the same product for less that the annual IBM PA renewal.

Why is this the case? You are buying ASL at the Business Partners price banding not yours and the majority of cases the Business Partner has a better banding – because they’re buying larger volumes for multiple customers.

ASL was designed to enable Business Partners to ‘aaS’ solutions. This means that you need to buy additional support offerings from the business partner. This doesn’t have to mean cloud or a managed service. My customers just need to use Predatar, or buy a number of Service Units.

Even with this element, I have written a good few business cases that show a customer can get a Fully Managed Service to proactively manage their estate and all the ASL software AND do so for less than the annual IBM PA Renewal and projected new license spend.

So why isn’t everybody doing this?

I really believe more should. As more organisations adopt a pay as you go, or utility mindset, it will become more popular.

One of the reasons I see people not going for ASL is a sense of being locked into a particular Business Partner. That is considered a risk and one that outweighs the financial benefits. Another is that IBM sellers do not recommend it. As a cynic, the revenue is associated to the Business Partner not the end user, so does not go towards individual’s targets. IBM sellers do get paid on it, but they don’t all know that or know how to claim it. This is one of the reasons we’re running sessions with our IBM contacts to help them understand this better.

Adding up the licensing options

As I said at the start, every model has positives and negatives. Each option can be easily modelled with real numbers and one size does not fit all. There is no need for guess work.

What I always encourage my customers to do is review their options regularly. There are always ways to reduce software costs, the broader question is, are the benefits worth the cost of change?

If you want to review your Storage Protect licensing model, Predatar have experts who can help you analyse your licensing and ensure you’re getting the best possible value from your business recovery platform. Don’t hesitate to email on info@Predatar.com or call to organise your initial free licensing review to see if you can save costs, or get better value from your existing implementation.

Due to popular demand, we’ve created an update to this blog. Please read 10 more ways to licence Storage Protect or find out how much you could save with our Storage Protect savings calculator.