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Home | New Service Delivery | Parallels, CSPs Can't Afford to Miss the Cloud
  Seth Nesbitt, Vice President Service Provider Marketing at Parallels
  Seth Nesbitt, Vice President Service Provider Marketing at Parallels

CSPs Can’t Afford to Miss the Cloud

Seth Nesbitt of Parallels talks to InterComms about how to get the most out of the Cloud

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Seth Nesbitt is Vice President Service Provider Marketing at Parallels, where he helps carry the message about Parallels’ vision of “profiting from the Cloud” to service providers around the world. Prior to his current role, Seth was Vice President Product Marketing for Amdocs. In May 2004 he founded the UK Product Marketing Forum in order to encourage the sharing of Product Marketing best practices within the UK. He also sits on the CMO Council’s North American Advisory Board. Seth earned his MBA in 2005 from Oxford University’s Said Business School where he wrote his thesis on Product Marketing strategy in technology companies.

Q: Interesting title – what do you mean by this?
A: It could be argued that Communication Service Providers (CSPs) missed some opportunities in the last 10 years. They certainly didn’t lead the market in the mobile application revolution. The next big opportunity is with cloud services. And, simply put, CSPs cannot afford to miss the cloud.

Q: How should CSPs be thinking about offering cloud services?
A: The good news is CSPs are in a fantastic position to capitalize on Cloud services for two main reasons: they own the underlying network infrastructure and they have existing commercial relationships with millions of customers. Further, some CSPs are already offering certain Cloud services like web hosting however very few have invested enough in the infrastructure or marketing to make them successful or bringing them meaningful revenues relative to their traditional network and voice services.

Q: What customer segments should CSPs target?
A: In general, all customer segments will adopt, or already use, some cloud services, whether its enterprise, small business, consumer, education or government, and CSPs must provide cloud offerings that align with the specific market being addressed. To date, CSPs have been focusing their cloud energies on their Enterprise and public segments. This is delivered largely through a direct sales model and the product centres around their core network and data centre services with some branching into virtualized infrastructure and storage.

While the cloud opportunity in the enterprise and government sectors is exciting in terms of potential deal size, I’d like to draw attention to another market - small businesses. These are the businesses that typically have very little in terms of their IT resources and they can benefit the most from the cloud services and applications. There are over 73.5 million small businesses and easily another 100 million home or small offices worldwide. Virtually all need a “web presence” and simple email. However, the majority of them will also greatly benefit from a range of applications, some which were traditionally available only to bigger organizations such as messaging and collaboration, backup and archiving, customer relationship management, and hosted PBX, especially as their business and marketing needs evolve.

Q: Why should CSPs target small businesses over other segments?
A: According to recent research from Spiceworks, small businesses are and will be adopting these cloud services very quickly, partly because it improves productivity and efficiency, and partly out of necessity, since they do not have an internal IT department. This becomes the easiest and best way for them to consume technology. Cloud services also make sense financially for small businesses, as there are no large capital outlays required and they can pay for just the services and applications they need, easily adjusting for both good and bad markets.

Q: Are there any particular end-user requirements a CSP needs to consider when targeting small businesses?
A: The way small businesses consume technology in general, and particularly cloud services, is very unique. Most of them do not care how it works so long as it works. To be successful, CSPs must make it incredibly simple for small businesses not just to subscribe to cloud services but also modify and manage their services and applications at any time. Modifications could be to the existing cloud services being subscribed to such as adding or deleting users, or increasing storage capacity, or this could mean adding new cloud services to their subscription bundle.

The last thing a CSP wants to do is introduce existing support costs from small businesses that cause confusion or frustration with their cloud services. This will destroy margins. The answer is providing an intuitive, self-service portal, or control panel, for small businesses to be able to easily manage the overwhelming majority of their needs.

Q: Do cloud services have any impact on churn?
A: Absolutely. Another reason CSPs cannot afford to miss the cloud is that cloud services fundamentally increase the average lifetime value of a customer. Let’s look at some internal data from Parallels that shows the impact in churn rates among small business who use one service (web hosting) versus two services (web-hosting and email hosting):

In short, small businesses that subscribe to web hosting services and use the hosted email services as well remain a customer almost three times longer than if web hosting without email is consumed! Furthermore, this positive impact to churn scales, as additional cloud services are added and bundled together.

Impact on Churn

Q: What is the best way for a CSP to rapidly get to market with cloud services for Small Businesses?
A: Developing a cloud solution from the ground up and integrating into existing OSS/BSS systems is a multi-year project. Building and managing a shared environment for applications (multi-tenancy) along with authentication, security, billing, and payment system integration are all very extensive and expensive projects.

Implementing commercial off the shelf automation software designed for cloud services that integrate with existing OSS/BSS systems is the fastest way to go to market. Given how rapidly things are evolving, time-to-market is THE critical decision making factor. This approach is also the most flexible, as a CSP will be able to adjust pricing and margins with the market, along with adding new cloud services.

Therefore, CSPs can rapidly and profitably get to market offering cloud services by deploying an open solution built on open multi-tenant standards, security, authentication and license tracking. Such a solution must:

1. Offer a catalogue of SaaS applications
2. Provide a flexible framework for easily adding new services and applications
3. Enable the syndication or sell-through of external third party cloud services (eg, Microsoft BPOS).

The Cloud Makes it Possible

Q: It also sounds like automation is important?
A: The key to success for a CSP is managing a cloud platform that is flexible, extensible and rapidly enables the roll-out of new cloud services. Just as automation is critical to profitability for traditional voice and data services, every possible aspect of purchasing, provisioning, billing and self-service management for cloud services should be automated. This is critical to keeping “book to bill” days low, support costs down and being able to rapidly introduce new cloud services. Further automation ensures operational efficiency thereby creating the opportunity for higher margins.

Q: What is the future of cloud services for CSPs?
A: Over the past few decades, communications have become ubiquitous. We no longer call a place, we call people. Cloud services take this trend to the next level. Documents, contacts, calendars, applications and other IT services are moving into the cloud. CSPs that will be able to leverage their network assets, put the right cloud automation systems in place, and aggressively target small businesses will be positioned for success in the years to come. After all, close to 40% of global IT spend is coming from small businesses and this spend is moving the cloud very quickly.

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