From threat to theatre: CenturyLink and the cloud channel conundrum

Channel distribution is a relatively new approach for CenturyLink in Canada that is gaining ground with the advance of cloud service delivery. The company is now in the midst of building a team, which is working with direct sales to help develop channel presence through the identification and onboard of new partners.

As it goes to market, CenturyLink in Canada emphasizes carrier neutrality – the company’s extensive US network infrastructure does not extend north of the border – as well as IT infrastructure services. According to Bik Dutta, director of alliances and market development at CenturyLink Canada, though a mix of the company’s data centre offerings may be attractive to certain integrators looking to deliver hybrid scenarios, cloud is the focus of most new channel activity since to “the universe of channel partners and prospects that are out there, cloud is newest, it’s not well done and there are not a lot of providers in Canada. So it’s a good conversation for us to have as many of these organizations work to figure out how they are going to tackle cloud within the context of their own business.” If this is a good time for the channel conversation, it also has to be one that balances the needs of the customer, partner and provider. InsightaaS has had an opportunity to speak with Mr. Dutta on how this balance can be achieved, and on the unique input and value that each member of the alliance brings to the cloud channel conundrum.

 

Mary Allen, managing editor, InsightaaS
Mary Allen, managing editor, InsightaaS

Mary Allen: When cloud first gained prominence as a new means of IT service delivery, it was viewed by the channel as a threat – a direct link between the customer and provider that would bypass traditional distribution networks. Since that time, the channel has shown remarkable resilience due in large part to its function as a ‘trusted advisor’ on best of breed solutions, and the conversation has become more sophisticated. In response, vendors have developed programs that address customer interest in maintaining their channel relationship, but how does the cloud provider organization weigh the benefits and costs of this approach to market?

Bik Dutta: When we use the word “channel” there are a lot of connotations. In the traditional definition, there were VARs, distributors and the customer; and we at CenturyLink could be viewed as similar to the hardware manufacturers, as the ‘cloud manufacturer’ or ‘cloud wholesaler’. When you look at VARs that are capable of delivering managed services, for example, they have the relationships and do a lot of unique things for that customer base that they have developed through decades of working with clients. And as the customers transition to different providers, they still go back to the VAR for assistance. We want to piggyback on that.

The cloud infrastructure services that we provide are only one element of what the VAR can offer to the customer. VARs that have traditionally done managed services have been agnostic in how they package these services and where they deliver them from and to. Typically, they don’t own data centers so the service destination doesn’t matter to them: it could be to the customer’s on-premise environment, to their own facility (rarely), or to a third-party data centre. With cloud, this provider group has a whole other option – they can leverage folks like us, while we have an opportunity to cast a wider net. For us, it really becomes a segmentation exercise that considers the account, coverage models and geographic markets as we try to extend our reach across the country. This is something that is difficult for us to do with our own direct sales team.

Allen: The reach scenario that you have described is in many ways the classic argument for a channel program. But how has cloud changed this equation? How are programs adjusted to take into account the fact that providers like CenturyLink now have automated capability to bill customers directly?

Bik Dutta, director, alliances and market development, CenturyLink Canada
Bik Dutta, director, alliances and market development, CenturyLink Canada

Dutta: We have experience in a couple of different categories that might help explain how we address that topic. In cloud in particular, we have white label relationships with some providers who are able to completely white label our cloud portal, making certain service available – or disabling others – depending on the customer size they are going after, where nobody knows on the backend that the service is provided by CenturyLink. These are essentially reselling our services ‘as is’ without adding anything on top of it. In this pure resale model, cloud becomes another service that the providers (VARs, solution providers, hosting providers) can to deliver to their customers.

The other option is an integration relationship where a partner might need a foundation for managed services like software integration or ERP, or ERP integration services and they need to have a hosted model for their client. In that sort of situation, the partner needs a provider like us that can make it irrelevant to the customer what location the service is being provided out of because they pay the bill to the integrator, who is delivering an end-to-end solution, which includes infrastructure management. This helps us to reach customers in markets where there is more depth in integration, more customer intimacy in an application model.

In terms of billing, the way we have built CenturyLink cloud is with as much self-service as possible. Every time we develop new features, the overall objective is to allow robots to run it, as opposed to humans. We have managed services capabilities and the intent here was to build self-service for this target. But with partners, we want them to add value in terms of managing clouds: there is a lot of room and a lot of need for enterprises to have managed service providers manage their infrastructure workloads for them so they can focus on the application. There is a whole roster of providers and consultants that can manage cloud – and our cloud – on behalf of clients. There is a lot of automation, but there is still work to be done within that to manage the cloud, and this functionality can be outsourced to the consultant that the customer is used to dealing with.

Allen: You have described three types of partners – the white label relationship, the managed service provider who needs a foundation for delivery of integration and other services and the consultant/integrator who provides cloud management. What about the partner who adds value through creation of vertical specific capabilities?

Dutta: ERP is one area that we are looking at. We are trying to leverage the success that we have seen with one integrator that is providing an ERP solution in one niche vertical. For the higher education sector in certain geographies in the US, this group has packaged up the software and are offering ERP-as-a-Service to customers who are asking them to take on the software, the integration and the managed hosting as well. We call this as an ‘embedded model’ as we would embed their software capability on our foundational infrastructure services.

More broadly, ISVs represent an area that we are carving off as a separate sales segment. Through Savvis and the CenturyLink network business, we have built relationships with a number of companies in that sector. Here we are looking at ISVs as a type of channel, where it’s not just a ‘sell to’ opportunity where we brought them in as part of a vertical, but also a ‘sell with’ partnership that we are looking to develop. This is where cloud comes in: the objective is to work with a handful of the channel or account managers to develop the MBOs as well as the metrics needed to create blueprints. Within the CenturyLink cloud, there is blueprint functionality and a cloud marketplace for blueprints, so customers who are looking for software ABC can with a few clicks of a button get properly sized infrastructure that is vetted by CenturyLink cloud. So all they have to do is get the licenses from the software vendor. This is another aspect of building our channel – and our cloud – ecosystem around the software vertical and workloads.

Allen: On a technical level, is there anything you are doing to package the CenturyLink cloud so that it is easier for partners to digest, integrate and resell?

Dutta: Cloud inherently has walls around it, so though there is some flexibility in being able to adjust the sizing by using a scrollbar, there are still parameters. It’s different from traditional hosting in that we have to put parameters in place as consumption impacts standardization, capacity and capital expenditure. There are some packages in cloud, but I would say that they don’t necessarily have to be created by us. Within the cloud footprint or portfolio, it’s possible to create packages of services – small, medium and large, for example – so the options could be limited for the customer or the partner. This is counterintuitive to our approach to cloud: we don’t do the T-shirt sizing but rather offer scalability and let the customer pick and choose how big or small they want to go within the three key areas of network, storage and CPU. Packaging sort of defeats the purpose of elasticity and choice. But there’s nothing to prevent a partner from doing this if they want to package in order to simplify the options.

Allen: Integrating cloud services may be more complex for a channel partner than managing hardware SKUs. Is there something you are doing to help with this?

Dutta: For the vendor, it’s a process of continuous education and partnering with the channel teams to ensure there is a program in place for full integration with us. It may be more difficult for the VARs that are accustomed to selling hardware to latch onto this, but we are looking for the VARs that are already on the path to cloud, and that have a competency level within certain services areas. Often, their customers are asking them about cloud, and we’re in there educating these partners that we have recruited or are recruiting on the high level sales process, on sales qualification and the way we go to market, so they will become more comfortable doing this independently over time. Because cloud doesn’t come with a box around it, there’s a lot of material that we provide to resellers, VARs or reference partners to continue that education. It’s a ‘crawl, walk, run approach’ with a lot of heavy lifting at the beginning. But over time partners become self-sufficient.

Allen: As you go out to build your ecosystem, how do you qualify potential partners? Is there a specific number of technology certifications that you are looking for, or how does this work?

Dutta: There is no silver bullet at this stage – it’s more trial and error. But the ones that have been successful are the ones that came to us for mutual engagement when they had a customer already in mind. This provided the trigger for them to get through our onboarding recruitment program and our enablement program. In Canada, the partners we have brought on didn’t even get through these programs as they already had customers and pretty deep technical competency and understanding of cloud. That said, some of the basics we look at are: the size of the business, do they have a practice devoted to cloud or managed services, what do their compensation models for the sales force look like and how has this shifted from traditional IT to cloud, what is their level of pre-sales competency, and what are their skill sets. In discussion with management and practice leads you get a sense of the organization’s commitment to becoming cloud-enabled and to developing cloud as a business. If it’s opportunistic and there are not true goals around cloud as a business, it takes longer for the partner to develop.

Allen: Can I ask how many cloud partners you currently have?

Dutta: In Canada, we now have about a dozen partners in various stages of productivity. We’ve only been at this for a little while. But we have many other partners in other areas of our business – service providers that buy colocation from us to deliver managed services or hosting providers that are using our infrastructure to service many end user customers – who may be able to transition. The CenturyLink cloud has been built to provide as much self-service and control as possible and these groups would also have access to our knowledge base and technical/pre-sales support as well as the ability to brand our cloud. Managed services providers, VARs that have a practice around cloud have been an initial target for us, but we have also been working with managed service providers that have a niche specializations – for example, in security, mobility, applications or application service delivery. We also act as a cloud platform for small and medium sized hosting businesses with good customer relationships that may need to access temporary demand through our global data center footprint.

Allen: Going forward, what do you expect the split will be between channel and direct sales?

Dutta: Well, we haven’t put a lot of focus on the indirect model yet, and our revenue has reflected that. But as we go forward, if we can get move 20 to 25 percent of the business to indirect channels, that is a goal that we are striving for in Canada. On a global basis across our different lines of business, CenturyLink is beginning to derive more business from indirect and there are a lot of initiatives under way to figure out how best to tackle that.

Allen: When you execute on a channel distribution strategy, how do you continue to build CenturyLink brand?

Dutta: There is definitely a change in model. As you start off an indirect business, there has to be a lot of collaboration to get to critical mass – or you would need a separate and massive sales team for direct and a separate team for indirect sales. What we feel makes more sense is to have the direct team targeted at the top 25, 50 or 100 accounts and the sales coverage in indirect for the lower end of the market segments. Where they collide, we have internal mechanisms in our rules of engagement and sales compensation systems to support integrated deals and to encourage collaboration.

It’s early days for us – in Canada and as a company – but the feedback that we have gotten from the partners that have gone through the cloud program in terms of the process, education, levels of information and access to people resources has been very positive. We continue to work with them, and it can only go up from here.

 

 

 

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