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How big an investment are you making in next generation software that is going to allow cloud computing power consumption monitoring and management?
Software is one third of my engineering budget. When you talk about power you still need to invest in developing new technologies for UPS (Uninterruptible Power Supply) and PDUs (Power Distribution Units), but in the end what makes the difference, what sells is software. We do have a top notch offering when it comes to UPSes and PDUs, but as I keep on telling my salespeople - don't go to transformative cloud computing VARs and talk to them about product. They could care less about products. What they want to hear is: 'what are you providing to help me (and my customers) solve their business issues.'
The software we develop is really designed for that. We can show the VAR that he can sell this piece of software for his customer's infrastructure and then he will be able to generate the reports to show them how much they are saving in energy power consumption on a monthly basis. And he can charge them five percent of the savings if he wants.
We provide the VARs with the tools to help them build their own value proposition. We are not like a typical cloud provider where this is the menu of the services that you as a reseller can buy and resell. We sell the infrastructure (power management products) to the VAR and then we provide tools for the VAR to build their own recurring revenue service model.
How big a competitive advantage is Eaton's software R&D investment?
It is the biggest differentiator that we have today. What happened is virtualization changed the rules of the game for the power industry. VMware comes in and says it is no longer about shutting down the servers in case of a power problem because I now have got my (VMware) ESX host on top of that.
When we looked at the opportunity we understood that virtualization can do something much better than shutting down gracefully the servers or the VMs or the host. You can enable a live migration of the VMs from Server A to Server B to avoid having to shut down, providing business continuity. That is a game changer. That is why I strongly believe that we can be number one in this industry. And I want Eaton to take the lead. We have been investing to develop these technologies around virtualization and moving to the cloud.
How big a difference will this make for solution providers trying to make the jump from progressive to transformative cloud computing providers?
It is enablement. What we are going to do is to provide our solution providers with the tools to make it prevalent.
Have we moved from a (power protection) marketing to (power management) technology paradigm shift where you will be able to grow market share dramatically?
This is what we are trying to build. We are bringing technology to transform the industry. Everybody today is looking for new solutions.
What this industry has been lacking for years is commitment from the vendors. I have seen in this industry so many vendors come in and invest for one fiscal quarter or two fiscal quarters, and when they don't get the success (they wanted), they back off.
It is going to take six months to onboard your reseller, your solution provider. Another three months for him to place his first PO (purchase order) and another three months for him to become an active solution provider buying on a regular basis. It is a one-year sales cycle (to recruit them) and it is a one year sales cycle to (get them up and running).
Our program has been running at Eaton for the last three years. At the end of the year we will have about 2,000 solution providers in the program. We had to recruit all of them on a one by one basis.
When you talked about the cultural challenges solution providers face with power consumption and monitoring, how is Eaton going to help partners cross the chasm and sell cloud computing solutions?
We need to go beyond I would say the default choice. In order to do that we need to be able to sell technology. We need to sell technology in a way that the solution provider can really adopt and make sense for the IT manager. They don't want to buy product. They want to buy something that addresses their business needs. So what we are putting together right now are quoting tools that solution providers can use to leverage the solutions they are selling.
We are currently developing specific tools for let's say storage virtualization. So they can simply cut and paste the power infrastructure section in their own quotations. I don't believe in big, fancy things because I have seen so many solution providers that have nothing or very few tools.
We need to make it as easy as possible for them. In order to resonate with everything we have discussed before like virtualization and storage, power must blend into the solution - not just a UPS at the bottom of the (technology purchase price) quote.