Ingram Micro CEO: Commoditization Makes Hosting Cloud 'Nonstarter'

Just a year after unveiling several new hosted services, Ingram Micro CEO Alain Monie said that price erosion has made hosting cloud a "nonstarter."

Monie said the Santa Ana, Calif.-based distributor was considering becoming a cloud host when it acquired hosting firm SoftCom in September 2013. That would have required Ingram Micro to invest heavily in infrastructure to power its own data center, Monie told the more than 900 attendees of Ingram Micro Cloud Summit 2015.

But by the time the distributor needed to decide on a course of action, Monie said Ingram Micro's leadership had determined that the hosting ecosystem was going to commoditize pretty quickly.

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"It was very clear that the market was going to be so competitive that it was probably a nonstarter," Monie said Monday at the Arizona Grand Resort & Spa in Phoenix.

The distributor has instead opted to use other companies' infrastructure in a utility or commodity-like fashion, Monie said.

Ingram Micro captured the channel's attention with the announcement at last year's Cloud Summit that it would leverage its SoftCom acquisition by rolling out its own hosted cloud services housed in its own data centers. The hosted cloud services Ingram Micro said it would offer included virtual private servers, web hosting and hosted Exchange.

The announcement generated blowback from channel partners and competing distributors alike (notably Tech Data), who said that Ingram Micro would be competing against solution providers, or would no longer be vendor-impartial, since it had an offering in the market.

For instance, Poway, Calif.-based Ingram partner Host For You critiqued the approach, telling CRN last year that the move forces MSPs with their own hosted cloud to compete against Ingram.

Renee Bergeron, Ingram Micro's vice president of cloud computing, told CRN last year that the distributor got into the hosted cloud market to give partners choices, adding that Ingram Micro's business model wouldn't work if it drove business to its own solutions over competitors.

Monie singled out the influence of Amazon in forcing Ingram Micro to rethink its position on hosting cloud, saying the retailing giant has driven down prices on cloud infrastructure 20 or 30 times over the past few years. Monie said he expects that to continue to the point where it will be very difficult for any other company to be involved with hosting cloud.

Although there are segments of the cloud marketplace that don't make sense financially, Monie said margin erosion is far less likely in areas such as cloud platforms, applications, migration, integration and support. Ingram has, therefore, opted to focus more heavily on those five areas, Monie said.

"If you sell it as a complete solution, that's where you can drive the businesses that really make sense."

Monie said Ingram Micro and its partners can best make money by being integrated, pointing to the distributor's announcement at the Cloud Summit of a fully HIPAA-compliant health-care bundle with email encryption, security and other message protection.

Ingram Micro partner CommQuest said it's been capable for a couple of years of offering hosting cloud on its own platform. Mark Sanchez, president of the Loganville, Ga.-based company, told CRN that in-house hosting is the only way for CommQuest to earn profits and own its customer relationships.

"I like owning my solution," Sanchez said.

At the same time, Sanchez said he didn't feel threatened by Ingram Micro's hosted cloud offerings because end users are looking for a solution provider to bridge the knowledge gap and walk them through the solution.

"It may be the cloud, but it's a particular cloud for somebody," Sanchez said.

Going forward, CommQuest may lean on IBM SoftLayer for a hand with hosted cloud.

Paul Smith, a partner at Walpole, Mass.-based Ingram partner Datasmith Network Solutions, said he hasn't used Ingram Micro for hosted cloud, and would be more interested in getting cloud infrastructure from a more recognizable household name.

PUBLISHED MARCH 9, 2015