CA's New Cloud Boss: We're Not Going To Slow Down
Andrew R. Hickey
CA Technologies has placed big bets on the cloud. The company has plunked down more than $1 billion in acquiring cloud-focused companies over the last several months and has now pulled the curtain off of a new MSP channel program around one if it's key cloud acquisitions, cloud platform 3Tera and its AppLogic offering.
Along with beefing up its cloud product prowess, CA also recently put more muscle behind its cloud and cloud channel strategy with the appointment of channel and CA veteran Adam Famularo as its general manager of cloud computing. Famularo said he plans to build out CA's cross-company cloud strategy in the enterprise and in the channel and help customers and partners hone their SaaS, IaaS and PaaS chops through a suite of cloud-focused offerings. CA is cloudifying its existing offerings, building new products and will soon launch its own cloud app store, all to bring customers and partners up to speed in the cloud.
CRN caught up with Famularo to talk about the three Cs: the cloud, the channel and the competition. Here are excerpts from that conversation.
You're now doing MSP products, but where else does the channel come into play with your cloud strategy?
What's going to wind up happening is MSPs are going to help customers in all of these different walks. They might set up a virtual private cloud that the MSP is hosting. They might actually use 3Tera to be the infrastructure-as-a-service for their customers. Even though I've got MSPs as a separate box here to call out some products that are there today, I can see MSPs playing across this whole entire ecosystem, including where they already play today in the mainframe and client/server world.
Next: Holes In CA's Cloud Portfolio?
Are those mostly the types of partners you're looking to bring aboard; the ones that already play in the mainframe space and the client/server space?
This thing has really been primarily client/server driven. We're looking for your traditional MSPs that are looking for new revolutionary ways to be able to solve business problems for their customers in relation to cloud computing. So when they think of cloud computing and their customer says 'Mr. MSP or Mrs. MSP, I need to be able to scale. I've got this Web site and on any given day at the end of every quarter the hits on the Web site go up exponentially because that's where all of my orders are coming from, but I can't afford to bring on additional systems. I need you to be able to do that and manage the increase and flow and order entry in the last days of a quarter.' And they can easily do that now today with our 3Tera product. If they set it up the right way they can actually scale the environment up and down based upon demand and they can be viewed as elastic to their customers.
I see MSPs playing across the whole entire new ecosystem. For us, especially with the 3Tera product, we believe it's a new evolutionary way that MSPs can help solve those new business challenges for their customers.
What's missing from CA's cloud portfolio?
I'm sure there's a laundry list of stuff without me being able to divulge where our next set of acquisitions is. I can tell you that we're not going to slow down. You're going to see us continue along this path. We firmly believe the cloud is that next generation of management and we need to be able to be in the forefront of all of that. We need to fill out all of the concerns our customers have between how do I actually move and manage. What we hear the most is this hybrid environment, because the enterprises that we typically service are going to have a mixed environment and they understand that. It's really our job to help them onramp into this new environment and then manage it on a day-in-day-out basis.
Next: Where's The Value Proposition?
CA had an MSP program before where you tried to sell CA products to MSPs and said 'Hey MSPs, go out and use our products and buy them as a capital expenditure to build your business.' What's the difference now?
The difference now is that we're building businesses to sell with you versus trying to sell to you. We're going to build the business with you to sell with you to your customers, which is very different. That was an old, antiquated model going back seven or eight years ago.
What's the financial value proposition and the channel business model you're proposing to MSPs to get them to take the ride with CA in the cloud?
First, we're giving it to you for free. We're going to give you AppLogic licenses for free through the end of March 31 and you can use it up to your first 20 CPUs to help you build the model. We already have 50 MSPs today using AppLogic and we want them to see all of the different ways that MSPs can actually build out business practices with our products and then start scaling. What's in it for CA? After you build out your business and scale past 20 CPUs, which I'm hoping you do in the first three to six months, then we'll have a joint model where we make money as you sell these new offerings. We're going to give them support entitlement, Web forums and live phone support. We're also going to set up special introductory pricing that's going to give them a special low rate on anything over the 20 CPUs that they sell in that introductory period. They’re going to be part of our beta programs. They're also going to have access to our solution architects to learn about the best practices that other MSPs are doing. And we're also going to have an optional program for installation, support and training packages available to them.
We're setting it up so that they can start signing up as of [today] at 3Tera.com/MSP. They'll send in their application and we'll evaluate them. We'll schedule a one-hour orientation and we'll give them a gird of their own to test for a week so they can start using a grid that's hosted by us and start playing around and understanding how they can start building out solutions to bring to their customers. Then we debrief how it went at the end of the week. We start painting some ideas and pictures of how to move forward. And then we roll them out.
Next: What's The Margin?
What's the VAR's take?
All of it. Up to 20 CPUs they'll make 100 percent margin. We want them to experience what it's like to build a business with this product line. It is so powerful of a product. They can build out their own infrastructure as a service, they can take applications and build out their own software as a service, they can build out their own virtual private data center with this product. There are so many different ways they can build businesses off of 3Tera AppLogic that we want to influence them to get started and I feel pretty strongly that once they start doing it and seeing how much money that they can make it's just going to grow exponentially. We're first to market with this kind of technology, so we need to bring it out and bring it out fast. This is a way for us to do just that.
After they hit the 20 CPUs, what's the margin on that?
Then there's a pricing model. I have to go through it, but it's a significant model. We usually don't work with less than 30 percent.
It's a recurring revenue model where they bill their customers on a monthly fee. It's based on CPUs, the service CPUs. You have a grid of servers and CPUs and on top of it you have all of these applications that are running on the grid. It's just as big of a grid as they're managing.
Next: The Competition
How many MSPs are you looking to recruit? How big of a bang is this?
Right now we have about 50. I honestly want to get to about 300 by the end of March. That's not just getting 300 interested, that's getting 300 up on our grid.
What does CA 3Tera AppLogic displace?
It's not displacing anything they currently do. What it's actually doing is it's helping them to compete with outside forces that their customers can go to. So instead of their customer going to an outside Web services like Rackspace, Amazon or [Microsoft Windows] Azure, they go to us. We can do it for you.
Next: How Much Can MSPs Make?
How hungry are MSPs to be the Amazon and the go-to cloud provider?
They want to be the infrastructure service provider for their customers. Over the years, the MSPs as well as the resellers have gotten so close to the customer they don't want to lose control of the customer.
That's the key in this whole model. We're enabling them to keep control of their customer and be able to provide a new cloud-based service.
How much money can a solution provider/MSP make going to the cloud with CA?
The cloud services business is projected to be a $17 billion market. This is a big, big market to start playing in. It's whether or not they want to dive in. Do they want to stick with the traditional IT approach and risk having their customers go around them to these outside forces? Or are they going to engage in this new model and build out their own cloud based offerings to bring to customers? Which way are they going to go? We need to be the enabler to help them there.
Next: Maintaining Control
What are the competitive advantages for an MSP or solution provider to join the CA program rather than Amazon, Rackspace or Windows Azure?
It's about the MSP keeping control over their customers and using the infrastructure that they've already built out in a new and innovative approach called the cloud. It allows them to bring the products to market differently than they have before, whether it's providing an infrastructure-as-a-service play, a SaaS play or even telling their customer that 'we'll set up your own virtual private data center that will link directly to our building and our data center.' You can do anything from cost of computing power, cost of storage, efficiency of resources, business continuity ... but there are all of those different things. Time to market, agility, all of those things you get in a cloud computing model you can now get through your MSPs. That's what customers are looking for. Customers are looking for the ability to have their IT, but pay-as-you-go. They're looking for having IT but they want to be able to scale it as they need additional resources or scale down as they're not using additional resources. Now, with this technology we can enable MSPs to provide that to them and their customers.
What's your message to MSPs and solution providers that might be familiar with CA getting in and out of the channel?
We're not letting up. [Bill McCracken our CEO] is a big believer in the channel, he's been a channel guy his whole career. Dave Dobson [executive vice president and Group Executive, Customer Services Group] also has a channel background from his time at Corel. We are stronger today believing that we need to be able to build out an entire channel ecosystem. We can't do this on our own. And the company understands that. That's why you see more channel people go into these pivotal roles, and the people we're hiring have channel background and experience. Just like I'm going to do in this new role; I'm going to take all of my channel experience and bring that through to the new products that we're bringing to market.
Next: Gauging Success
What's going to be the gauge for the success of the MSP program; partner numbers, how they're making money, how CA is making money? What is successful in terms of revenue and profitability?
It's going to be less about how we're making money in the first six months and more how the partners are making money. If I get 30 to 40 positive success stories out of it of partners making money I'll feel really good. The first six months is the partners making money and proving the model. I've got 50 today that are doing it, some more successful than others. I'd like to have 20 to 30 that are very successful. Once I have the very successful ones, then I'll have a great showcase I can build off of.
I would love them making 30 to 40 points in margin opportunity and having million dollar businesses. There's no reason they shouldn't be in million dollar businesses.
Do you feel that a lot of solution providers and MSPs are making a big mistake right now by signing deals with Rackspace, Amazon or becoming VMware partners?
I don't think VMware is the type of company that would take a customer away from them. I don't think they're going to lose control with VMware. I think that they can do it more operationally efficient without them. I think that they can save a lot of money without them. On the other side, it's up to them. Are you OK with sending your customers' data and applications and information over to another third party and relinquishing some level of control? They usually aren't for that, but if they don't have the scalability themselves, then of course they're going to go outside. So now I'm going to give them the tool so they can do their own scaling.
Next: CA's Channel Investment
How important is it for these MSPs to control the customer data?
If you want back 10 years ago, the channel partners' allegiance was to who? The vendor. They were always aligned to the vendor because that's where they made their money. But then, over the years, vendors, not just us, have gone in and out of the channel. What happened then was the channel woke up and went, 'My allegiance really needs to be to my customers so the closer I get to my customer the more control I have and the vendors I can change in and out of, but I have control of that customer.' That's what gets them most nervous in this new model more than anything else. It's not giving up control of that customer again and starting that cycle all over again. This will empower them to keep the model that they have today with more ownership of their customers, but be able to give them the flexibility that's out there today in this new cloud model.
Can you quantify the investment that CA is making in the channel?
It's a massive investment. I can't quantify the number right now ... We've spent over $1 billion in [cloud-focused] acquisitions. The truth is that we're in on this thing. We spent over $1 billion on acquisitions, we're not letting up and this is just the beginning.
The next piece to this is we will be launching an overarching MSP program bringing all of these products out through MSPs. That's going to happen in the future. In the near future we'll have an overarching MSP program for all of these products that we're going to be bringing out for them. Today this is focused on 3Tera, we launched one four or five months ago for ARCServe, so you can start seeing that we have it by product, but what we're going to wind up doing is let's bring all the products together and have a stack for the MSP and say here's the entire MSP program with a full stack of software.