3 Tech Disrupters On How They Are Tapping Channel Partners To Leapfrog Industry Stalwarts

The advent of cloud computing has created unparalleled prospects for channel partners crafting fresh new solutions built on disruptive technology. At last month's XChange 2016 conference, hosted by CRN parent The Channel Company, CRN editors sat down with executives from some of the industry's cloud upstarts to find out just how big the opportunities really are.

The three companies represented were Concerto Cloud Services, a provider of solutions for public, private and hybrid cloud initiatives that's based in Tampa, Fla.; LogicMonitor, which offers a software-as-a-service performance monitoring platform and is based in Santa Barbara, Calif.; and Star2Star Communications, a provider of hybrid cloud communications solutions that's headquartered in Sarasota, Fla.

The participating executives included Concerto President Steve Terp, LogicMonitor CEO Kevin McGibben and Star2Star President Gary Testa.

[Related: 3 Tech Disrupters On What's Keeping Partners From Finding Cloud Success]

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Here, in their own words, the executives share insights into how they are utilizing channel partners to jump past industry stalwarts in their respective markets.

We'd love to get some examples of where you guys disrupted one of the bigger players, whether it's Cisco, CA, Amazon Web Services, whoever it may be. Talk about some of the disruption you're driving. That's what's going to drive it home.

Star2Star's Gary Testa: We are in the process right now of working with a medical group that is out actively buying urgent care medical facilities, and they are all in these kind of semi-rural environments so they have spotty-to-good coverage. They were [being quoted] tremendously high prices, a lot of the solutions that were being offered were all MPLS. Obviously they have HIPAA issues, and MPLS is interesting because people equate it not just with reliability, but they also for some reason equate it to reliability, because you are paying a lot for it.

So we were able to go in and actually disrupt all of their current vendors -- they had about 18 across 80 different locations -- and really show them that using just public Internet and our proprietary hardware and software, we were able to do two things that they couldn't. One is we gave them a unified dialing plane across multiple locations across multiple area codes. We did it for free, and we were able to pool all of their lines and aggregate them together, so we ended up with something close to a 78 percent cost reduction for them.

But the thing they were most impressed with frankly was our ability to provide instant fail-over, so if there was an issue at one location, those patients that were calling in were still able to contact doctors, although the doctors were located in any of the other locations. We gave them multiple ways of backing up in case there was an issue, whether it was multiple WANs, whether it was rerouting calls properly, even going so far as to transfer calls to mobile phones. Because we were looking at what was happening, we were helping them identify problems in the network as well. We ended up with higher reliability, better customer satisfaction, all at a lower cost.

Who were the vendors that you disrupted there?

Testa: I think it was AT&T, Frontier, it was the classic telcos. Then they had multiple WAN vendors as well. We helped them consolidate that down as well.

Was a solution provider involved in that deal?

Testa: Actually, we are only through the channel, so it actually is one of our solution providers based out of Nashville.

What about LogicMonitor, Kevin?

LogicMonitor's Kevin McGibben: With LogicMonitor I mean I think by definition [we're disruptive] because we are really upsetting a well-established, well-understood market, and the monitoring market is a $2.5 billion-a-year license market. Again, we are really transforming the way that kind of a solution is delivered ... Legacy technology just is a non-starter today. It takes too many man-hours, keeping up on the technological change, the technology overhead, the technical debt that those companies run up, is really significant. So for us we look at the market very simply—we realized that any company that has a complex environment, complex technology infrastructure, and is either agile or wants to be agile in their operational mindset, is a good fit for us.

I could give you dozens of takeaway stories. The kind of difference that our customers are reaping in terms of benefit is dramatic. So one example is a Fortune 2000 client out of Silicon Valley in the microchip processing industry that ripped out a $3 million HP OpenView instance, that they were paying several hundred thousand dollars a year maintenance for, just for their maintenance of their software upgrades. And with LogicMonitor they have a full-fledged monitoring capability for under $200,000 a year. We're talking massive change from the business model, and not just that, but the flexibility and the dynamic capability we provide them is dramatic. Another good example is another publicly traded company that is one of the world's largest credit card transaction processing companies -- it's a U.S.-based company -- ripped out a BMC Software instance, that had cost them I believe close to half a million dollars for their initial license fee, along with annual maintenance, and for us they are doing it for a fraction of that cost for the same kind of performance.

For us, we are not going to undercut our own business model per se, but we really realize what we are offering to our clients can be delivered in a way that allows us to be really competitive price-wise where it's not cheap, but it's very valuable to our customers. And then we are also providing a solution that's going to be able to be layered onto over time, because our continued capability just expands over time. And so we are becoming more well rooted and sticky in those environments, and so for us it's a really good investment as well.

What percentage of sales for you go through the channel versus direct?

McGibben: We have about a third of our customer base are indirect partners, they are MSPs, or system integrators, or whatnot. Some kind of service provider. About 40 percent of our revenue … If I just could add one more thing, particularly around LogicMonitor and performance monitoring, I feel like the other thing that's happening, maybe across the board here, but particularly with us, is within the infrastructure management space, whether you are a service provider or enterprise, there have been massive investments laid down in terms of new technology over the last five to eight years, look at virtualization, and now you are looking in topics like software-defined networks and infrastructure, flash-based storage. This radical change that's happening, and the kind of behind-the-scenes management capabilities like ours, I think are maybe the final step in the process. So the ServiceNows of the world have really done the ice-breaking for companies like ours, but I think a lot of firms, whether they are service providers or enterprises, are realizing that they have to upgrade all of their management capability in order to stay up with the times. I think that goes back to the point of companies that either are or want to be agile have to find new technology solutions in order to be relevant.

These partners are putting everything in your hands. That's a big relationship, when they make that bet there, that's a make or break bet.

Concerto's Steve Terp: The best examples I have actually are, if I work from the customer through the partner back to us, are the customers that, like you said, have made investments in a lot of different technologies, and they all come to some inflection point. Maybe the inflection point is around not having the talent or keeping the talent. Maybe the inflection point is clouds for all where they've got stuff in four different clouds, and they are not really sure how to manage all that. Maybe it's concern about security, maybe it's they've got five different vendors that are doing managing services in different locations because of it. The biggest thing that we've seen, especially over the last 7 or 8 months, has been our partners going to those guys and saying, "Let's take all IT and put it in the cloud." The concept that all their applications, everything is going to be put in the cloud through one provider, takes a lot of pressure off those end customers, and it quite frankly eliminates all the bits and pieces that make those guys nervous and allows that customer to focus on their business, not on IT.

It's pretty historic outsourcing, right? The only difference is I think what we've seen is there are so many new things to try, and so many new tools, and so many providers out there that people get this mix-and-match [solution] that in the end doesn't serve the customer well. And so the aggressive MSPs, the aggressive integrators, are going to those customers and saying, "Let's take it all and show you how we're going to do this. Let's show you how we're going to monitor it. Let's show you how we're going to report on it. Let's show you what we're going to do around an SLA perspective and, oh, by the way, don't worry about the security, don't worry about the disaster recovery, don't worry about uptime, because it's all about how we are building this into a mission-critical cloud."

Can you give us any examples of big powerful stories about how customers using the old model are struggling? Some of those guys must be pulling their hair out.

Terp: Oh, no question. You've got [one customer] that was about to have to write a gigantic check. You know the lawyers; they don't like to write gigantic checks. We were able to come up and say, "Hey instead of doing all these upgrades, instead of worrying about hiring more people, to take care of a really sensitive user base." The opportunity cost of those people not being able to work is pretty critical. To be able to revamp how you're doing this, their option was, "We are going to spend a bunch of money to build more staff, maybe put some stuff in the cloud, but we are going to rebuild our data center." In essence we came in and said, "Why do that when we could do this here [at Concerto]?" They recognized it's a big difference.

What would have been the cost of upgrading versus going to the OpEx model?

Terp: Well, just the product cost alone was probably 18 months of the fees they are paying us, but that's not including the people, that's not including some of the other vendors that they would encounter along the way some place. Our idea is we would capture more customer share with our partners from those end customers, and get more of that business.

That was at least a multimillion dollar savings. Did they lay off some of their IT staff?

Terp: In that particular case I don't know that they did, but we have seen either the avoidance of additional [employees], for some people that started doing cloud on their own. Because that's the other disrupter for us, is the do-it-yourselfers that jump in and say, "Hey this looks pretty easy with Azure, with Amazon [Web Services]," with whatever the case might be. Then they come to realize, man, it's not as simple as it appears. There are a lot of nuances to it, and oh, by the way, how do I go find and keep the talent that allows me to do this? If you are one of those really, really sharp young guys, girls, that want to jump into the cloud, do you want to go to the company where you do the same thing every day, or do you want to go to a company where you get to do it across a whole lot of different environments? They have trouble keeping people and finding people, so it's really a challenge.