itutility whitepaper - practical approach for integrating industry trends - 2008-01

7/31/2019 ITUtility Whitepaper - Practical Approach for Integrating Industry Trends - 2008-01

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ITUtility3rd Floor, 555 Legget Drive

Kanata, Ontario K2K 3X3

888-567-4886www.itutility.net

ITUtility: Practical Approach for Integrating IndustryTrends

2008 ITUtility Corporation. All rights reserved. January 2008- Confidential -

An ITUtility Whitepaper


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ContentsContents ............................................................................... .............. .. 2

Introduction ................................................................................ ..... ..... 2Problem statement ............................................................................... 4

Previous options ................................................................................ .. 5

ITUtility solution ................................................................................. .. 6

Costs to VAR or channel partner for moving to this model............... 8

Summary .................................................................................... ..... ..... 9

Appendix A: ITUtility and top-10 IT-related trends ...................... ..... .. 9

Appendix B: ITUtility and ChannelWeb Magazine top 10 steps to

growth in 2008 ......................................................................... ..... ..... .10

Appendix C: One support personnel can generate $240,000 ofannual revenue by supporting 500 SaaS users ............................. ... 11

Appendix D: 3-year Total Cost of Ownership (TCO) Comparison ...13

Introduction

It is an unquestionable fact thatthe information technology(IT) industry is going throughsignificant changes.Continuously eroding profit

margins are forcing channelpartners and value-addedresellers (VARs) to make morefrequent incremental changesto their business to staycompetitive. Their commoncomplaint is that they havenever made so little moneywhile being so busy. With thebiggest concern among thechannel partner and VAR

owners being pure survival,making disruptive changes tothe way they do business isunthinkable. Unfortunately,with small and mediumbusinesses (SMBs) of 5 to 250users becoming the newdominate customer, disruptivechange is required in many


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cases. Most channelpartners and VARsbusiness models do not

allow them to be profitablein this segment. Theconcept of servicing a largenumber of SMBs iscurrently not feasible.

Access MarketsInternational (AMI)published a study outliningthe top-10 IT-related trendsfor 2007, refer to AppendixA:

1. SMB IT spendingwill outgrow large-business IT spending

2. Security andstorage convergence

3. Software as aservice (SaaS) will turn tothe next chapter

4. Managed serviceswill shape up, helpingSMBs do more with less

5. Outsourcingrevisited: incorporatingbusiness as a service(BaaS)

6. SMBs willmobilize

7. Microsoft Vistastill not the desktopstandard

8. Unifiedcommunications

9. Changing channels:the rise of the value addedpartner (VAP)

10. The battle for theweb-based operatingsystem takes place

11. Bonus prediction:IT generation gap emerges

when Gen-X managers take amore senior role

Some of these trends happenedas predicted while others arestill incubating. This year,ChannelWeb magazine cameup with VARs 10 steps togrowth in 2008 that are inmany ways aligned with lastyears predictions, refer toAppendix B:

1. Embrace SaaS2. Get creative in

technical hiring3. Use Web 2.0 formarketing

4. Build managed services5. Maintain vendor

support6. Understand your

customers business7. Provide specialized,

customer-sizedsolutions

8. Upsell, upsell, upsell9. Expand new technology

offerings10. Virtualize

ITUtility, a white labelprovider of hosted solutions,offers a platform for VARs andchannel partners to easilyaugment their business models,offering an affordable, risk-freemeans of implementing thetop-10 steps to growth. Thesolution includes white labelhosted Microsoft Exchange,SharePoint, BlackberryEnterprise Server (BES), and ahighly customizable BusinessPortal with applications such assales-force automation,
http://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.crn.com/it-channel/204802751?pgno=2http://www.crn.com/it-channel/204802751?pgno=2http://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.crn.com/it-channel/204802751?pgno=2http://www.crn.com/it-channel/204802751?pgno=2


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helpdesk, project,document, and recordsmanagement. This enables

VARs and channel partnersto leverage their deepknowledge of their verticalmarkets to offer enterpriseclass IT to the SMBmarket. While becoming atrue MSP, they also get theopportunity to partner witha Microsoft-selectedvendor in marketingcampaigns,

Problem statement

In simple terms, businessstrategy involves planningand positioning for tomorrowwhile surviving today

Harvard Review Press Strategy

Channel partners areconstantly forced to makeincremental changes in the

way they do business.From forging new vendorrelationships to profitcenter shifts from productsto services, change isincremental and oftenslow. The changesproposed in the 10 steps togrowth for VARS in 2008article are potentiallydisruptive, expensive andtime consuming.

Past: the history of thechannel

The VAR and channelpartner market hastraditionally been focusedon providing solutions tolarger customers of more

than 250 users. Throughout the1980s and into the early1990s there were healthy

profit margins in sellinghardware and software.Customers needed VARs andchannel partners for thingssuch as presales configuration,local inventory, onsite supportand installation, and ongoingmaintenance. In many cases,VARs even provided strategicadvice on technology trendsand planning. Smaller

customers were serviced byretail.

As with most other industries,the Internet brought majorchanges to the VAR andchannel partner market. Ascustomers started doingbusiness online, a whole raft ofnew challenges arose, frommessaging to security,changing the traditional model.Professional services became asignificant profit center whilehardware and software becamelow margin commodities.

Present: the state of thechannel today

Today VARs and channelpartners are still geared towardsupporting customers with 250plus users. These VARs andchannel partners typically fitinto one of three categories:

Fulfillment partner

The fulfillment partnerprovides a product or servicefor a price, and nothing more.They rely on a very


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knowledgeable customerknowing exactly what theywant; the fulfillment

partner is typically verygood at finding thematching product orresource at the best price.They have low margins,very high volume, and avery large customer base.

IT partner

Going farther than thefulfillment partner in

supporting the customer,typically the IT partner isactively involved insupporting the physicalinfrastructure: network,servers, security, storage,desktops, and handhelds.When providingprofessional services, theactual onsite resource isusually an employee or

exclusive contractor to theIT partner. These resourcesform a relationship withthe customer and theirvalue revolves around theirfamiliarity with thecustomers environment.

Information managementpartner

Increasing the level ofcustomer support further,the informationmanagement (IM) partnertypically has a deepunderstanding of thecustomers businessprocesses and often buildsbusiness-centricapplications such as Websites, intranets or employee

portals, and even business-to-business systems.

Future: becoming thevalue added partner

Both the AMI study and theChannelWeb recommendationsindicate that the future is inbecoming a VAP to thecustomer. Understanding thecustomers business andbecoming a technology partnerin delivering their product to

their customers is the modelthat will lead to growth. Toimplement this model, all threetypes of partners requiresignificant changes to the waythey do business today.

Resistance to becoming aVAP

Becoming a VAP requires

investing in areas such as SaaS,managed service provider(MSP) and BaaS, not tomention changing the nature ofrelationships with existingcustomers.

Previous options

The concept of surviving todayis far more important than theconcept of positioning for

tomorrow. Until now, the onlyway for a typical VAR orchannel partner to grow wouldhave involved investinghundreds of thousands ofdollars and dozens of personyears.


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ITUtility solution

The ITUtility platformprovides channel partners

and VARs with a risk-freeway of transforming into aVAP. Solutions includeMicrosoft Exchange,SharePoint, and a BusinessPortal application thatincludes sales-forceautomation, projectmanagement, helpdesk,and document and recordsmanagement. Other hosted

solutions include MicrosoftLive Meeting and BES, allwhite labelled and allavailable as a service.

Platform, platform,platform

The ITUtility platform islargely based on Microsofttechnology. This white-labelled, multitenant

solution employs the latestback-up and securitysystems and is hosted in acarrier-grade data center.As far as the customer cansee, this infrastructure islabelled as the VAR orchannel partnersinfrastructure.

Building an ecosystemEcosystem - a system formedby the interaction of acommunity of organisms with

their environment.Websters

Fulfillment, IT and IMpartners all have onecommon attribute: a solid,

trusted relationship with thecustomer. This is tremendouslyvaluable and uniquely positions

them for transforming theircustomer relationships fromone of fulfillment or IM or ITaugmentation provider to thatof a VAP.

ITUtility is building anecosystem where partners canleverage both the infrastructureand each other. Fulfillmentpartners can leverage their

many customer relationships,and pull in the skill-sets of IMand IT partners within theecosystem to deliver acomprehensive solution. IMpartners that have developedhighly specialized solutions forthe infrastructure can pull inother partners on the ecosystemto act as their sales channel. Bypartnering, IT partners canprovide IM-centric serviceswhile avoiding hiring anyadditional resources.

Concept of coring to builda SaaS platform

The ITUtility Business Portalcombines a subset of the top-40SharePoint component library.Originally these componentswere not designed to worktogether, but after significantdevelopment efforts they arenow seamlessly integrated intothe platform. They offer an out-of-the-box lite version of ahosted customer relationshipmanagement (CRM) solution,administering the relationship


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from lead generation,through opportunity,project and implementation

management, to ongoingsupport and issuemanagement. The portalalso leverages the power ofSharePoint to provide ahighly reliable record anddocument managementsolution.

IM channel partners areinvited to modify

components of thissolution to meet the manyvertical markets theysupport. ITUtility will notonly support thesemodifications, but workwith the partner to promotethem within the ecosystem.The infrastructures billingsystem tracks usage, billsand pays out all royaltiesaccordingly.

Winning model:customer wins,VAR and channel

partner wins

The following businesscase consists of a VAR orchannel partner providing acustomer with a fullymanaged hosted messagingsolution, including theBusiness Portal.


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Cost of a bundled hosted

solution to the VAR or

channel partner for a 25-

user Company with setupand support fees included

Prices are per user each

month:

Business Online:$14.00

Exchange and Outlook:Incl.

Enhanced Anti-spamIncl.

Monthly Support Fee*$14.00Total cost:

$28.00

Suggested Retail Price:$40.00

Margin:

42%

* Support personnel costs is$9.17 per month for each user.

The monthly setup fee is $80 peruser with additional fees for

customization. SaaS product to

service ratio is 1:1. Refer to

Appendix C for an example on

how one support personnel can

generate $240,000 of annual

revenue by supporting 500 SaaS

users.

Total cost for a customer

to set up an internal

solution for 25-users with

setup and support fees

included

Prices are per user each

month:

Hardware and softwarecosts amortized over 3-years: $122

* Costs include: serverhardware and software;

Microsoft client access andOutlook licenses; anti-spamand anti-virus; backuphardware and software withrelated setup and supportcosts.

3-year total cost of ownership

scenario for a 25-user

Company including setup

and support services, refer to

Appendix D:

Hosted Solution:$ 42Internal Solution:$122 Total savings:

65%

Costs to VAR or channelpartner for moving tothis model

The only costs associated withbecoming an ITUtility Partnerconsist of the administratoraccount to manage yourcustomers online setup($10.00/month) and therequired Secure Sockets Layer(SSL) Certificate.

To increase the marginsindicated, VARs or channel

partners can customize theBusiness Portal to the verticalmarkets they serve. Byintegrating into verticalmarkets, customer relationshipsare deepened and there is alarger potential for ongoingprofessional services fees.


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Summary

Leveraging an ITUtilitypartnership makes

transforming from a VARor channel partner to aVAP very inexpensive andrelatively risk-free.

Appendix A: ITUtility andtop-10 IT-related trends

Description of trend ITUtility partnership

1. SMB IT expenditures willoutgrow that of large-businessIT spending for 2007

ITUtility positions VARs and channel partners with asolution that is extremely appealing to business with 5 to250 users. It brings enterprise-class IT to an SMB. Oncethe customer is enrolled, billing is automatic and thesupport requirement is minimal.

2. Storage and security:convergence will help SMBsmove up the adoption curve

The ITUtility solution is hosted and fully-managed. If thcustomer implements the Business Portal virtually, all othe customers data is stored on the platform, benefiting

from carrier-class integrated storage and security system3. SaaS vendors turn a newchapter

This solution is based largely upon Microsoft technology

4. Managed services shape up:helping SMBs do more withless

ITUtility enables VARs and channel partners to leveragetheir knowledge of their vertical markets to become trueMSPs.

5. Outsourcing revisited:incorporating BaaS

The Business Portal helps VARs and channel partnersmove to BaaS.

6. SMBs will mobilize: the roadfrequently traveled

With full BES and support for Windows mobile devicesVARs and channel partners will be up for the challenge.

7. Vista N/A

8. Unified communications N/A9. Changing channels: the riseof the VAP

By leveraging ITUtility, VARs and channel partnersbecome VAPs.

10. Battle for web-basedoperating system

N/A
http://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdfhttp://www.ami-partners.com/ami/sections/Press/2007_AMI_Top_Ten_Trends_w-slides.pdf


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Appendix B: ITUtility and ChannelWeb Magazine top10 steps to growth in 2008

Description of step ITUtility partnership

1. Embrace SaaS One of two white label providers of Microsoft software Canada, ITUtility offers an infrastructure for channelpartners and VARs to become SaaS providers to theircustomers. Currently Microsoft Exchange, SharePointand Business Portal are offered along with the RIM BESMicrosoft CRM is on the roadmap.

2. Get creative in technicalhiring

ITUtility diligently helps channel partners present theirbest and brightest technical resources to the ecosystemcommunity. For example, a SharePoint resource from a

partner in Calgary can be made available to a VAR inOttawa. These types of interactions keeps overhead low,keeps a good resource motivated through challengingprojects and is done in a manner so that neither partnercompetes with the other.

3. Use Web 2.0 for marketing All channel partners benefit from ITUtility marketingcampaigns.

4. Build managed services ITUtility allows VARs to leverage their knowledge of thvertical markets they serve to become a true MSP.

5. Maintain vendor support Microsoft is the most significant vendor of our time.

6. Understand your customers

business

ITUtility channel partners have the opportunity to take

their understanding of the customer to a new level bycustomizing the Business Portal, meeting the needs of thverticals that they support.

7. Provide specialized,customer-sized solutions

See Step 6

8. Upsell, upsell, upsell Over 15 stock keeping units (SKUs) available.

9. Expand new technologyofferings

Future offering aligns with the Microsoft SaaS strategy.

10. Virtualize The ITUtility infrastructure provides benefits similar tovirtualization. Customers can increase their storage spacand add more users to the system without reconfiguring

or purchasing new equipment.
http://www.crn.com/it-channel/204802751?pgno=2http://www.crn.com/it-channel/204802751?pgno=2


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Appendix C: One support personnel can generate$240,000 of annual revenue by supporting 500SaaS users

The complexity of the backend services to support the HostedSolution environment is managed by ITUtility. This removesthe high cost of skilled technical personnel. The tools offeredby ITUtility to manage the Hosted Solutions enable an entry-level to intermediate-level support personnel to managethe solution remotely. One support personnel can nowmanage 500 users and generate $240,000 of revenue peryear by bundling the ITUtility Hosted Solutions with end-usersupport, which includes:

SaaS setup and configuration

SaaS administration and support

Business Portal customization and support

End-user training*These services can be delivered by the SaaS Service Provider or byanother provider on the platform.

Revenue and Margin Calculation

Total Revenue per User: $480 per yearRevenue from SaaS Product Sales per User: $240Revenue from SaaS Service Sales per User: $240($20/month for each user with a support contract)

- $20/month per year for each user (annualized,service peaks during setup and configuration

stage)- Estimated support required for each user per

year is 3 hours- This fee represents a fully managed service

(Customer pays one fixed price for service peruser)

- Ad-hoc services such as consultation,customization and development services areextra

Total Cost for a Support Personnel: $55,000 peryear

Intermediate Technical Analyst II: $55,000 per year- $40,000 Salary (salary.monster.ca)

- $15,000 for fully loaded costs and relatedexpenses

Available work days per year: 235 per personnelWorking hours per day: 8-9Estimated working hours per year: 2,000 perpersonnelAccount Management: 500 hours

Technical Support and Administration: 1,500 hours(500 users @ 3 hours per user)


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Revenue = $240,000 per year (SaaSProduct to SaaS Service ratio 1:1)SaaS Product ($240/user): $120,000 per year (Equivalent

to $20/user/month)Support Service ($240/user): $120,000 per year(Equivalent to $20/user/month)

Costs = $139,000 per years (Cost of SalesPersonnel are not included)SaaS Product Subscription Fees for 500 Users ($168/user= $14.001/user x 12 months): $84,000 per yearSupport Personnel and Administrative Costs for 500 Users($110/user = $9.17/ user x 12 months): $55,000 per year

Profit Margin = 42%Profit = $101,000 (breakeven at 229 usersto cover costs of support personnel)

1Reseller price for the PortalDesk Business Online bundle (SKU26) has been used in this example, refer towww.PortalDesk.NETfor details.
http://www.portaldesk.net/http://www.portaldesk.net/http://www.portaldesk.net/http://www.portaldesk.net/


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itutility whitepaper - practical approach for integrating industry trends - 2008-01

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