We Need a Multi-tier Wholesale Cloud Solution Built for the Channel

By Egenera Guest Blog

The business model for the channel is undergoing a major disruption with the widespread adoption of cloud computing. Most channel players are actively trying to transition to selling cloud services, and it is clear that they are struggling with how to transition their business model. As it turns out, jumping into selling cloud services is no easy task–you either need to make a major investment in building and supporting your own cloud service or you have to live with the small margins that come from reselling existing public cloud services. Neither option is very attractive for most players. What is really needed is a wholesale cloud solution that is purpose-built for the channel–a solution that allows a channel partner to define the services it wants to sell, control the margin on those services, automate the business processes within its ecosystem, and, of course, put the focus on supporting and servicing clients.

At Egenera, we have created a wholesale cloud offering that is built specifically for this purpose, providing a feature-rich enterprise-class cloud that channel players can use to make the leap into selling cloud services with minimal investment. This offering is called Xterity Cloud Services, and it is powered by an advanced cloud management platform called the Egenera Cloud Suite (ECS).

One of the interesting capabilities of ECS is that it includes a multi-tier distribution facility that models the real-world ecosystem for channel suppliers. This allows the various hierarchies of suppliers to be represented in the workflow for building and managing IT environments. This is especially important in the context of billing, where each party’s “cut of the action” has to be appropriately accounted for. Cloud products on the market today do not have the concept of a multi-tier distribution model, and therefore it is left as an exercise for the cloud operator to manually manage the payments for all the parties involved in a transaction. And, in the real world, this is complicated, error-prone and a pretty big time sink.

ECS has tackled this complexity head on by building in workflows that accommodate the various players in the supply chain and their relationships. The main players involved are the cloud operator, distributors, resellers, application architects and agents. We are even thinking about multi-tier reseller relationships (more on that later). For now, let’s explore these roles and their relationships.

1. Cloud operators: Let’s start with cloud operators. Their job is to manage and support the cloud infrastructure resources. Typically, they own the hardware resources, provide the software to manage the cloud infrastructure and provide service for the entire cloud environment. They also manage the resource catalog and the back-end content management system. The operator has the responsibility to recruit distributors and/or resellers to fill out the next layer of the hierarchy. The cloud operator is basically providing the wholesale cloud service. (This is essentially what Xterity is providing.)

2. Distributors: Distributors act as a selling agent for the operator to help find resellers. This allows the operator to help drive scale in its operations. Distributors will expect a cut of the revenue from each reseller they bring on board. The “cut” is applied for every client that a given reseller is hosting in the cloud. ECS manages the list of distributors and keeps track of the total payment that each distributor should receive during the monthly billing cycle. Effectively, ECS sends a payment invoice each month to the cloud operator for the amount that each distributor is owed.

3. Resellers: Resellers are effectively managed service providers who look for end clients that need IT solutions designed and delivered. The reseller directly recruits clients by marketing and selling the wholesale cloud services. The reseller provides the service of designing, building, deploying and supporting those IT solutions. The reseller will typically have an application architect, whose job is to collect the detailed technical requirements from the client. Based on those requirements, the architect will design an appropriate solution using a visual design tool within ECS. The solution is crafted from a catalog of items that are presented to the application architect from within a designer window. Each reseller has complete control of the margin for its catalog. Resellers can offer discounts on certain items or charge an uplift for their services. The design created by the application architect is easily captured in a network map diagram that can be shared with the client to provide a topological view of the services provided. The reseller can use its own logo to brand the user interface for its employees and clients. The reseller also maintains control over each of its clients with visibility into each environment and the status of running services. The client can also use the portal to view the status of its solution.

4. Agents: Finally, there are agents. An agent works for a given distributor to help the resellers (that have been recruited by that distributor) find new clients–essentially helping to scale the business. Ultimately, this drives increased revenue for distributors because they get a cut of every client a given reseller brings to the wholesale cloud. An agent, of course, gets a “cut” of the revenue from the clients it finds for the reseller. Much like it does for the distributor, ECS provides a payment invoice each month to the cloud operator for the amount that each registered agent is owed.

Each of these roles reflects the real-world ecosystem that a channel-based business might have to account for. And, having a wholesale cloud service (Xterity) that integrates a multi-tier distribution model into the workflow processes is a great way to simplify operations for an MSP. This allows an MSP to spend more time finding new business and less time on mundane operational tasks–a real win for the business!

As Chief Technology Officer and Executive Vice President of Engineering, Scott Geng has more than 20 years’ experience managing and designing software for mission-critical environments. He has deep experience in operating systems, distributed computing, clustering, high availability and middleware technologies. Geng led the Egenera software team in delivering each release since the company was founded. Guest blogs such as this one are published monthly and are part of MSPmentor’s annual platinum sponsorship.