Profiting From Microsoft Azure

Article originally published on ChannelProNetwork, featuring the expertise of our very own Joe Holko.

Office 365 gets all the attention, but channel pros can make money reselling Microsoft’s Azure platform-as-a-service solution too.

By James E. Gaskin

Azure, the cloud computing platform run by Microsoft, first appeared in February 2010 as Windows Azure. In April 2014, the name changed to Microsoft Azure, the marketing push started, and sales ramped up. "Customer demand is strong now and getting stronger," says Alex Brown, CEO of 10th Magnitude, a 30-person systems integrator in Chicago, "focused 100 percent on the cloud."

Brown walks the walk. "There has never been a server in our business the five years we've been open." His hardware consists of a router and a couple of printers, besides client systems. But he knows how to start customers on Azure: "Backup and disaster recovery is the easiest way to start. It's a defined solution and sale."

Joseph Holko, director of technical operations for Greenwich, Conn.-Lighthouse Technology Partners, a 25-person business that was the New York Metro Microsoft Cloud Partner of the Year in 2014, believes too many dealers remain behind. "Most cloud resellers are just learning about the power of Azure and are unsure how it will influence the future of technology," he says. Other firms may want to try using Azure the way Holko does. "We use Azure primarily as a low-cost alternative for a co-location site." Both Lighthouse and its customers trust Azure for disaster recovery and business continuity support.

Nikkia Carter, however, has had no luck selling Azure to her customers. The CEO and owner of Carter-McGowan Services LLC, a five-person firm in King George, Va., says her company sells Office 365, but not Azure. "I don’t have any customers asking for it," she says. Her customers remain paranoid. "It's still sometimes a hard sell, because they don't understand how the cloud can [offer] more security than their own on-premise hardware. They don't realize they've been using the cloud forever." Carter would like Microsoft to push Azure more, and says she saw evidence of a higher Azure profile at the recent Worldwide Partner Conference.

For Love of Azure
On the opposite end of the Azure spectrum is Phidiax LLC, a consulting firm in Denver with 10 architects who are all partners in the business. The specialist group works with Microsoft to support clients. "This is an easy service to sell," says Jason Sauers, founder and CEO. "Quick setup to deploy a website on Azure and only spend a couple of dollars per month." He sees no reluctance in his customer base. "We've seen a continual ramp-up: about a 10,000 percent increase in Azure usage. Microsoft is truly the leader in this area." He admits there were growing pains, but those are fixed. "Azure now has a refresh cycle quarterly and some amazing products rolling out. A problem today will not be a problem tomorrow."

While Sauers focuses on services and gets only small residual payments for Office 365 installations and the like, Brown's business lives on the cloud-based cash flow model. "It will cost you a lot of money to make the change," he admits. "The first 12 to 18 months you won't make as much. After that, things will get better and you'll have a smoother revenue stream." Whereas before a reseller might get thousands of dollars of margin on the sale of physical storage, setting up a virtual contract may mean $500 per month, of which maybe $100 will be margin.

Brown doesn't sell the cloud on savings alone, or at all. "Our message is not about cost reduction. It's not necessarily cheaper to move to the cloud,” he says. “But it's a whole lot faster to set up and administer and frees up lots of time to do more important things. And you get away from patching."

Holko agrees with Brown about not emphasizing cost as the only cloud advantage. One problem he says resellers should be wary of is trying to give a firm quote like you can do with hardware. "You need to be very careful when you estimate usage costs," says Holko. "It is important to let the client know that the costs are estimates," based on traffic and storage use.

But Azure services can be very profitable, says Holko. "Using Azure site recovery in conjunction with always running Azure VMs can make a powerful disaster recovery and business continuity solution that is not only profitable for the reseller but saves the client money over traditional co-location services. It's a win-win."

Brown mentioned VMware as well when talking about Azure. "Azure in many ways is similar to VMware today. Maybe those partners hesitant about Azure are seeing the writing on the wall."

A Win for Microsoft
Comparing Azure to Amazon Web Services, says Brown, is a win for Microsoft. "Azure is a friendlier version of AWS, and easier to start working with. Microsoft is better with the channel, has a better portal, but similar platforms and products. Azure extends far beyond a normal IaaS provider with big data and analytics support, media services, and more."

Microsoft has also made strides helping resellers get started, says Brown. "They're putting out much better technical on-boarding information, at least on the engineering [side]. You can spend a fair amount of time researching business models from Microsoft partners on these topics. Things are a lot easier from that perspective."

Sauers believes Office 365 in an excellent jumping-off point to Azure. "If you have Office 365, and already have your credentials in the cloud, that creates a bridge from your organization to the cloud. Sync Active Directory to the cloud to support your Office software, then it's an easy step to Azure. And you have no worries about on-premise provisioning."

Brown in Chicago understands the move to Azure can be wrenching for many resellers. "The cloud does force lots of solution providers to rethink [some] lessons learned in the last 10 to 15 years in this business. But you can stop wasting expensive engineering time racking and stacking hardware, and look for ways to add even more value to your customers."

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