According to Jason Byrne, SVP, Products and Marketing at netsapiens, over 80% of the revenue for service providers comes from the set of services that sit atop the underlying infrastructure. In this podcast, Byrne notes how Managed Infrastructure as a Service eliminates the extensive time and administrative activity involved in launching an application. “Managed infrastructure will take off all that, and make sure that the application is running 100%, at five-nine reliability,” says Byrne. Byrne sees managed infrastructure as a path for MSPs to really focus on their business, by using a service that is wholly optimized for Unified Communications.
Doug: This is Doug Green, and I’m the publisher of Telecom Reseller. And today I’m with Jason Byrne, who is the senior vice president of products and marketing at netsapiens. Jason, thank you for joining me today.
Jason: Yeah, thank you. Thank you, Douglas.
Doug: So, this is a very interesting Podcast, we’re going to be talking about industry trends, industry trends around Infrastructure as a Service, and the shift towards managed infrastructure. We’re going to find out what that means. But first of all, Jason, what is netsapiens?
Jason: netsapiens is a Unified Communications platform provider. We typically sell to service providers, from ILECs to CLECs, MSPs, ITSPs, and VARs who want to provide Unified Communications to end users. To businesses. We have a little over 150 providers around the globe. Recently we just crossed the 1 million seat mark, or user mark, on our platform back in August (2019). We’re growing very quickly, roughly 40% year over year. And we’re glad to be talking to you.
Doug: That means if we looked at a sort of user map, you guys would now be on the map at 1 million users? Congratulations on making that milestone. You know what I think we ought to do today is, as we talk about managed infrastructure, let’s define some of the terms, see what the trends are, and go from there. So first of all, what do we mean when we use the term infrastructure?
Jason: That’s a good question. When it comes to Unified Communications and infrastructure as a whole, infrastructure could mean the servers that the applications sit on, the switches, and, to some extent, some of the software. Primarily, it really is the physical hardware that will run your applications in the cloud. There’s not just infrastructure as a service, there’s software as a service, and platform as a service. So, there’s many different forms. But what we’re going to focus on today is that Infrastructure as a Service.
The shift of Unified Communications towards a Managed Infrastructure as a Service
Doug: Traditionally, and I’m talking about before the big roll out of cloud communications, even today for a lot of people that are end users or channel companies that are serving still traditionally situated users. That infrastructure is on site, am I correct about that?
Jason: Typically, yeah. Typically, today the bulk of – especially in the communications space and unified communications – the bulk of the business is on servers on site. There is a shift towards hosted services in the cloud – whether it’s their own cloud or the service providers cloud or a third party like Azure or someone like that. Predominantly, the industry has started off with their own infrastructure. But now, what we’re going to talk about, that shift away – more into a Managed Infrastructure offering.
What is Managed Infrastructure as a Service?
Doug: Let’s define what that means. So, as opposed to those big pieces of hardware somewhere in the basement, now we’re talking about Managed Infrastructure. What does that mean?
Jason: Great question. Maybe we should start off with some of the demands or needs for why folks are moving to the Infrastructure as a Service and why they’re moving to Managed Infrastructure. When folks start to migrate over their applications and some of their core applications, they’re typically faced with – I’ve seen some stats recently from THINKstrategies:
- 43% of migrations fail.
- Two-thirds are actually delayed.
- The requirements change and 50% of budgets increase when doing a cloud migration yourself.
So, there’s definitely a need to get white glove [migrations]. Typically done by enterprise themselves. And where the issues lie is a cross from the actual service provider they’re using, their own staff, and their own workflows. The biggest errors, technical errors, in part of the organization looking to migrate to the cloud. So, there’s certainly needs for having a managed infrastructure service. If you cast your mind back to that comment about infrastructure as a service and platform as a service, platform as a service is more up the stack. Where the provider will actually do more of the work and lets you have less control of your own application. And when there’s less control, typically, there’s less margins.
So, there’s certainly a shift happening in the industry today. Especially around Unified Communications, where folks are looking at UC as a Service (UCaaS), but what they’re seeing is diminishing margins. Folks are starting to really look at what they can do to offer that same offering without having to pay that white label that they’re using. And Managed Infrastructure as a Service (M-IaaS) gives them that control and gives them that margin. But they are looking for some of that bleed-over into the Platform as a Service. And Managed Infrastructure really is that, what I call bleed-over. Where the industry is providing a white glove service, where you can really get the service provider to take ownership of the application layer.
When you’re looking at Managed Infrastructure, it provides you [the opportunity] to just focus on the application itself and the business that you’re in. Really focus on growing your business, rather than having to worry about the infrastructure. There’s a great statistic – I think from [IDC] – that shows 80% of revenue comes from above the infrastructure. So, if that’s the case, we’re starting to see service providers really shift towards a focus on the application itself. And this has given rise to an Infrastructure as a Service demand. But more to the point of Managed Infrastructure, where you do much more white glove. Where the service provider will do a lot more and bring a lot more value to bare.
If you look at, sort of, the cloud migration will typically go through around 12 steps. From solution design, infrastructure, acquisition, and signing contracts with COLOs. There’s several months, I mean six to nine months, of work, typically, before your application is even up and running. Managed Infrastructure will take care of that. And also make sure that the application is running at 100%. You know, that five-9’s type of thing. I think that really is where Managed Infrastructure has grown, from that demand. Where they [service providers] like the high-touch of Platform as a Service, but really want to keep control of the platform and their business model. And [that’s] given rise to this Managed Infrastructure.
Advantages of Managed Infrastructure as a Service
Doug: So, let’s break this down from the standpoint of the different parties involved. It sounds like what you’re telling me, from the standpoint of the managed service provider and also the channel, there are big advantages to going to managed infrastructure.
Jason: Yes, exactly!
Doug: They’re going to be able to really focus on the service their selling as opposed to having to fool-around with the actual physical stuff.
Jason: Exactly. Also, there’s a lot of providers out there who actually don’t have the technical expertise. And are looking for someone to off-load that to and really a trusted partner. And the key part is, their application needs to be tightly integrated with that infrastructure.
That’s where Managed Infrastructure really comes to bare. Versus just an Infrastructure as a Service, where there really are strong demarcation lines just at the hardware itself. Certainly, the application is where most folks are starting to shift towards. Because that’s where the revenues are coming from. It’s not coming from the infrastructure itself. If that answers your question?
Doug: Yeah. And you know, Jason, it almost sounds to me like what’s happening is what used to be sort of the core offering from the MSP is almost becoming like electricity. You know, it’s a commodity product. It needs to be generated, in the most efficient place, maybe by somebody else. And it’s what we do with the electricity, not so much that we have it to sell.
Jason: Exactly. That’s a really good analogy. It certainly looks more like a utility. It is really starting to look like folks are going, “well if the infrastructure is not generating a lot of cash and consuming a lot of my resources and cash. Then perhaps I can use a provider, such as netsapiens, to really offer that unified communications.” And they just focus on growing their business. Yeah, that’s a great analogy. Very good.
Advantages for End Users
Doug: So, before we jump onto how you guys approach this, I also want to just understand this for our end user readership also. From their point of view, what’s the advantage of moving from – making the big journey from – historically, we had this done all in-house. To, not only handing it over, but handing it over to someone who’s doing it as Managed Infrastructure as a Service?
Jason: Yeah, that’s a great question. Certainly, that’s a big step for folks to have and for folks to take. Certainly, a lot of investment has typically gone in, from a service provider standpoint, into their infrastructure, into their tweaking. But, I think what the shift is happening is towards folks, like netsapiens, where we’ve done this for 150 service providers. We know exactly how to optimize the infrastructure. We’ve done all the tweaking, the optimization, and really squeezed the most out of the infrastructure.
But, more to the point, the reliability. Right? With geo-redundant solutions, where there’s five-9’s offering. Really, I think that’s the biggest draw. It’s not just the off-loading of some of the cash or the resources. It’s more of, having the confidence that you will have the up-time. You won’t have any issues with your platform. It’s really focused, you know, you really get to turn the – the service provider gets to turn their back on the infrastructure. And really focus outward on growing their business.
The netsapiens Approach
Doug: So, let’s bring netsapiens into this next. What are you guys bringing to the table in terms of this approach?
Jason: It’s really a Unified Communications Managed Infrastructure offering. So, for all the folks that are offering it or purchasing unified communications through a white label and offering it to their end users, we’re now providing that ability to bring more value. And more to the point, control their own business model. Because, when you’re on a white label or large provider and you’re just reselling services, your margins are out of your control. But, by offering – going down the Managed Infrastructure – you really are taking back control of your business model and owning those margins. And it’s really up to you how you define the success of your company, rather than in the hands of somebody else.
So, what we’ve done is, we’ve really taken that experience of 150 service providers, we’ve been around for 17 years, and we’ve been doing this a lot on everybody’s architecture – infrastructure. We’ve taken that learning, that industry knowledge, and really brought to bear a very fast, very stable, and very reliable solution totally optimized from a unified communications standpoint. So that you have the confidence, security, and reliability – all the key things from an infrastructure standpoint. So that you can truly focus on growing that business and turning your back, essentially, on the infrastructure.
Changing the Delivery Model
Doug: So, Jason, it almost sounds like, especially for MSPs that have been in this field for a while, that you’re arguing that the business model might change for them.
Jason: Yeah, exactly. Certainly, the industry as a whole, and across the board from an MSP standpoint – no matter what the service – the vast majority of the revenues are coming from a seats-based pricing model. And I just want to expand a little more on that. Certainly, a lot of folks, if you’re selling on a seats-based model and folks aren’t actually making phone calls. Or if you’re selling into hospitality or into any of the other – even into hospitals and stuff like that. Folks aren’t actively using those, what we call, seats – those licenses. So, you’re starting to see a shift away from seats-based licenses.
There’s a great report out – another 80% report – 80% of the workforce don’t actually have a seat. You know, again, it depends on what the industry is. You know, if that’s the case, then we’re all chasing this 20%. So, netsapiens, from the very beginning, really shifted the conversation away from seats-based pricing, to active calls – or sessions-based pricing. Really opening up the market for you to address – or really take back control of your business model. So, you as a service provider and MSP, can sell in on a seats-based pricing, but you’re only purchasing on active sessions. Greatly increasing your margins. And really, that has resonated, and really started to take off. I’d say in the last year or so. We’re really starting to see the shift away from seats-based pricing, towards the business model conversation.
We all have – we all believe we’ve got the best platforms out there. But, you know, when it comes to reality, there’s very little difference between most providers or platforms. So, the conversation really should shift towards more around the business model. What can we do? What flexibility do you need in order to grow your business? It’s certainly shifting away from a seat-based model and giving you the flexibility to go chase on a tiered basis, or whichever way you want to do it. This is where we focus. This is again, back to taking back control of that business model.
So, between Managed Infrastructure, where again, we provide much more control for the [service] provider. And then, the one-two punch with the unified communications sessions-based pricing. It really is resonating with the industry. And it really is driving our 40% growth year over year.
Future Trends for the UC Community
Doug: So, Jason, you know, we’re coming up on the end of the decade – if you will – in cloud, managed services, and unified communications. We’re entering a new decade – a new year – and what do you see as the main trends going forward in the UC community – in the UC world?
Jason: Yeah, great question. There’s a lot of niche players cropping up and being very successful. From a zoom to a flack. And really, they’re leveraging a lot of the shift away from typically picking up the phone and calling your business colleague. I think there’s a lot of investment going into these types of applications. And really trying to meet the demand of the customer – moving away from phones calls more to a collaborative approach.
So, meetings and collaboration. Certainly, that’s something that netsapiens has got a big investment in. Our upcoming release has gone very, very big into the meetings and collaboration and trying to take a leading stance on that.
But also, if I look longer term, artificial intelligence – AI and machine learning are having a profound impact – or will have a profound impact on the industry. It’s very early stages now, but I would love in the next year or two for you to see a lot more use-cases and a lot more value being driven around AI, some of the machine learning, and natural language processing.
And, sort of touching back on the infrastructure itself, you know, a lot of folks saw the value in “as a service.” This is why the Amazons of the world have become so large with these offerings. But, a lot of folks are now saying “well, I’m losing a lot of control here,” from an application standpoint. If they go all the way up to a platform as a service, especially [losing control] around some communications offerings. And [those] folks are starting to pull back away from a platform as a service. Away from those UCaaS offerings type of thing. And going more, again, into that infrastructure. “I want to keep control of my business model. But I don’t want to have the headaches of maintaining all these COLOs.” I think those are the big trends we’re seeing from a UC standpoint. As well as the infrastructure side.
Doug: So, Jason, thank you very much for joining me today. And for giving us an interesting overview of what I think is an emerging trend and interesting topic: managed infrastructure as a service. Jason, where can we learn more about netsapiens?
Jason: Yeah, certainly. We’re across all social media platforms. Just look for “netsapiens” (n-e-t-s-a-p-i-e-n-s). As well as netsapiens.com, we have a lot of information around Managed Infrastructure. But, also the, what we call, sessions-not-seats. Where really the industry is starting to shift away from that seats-based pricing. So, we’ve got a lot of details around, a lot of background information, industry trends, and that sort of thing. Feel free to stop by any of our channels and learn as much as you can.
Doug: Well, I know we’ll be talking more about this topic going forward in the new year. But, for now, thanks very much.
Jason: Thank you, thanks, Doug.
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