New Virtuozzo Hybrid Cloud Comes With Bold Margin Claims for MSPs
The hyperscalers, says Joe Morgan, “are definitely not friendly to the MSP.” So Virtuozzo is stepping in.
enciktepstudio/Shutterstock
Channel Futures: Who’s the underlying cloud provider for Virtuozzo Hybrid Cloud or is this something Virtuozzo developed from the ground up?
Virtuozzo’s Joe Morgan: We created the software and we license it out to our partners so they can build their own little environments in what we call the alternative cloud market. We are selling it under our brand name but we’re not out there building data centers, and we don’t want to build data centers and compete with our partners. We just want to be able to facilitate funneling more work to them. We have these delivery partners on the back end that we use for the infrastructure. The idea here is that we build an ecosystem where we’re trying to have a healthier internet, giving MSPs the ability to buy from that local provider of their choice but through our platform.
CF: I’m curious how Virtuozzo sees itself compared to the likes of Vultr, Linode, DigitalOcean. Give me a sense of where you fit into that landscape.
JM: This particular product was really based on the need for MSPs to be able to sell cloud services. A lot of those other providers, they do stuff like traditional hosting or maybe even they’ve got their cloud products, but it wasn’t really built for channel and it really wasn’t built for, in my opinion, MSPs specifically. In fact, I just got off another call with an MSP and you could hear the frustration in his voice because he had accounts at two or three of those different places. And it’s hard for him to manage it. It wasn’t built for him and he didn’t want to go to the likes of the hyperscalers … because he’s afraid that they’re going to steal his business from him and he’s not got any margin. … We gave him a demo of this cloud … and he [said], “This is exactly what I need.” … It gives him that guaranteed margin built in. He understands that we’re not doing this as a ploy to get his customers into our ecosystem and locked in and then we steal them from him potentially. It was built specifically around the idea of empowering MSPs.
CF: What size MSP does this target, and what size of end user does this target?
JM: It’s a scalable cloud. So we can have any customer size in it, but our ideal is midmarket MSP. That being said, there’s no reason why a small MSP couldn’t use this because it’s it was built specifically for MSPs. And there isn’t a large commitment barrier to entry. You can pay as you go.
CF: How is the partner program structured?
JM: We looked at what the industry was selling cloud services at and we came up with a system where we discount off of that by 25%. … Then what we’ve done is give them 20% margin on top of that. So we’re saying, “You go sell this, you can be cost competitive, and then we’re going to guarantee you 20 points on the back end.” … We’ve matched what pretty much everybody in the industry does, which is this concept of reservations. So if [MSPs] build up their portfolio large enough, they’re going to see that they have resources now that are consistently on their platform, and they can basically commit to us for those amount of resources. And then we have price breaks based on one-year, two-year, three-year commitment of those resources.
CF: So it’s 45% off of Virtuozzo’s own back end from the beginning. I’m curious how the company can afford to do that.
JM: [The hyperscalers] are definitely not friendly to the MSP. Their market is enterprise, and they’ve designed it to where, unless you have large buying power, you’re paying a huge premium. … We have a pool of these infrastructure providers. That’s what they do. And it’s our software. So there’s not this huge barrier in the licensing costs. In fact, we’re actually paying our partners on the back end for using their resources. So we’re almost flipping the script a little bit and saying, “Hey, we’re not going to charge you for a software license. Instead, we’re going to pay you for the usage on your infrastructure.”
CF: Correct me if I have this perception wrong, but it almost feels like, “If we build it, they will come.”
JM: We actually have existing customers that were using this, but it wasn’t built for the MSP. So we had some of this infrastructure and we had some of this in place already. And the offering is attractive enough that some of our partners are saying, “I’m going to move my workloads off of my infrastructure — that I was paying you the software licensing for — into this cloud.” We know there’s demand there and we know there is a little bit of a chicken-and-egg situation in which we need the infrastructure to be able to start and provide the cloud, which is what we’ve built now. And then the growth and demand of this will allow us to then scale to more and more partners, more and more regions and locations. I wouldn’t say, “If you build it, they will come,” but there is a little bit of this idea that there’s a base minimum that you have to have to play in this space.
CF: By the end of the year, how many MSPs do you hope to have on your platform?
JM: Our goal is probably going to be in the high hundreds. … We’ve probably got 50-100 in the platform right now.
CF: Let’s wrap up with a look at the features and capabilities MSPs get to via the Virtuozzo cloud platform.
JM: We’ve tried to make this turnkey. They log into the platform and they have the ability to manage their customers, which means that they can easily see the different resources that are being used by each customer. They get traditional infrastructure as a service, meaning they can do all the normal compute, but it also has our platform-as-a-service offering as well for, for example, database as a service, WordPress as a service. … Our platform has the ability to automatically scale. … You can put a small website on it and as that customer’s needs and demands grow, it’ll automatically scale the infrastructure using our platform service. We also do object storage.
CF: Let’s wrap up with a look at the features and capabilities MSPs get to via the Virtuozzo cloud platform.
JM: We’ve tried to make this turnkey. They log into the platform and they have the ability to manage their customers, which means that they can easily see the different resources that are being used by each customer. They get traditional infrastructure as a service, meaning they can do all the normal compute, but it also has our platform-as-a-service offering as well for, for example, database as a service, WordPress as a service. … Our platform has the ability to automatically scale. … You can put a small website on it and as that customer’s needs and demands grow, it’ll automatically scale the infrastructure using our platform service. We also do object storage.
It’s not every day a company hits up a journalist and claims its new platform “will reset the margin and cost equation for managed service providers and their customers.” We admit, that line about the new Virtuozzo Hybrid Cloud caught our attention (and raised our eyebrows). So we got on the horn with Joe Morgan, vice president of cloud at the Switzerland-headquartered vendor — and former MSP himself.
Turns out, Virtuozzo Hybrid Cloud looks like the real deal. The provider is intent on, in its own words, empowering MSPs.
Virtuozzo’s Joe Morgan
“We’re basically guaranteeing [MSPs] margin at a price that lets them additionally sell below the traditional pricing,” Morgan told us. (Don’t worry, we’ll get into the details in the Q&A.)
That guarantee comes alongside pay-as-you-go pricing, four-nines SLAs, and all the standard security and compliance assurances. As for what comes inside the OpenStack-based Virtuozzo Hybrid Cloud, expect IaaS, PaaS, storage, Kubernetes, backup and more.
The efforts started as Virtuozzo, known for its software, watched MSPs struggle in a hyperscaler-dominated world, Morgan says. Margins are tight, there’s fear about vendors poaching customers, and, in many cases, the services are too much for the size of MSP Virtuozzo serves.
Enter Virtuozzo Hybrid Cloud, which Virtuozzo says addresses all of these challenges.
How, exactly, can Virtuozzo Hybrid Cloud do all this? We asked that question, and more, in the Q&A above. Click the image above to get started.
Want to contact the author directly about this story? Have ideas for a follow-up article? Email Kelly Teal or connect with her on LinkedIn. |
Read more about:
MSPsAbout the Author(s)
You May Also Like