Verio enables cloud service brokerage with VerioCatalyst

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1 Verio enables cloud service brokerage with VerioCatalyst Analyst: Agatha Poon 30 Aug, 2013 Verio has been in controlled beta since April, but recently announced the commercial availability of its channel-oriented cloud-marketplace-enablement platform dubbed VerioCatalyst. Built from the ground up, VerioCatalyst provides global partners with a full set of management capabilities while exposing front-end interfaces for retail purposes, the company says. The platform is available globally at launch, and early adopters include two NTT affiliate companies that deploy VerioCatalyst as a retail point of presence. Context Incorporated in 1996 and headquartered in Denver, Verio has been a wholly owned subsidiary of NTT Communications since The company continues to transform its business model to meet changing SMB requirements. By taking advantage of its parent company's extensive network, Verio is able to enter new markets and grow beyond its home turf. Its viaverio and OEM programs continue to gain traction as VARs and SIs look for ways to boost wallet share and improve customer stickiness. From simple Web hosting, managed services and application hosting to cloud services, the company has done a good job of embracing innovative business models and service delivery. Verio has aligned with Citrix and Parallels to provide a version of IaaS offering dubbed Cloud(n), which is optimized for smaller businesses. Its cloud efforts seem to pay off as the company announced in May a whopping 102% growth Q/Q for Verio Cloud(n) sales through a combination of retail and reseller channels. With cloud computing becoming an important part of the company's growth strategy, Verio has invested in simplifying the procurement and provisioning of various cloud services, enabling the creation of bundled packages for a complete business offering. This is where the VerioCatalyst story begins, which, the company notes, represents the next generation of its Copyright The 451 Group 1

2 ordering and provisioning capabilities. Products The company says VerioCatalyst functions as a cloud service brokerage and was built from the ground up. It leverages a mix of in-house capabilities and service components from third-party vendors. For example, it utilizes a commercial enterprise service bus to drive service agility and flexibility while facilitating interaction between applications. At the core, VerioCatalyst comprises three main components: sales portal, provisioning system and operational platform. They work together to create a service-delivery platform that provides customers with a seamless service experience while simplifying the procurement process. The sales portal is a customer-facing, data-driven application store where customers browse, discover and order various applications. Accordingly, the sales portal, which can be fully branded, is designed to support multiple layers of resellers and partners. It is touted to meet PCI data security standards with PCI compliance and provides an upsell/cross-sell mechanism. The provisioning system allows marketplace owners to provision their own products, Verio products and third-party applications with provisioning APIs (on demand) or without provisioning APIs (by hand). What differentiates Verio from other marketplaces is that the system can provision products from other marketplaces using what it refers to as the 'share' function through aggregating third-party marketplaces. The operational platform is a management portal for both administrators and users. Using the admin portal, administrators can manage service orders, packaging, pricing and customers. Meanwhile, the customer portal lets users set up accounts, track usage and manage subscriptions with some reporting capability. All functions are exposed in native GUIs and via Web service APIs. In phase two, Verio will support downstream license management, which is for managers to assign licenses to individual users. To build out its service catalog, Verio says it is in active negotiation with several dozen app providers. At present, its service catalog has nearly two dozen applications/services (some cannot be sold as stand-alone services yet) in 15 categories, with a primary focus on apps/services that address the needs of SMBs. Verio will handle billing and payment for third-party services, and the pricing model is a typical wholesale agreement a fixed rate negotiated on the marketplace owner's behalf. In some cases, it could be a referral agreement if the offering is popular, although there won't be significant margins on the Verio side. The company plans to expand the breadth of its service categories and the depth of service options within each category. At present, it's a manual process for application onboarding, but the company says it is developing a new process with an API standard. It is also working on an Application Packaging Standard (APS) adaptor so that Copyright The 451 Group 2

3 any APS-enabled applications will automatically work with the VerioCatalyst platform. The company uses a managed service approach and says VerioCatalyst facilitates lightweight integration with customers' existing back-end systems. The delivery platform can be hosted and managed by its engineering team or hosted by partners and managed by its team. Likewise, services can be delivered as add-ons or stand-alone offerings with multiple sales and billing options, which should be a welcome call for SMBs seeking flexible deployment models. In terms of customer support, Verio says it has been baked into the support model, where it provides tier 2 and tier 3 support for its products while marketplace owners provide tier 1 support. In some cases, Verio will offer tier 1 support, but branded for the marketplace owner. For third-party offerings, Verio will share responsibility with the other two parties (SaaS vendors and marketplace owners). Pricing for VerioCatalyst consists of platform and service support monthly fees. The service-support fee may vary from one marketplace owner to another, depending on the complexity of service integration. That being said, marketplace owners will get refunded if they meet certain sales targets of reselling Verio-branded and Verio-enabled third-party offerings. Sales In this version, VerioCatalyst is specifically designed for channel partners and service providers across verticals, regardless of geographical location. It claims to have a number of strategic partnerships with large resellers with multi-year contracts at the global level South Africa, Mexico, Brazil, UK, Italy, Indonesia, the Philippines, Australia and Switzerland. With that, the company can learn from these resellers to provide services that are relevant to market segments by region. In terms of branded sales assistance, Verio realizes that marketplace is not a 'build it and they will come' proposition. Aside from offering branded sales resources to handle both inbound and outbound traffic, the company will provide sales-enablement and customer-support training and tools. Competition The idea of a cloud marketplace is well received in the telecom and hosting markets. KPN is pushing the app store model in both the retail and wholesale markets, while Orange Business Services is delving into the private app marketplace model. Deutsche Telekom, on the other hand, has partnered with AppDirect to deploy a SMB-focused app marketplace, in which the company is looking to differentiate itself from competition using an end-to-end approach from connectivity and storage to billing. Interoute has positioned itself as converged network and cloud player with Copyright The 451 Group 3

4 CloudStore a converged compute and network platform that comprises some fundamental elements of a business app marketplace. Hosting providers Terremark and Savvis are increasingly taking an integrated cloud delivery approach, leveraging network assets from their respective parent companies Verizon and CenturyLink. Nevertheless, not all services and network components are accessible from a self-service menu. As Verio eyes opportunities in the service-provider market, it is likely to bump up against Ensim, Jamcracker and Parallels, among others. The 451 Take VerioCatalyst's service-delivery approach gives resellers and channel partners a much-needed helping hand to get started. The company's domain expertise in the SMB-focused hosting market is an asset as well, both in winning SMB trust and creating segment-specific service bundles to boost sales. Given that it is less dependent on platform sales (customers will get refunded as they meet sales targets), Verio should invest further in expanding the breadth and depth of its product portfolio for sustainable growth. Special from 451 Research's Market Insight Service SWOT Analysis Strengths Weaknesses Verio is gaining traction in the channel play with a SMB-focused product portfolio and intuitive tools for service bundles. The 'share' function available in VerioCatalyst can open up new growth opportunities for channel partners while setting the company apart from competitive offerings. Opportunities Threats More overlap with Verio's existing line of tools and services could provide cross-selling and upselling opportunities as the marketplace vendor ecosystem continues to expand. Despite its global aspirations, Verio is still perceived as a US-focused hosting provider for SMBs. Its collaborative efforts with NTT affiliate groups and distribution networks will take time to materialize, not to mention resources and budget required to move forward. Stickiness among various Verio and third-party SaaS offerings, which ultimately defines the success of VerioCatalyst, will largely hinge on channel partners' capabilities to boost customer loyalty in the SMB market. Copyright The 451 Group 4

5 Reproduced by permission of The 451 Group; This report was originally published within 451 Research's Daily T1R. For additional information on 451 Research or to apply for trial access, go to: Copyright The 451 Group 5

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