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While the Cloud is still in its infancy and somewhat fragmented,
Parallels is already positioned well for aggressive growth

Orlando, FL

22-24 February, 2011

The announcement at Summit by Parallels Executive Chairman Serguei Beloussov left no doubt; one of the keys to this positioning is Birger Steen’s appointment as CEO, while Serguei Beloussov continues as full-time Executive Chairman, and Chief Architect.

While the Cloud space is nascent, Parallels is enriching its talent capital and passionately seeking both customer and partner feedback and assessing needs. Over 1200 attendees from established Cloud leaders, event sponsors including Microsoft, Intel, Go Daddy, and HP took in the hosting and telecom verticals’ “Cloud noise” together with a solid representation from Parallels employees.

Profitability and scale were the hot subjects of many discussions. As the only commercially available automation solution for Cloud services deployment, Parallels Automation (PA) 

enables hosting companies and telcos to sell to their customers at a reduced cost, which, of course, will drive both scale and profitability.

Many observed that a common denominator or easily-identified trend in any of the cloud-related segments remains elusive. Divergent opinions and controversy span a wide spectrum of topics. In one-on-one meetings and at the Expo Hall the industry players brainstormed ways to satisfy the diversity of needs of SOHO and SMB–particularly in international markets–guessing which of today’s strongest ISV, hosting or telecom brands has the better chance to penetrate and lead this market through partnerships enabled by Parallels Automation. ”The hosting market might increase from current $9B to $21B in a few years,” offered Joshua Beil, Director of Strategy and Research, Service Provider Marketing at Parallels, and that is a substantial market to control.

APS packaging, as the technology of choice for integrating applications and services with Parallels Automation cloud service delivery platform, is gaining substantial support from other software vendors. McAfee announced its security support to Parallels Automation, and LuxCloud developed a management console for PA both on the end-user and service provider side.

Parallels is committed to supporting the fast-growing APS ecosystem. “All ISVs and service providers are encouraged to package their applications in APS and join the ecosystem. We already have over two hundred APS packages in the APS Catalogue and we are investing the necessary resources to ensure fast growth of this ecosystem”, said Ilya Baimetov, Director of Technology, and Cloud Computing.

APS and Parallels Automation become central points of leverage for other players, as well. How will the industry structure change? When many players are making some incremental moves, it might take a few leaders with bright ideas and bold investments to simply make a bet and charge forward, thus winning the market and changing the industry game plan to the point of no return in a foreseeable future. Kind of like what Apple did with iPhone and iPad. What was interesting is that regardless of market position or their particular vertical, many companies expressed their intent to enter new markets in order to provide a more complete offering to their existing and prospective customers.

Examples include hardware and security software companies offering hosting solutions, hosting companies looking to add telecom services, and telcos adding 

hosting  solutions for their SMB customer base. Watch the upcoming battle of discounted bundles that will be targeted to cover as much of the customer needs throughout the customer life cycle. Large hosting companies and tier one and tier two telcos are also surveying their respective customer bases, pulling various reports from their CRM/BI infrastructure to identify new market opportunities. With the demand for scale comes a necessity for well-calculated, low-risk moves.

Another key topic of discussion at Parallels Summit 2011 was about how to retain existing customers and make some new customer acquisitions, and what role the technology and cloud-based products can play in that. All of which is a pleasantly refreshing conversation compared to the heavy focus on channel upsell and cross-sell motives that dominated the air just a year ago. Is this a sign that the hosting channel is beginning a transition from an innovative, opportunistic approach, to a more weighted, planned form that is more aligned to customer needs?

There is still plenty of room for innovation in both products and business models. At Summit there were very successful and profitable businesses that have sophisticated marketing and sales programs, and there were other, also very successful and profitable businesses, that have little or no dedicated marketing budget at all. For no or little marketing budget, the profitability and scale opportunities can be derived from Business Analytics, business operations and business model optimization. For marketing-driven businesses, both Business Analytics and CRM approaches, combined with Customer Acquisition and Retention Programs can help deliver that desired growth. One can easily determine the best approach for a company by running the marketing spend efficiency and effectiveness analysis.

A key challenge to overcome on the way through the industry supply chain from ISV to customer is that, more often than not, ISVs have only a vague understanding of hosting and/or telecommunications channel business models and needs, and hence struggle to define and communicate a value proposition to them. Another piece of work to do here is adjusting the sales force to these verticals’ sales processes and business models, sharpening the professional skill set and improving industry knowledge of the sellers.

Because targeting SMB and consumers directly requires a marketing ‘mainframe’, which takes time and large investment to build internally, players are being attracted by those few who do have access to substantial customer bases. But even in this case they ought to develop both to-partner and through-partner programs, i.e. to-customer value propositions. This is a continuous challenge even for those with ‘mainframes’ and broad customer bases, as their primary concerns over the last few years are retention programs, churn reduction, business processes optimization, and profitability improvement via value-added services.

The rather relaxed and positive disposition of the Summit participants leads one to believe that the whole pull of those companies participating in the Summit is better off now, and they did make money in 2010.

It will be another interesting year in 2011. Even though some interesting product releases might be coming, it feels as though the industry might benefit from a relatively quiet release season, to allow for some rest and necessary stabilization.