Increasing Revenue, Margins and Differentiation with heleos

Executive Summary

Service providers around the world are racing to find new and innovative ways to provide enterprises of all sizes with robust cloud Infrastructure as a Service (IaaS) offerings. When it comes to the network, the challenge has been finding unique ways to offer value-added services that will get enterprises comfortable moving business-critical applications to the cloud.

Embrane’s heleos™ is the industry’s first multi-service, distributed software platform that powers on-demand virtual network services such as server load balancing, firewalls and VPN termination. Purpose-built for those offering cloud IaaS, heleos delivers the agility - rapid procurement and provisioning, elasticity, multi-tenancy at scale, and programmability - and cost savings users expect with the cloud.

A software-based solution, the heleos platform runs on industry-standard x86 servers and any hypervisor technology to eliminate vendor lock-in. It leverages a distributed virtual architecture that decouples network services functionality from the underlying physical infrastructure and hypervisor technology, providing high scalability, flexibility and performance. With the heleos platform, a typical layer 3-7 network service can be procured, provisioned and configured in less than two minutes. heleos-powered services are also elastic and can be grown/shrunk, depending on specific business requirements, in less than 30 seconds.

Beyond the innovative technical approach to delivering these networks services, the heleos platform offers cloud service providers a strong business benefit - the ability to add new layer 3-7 network services to their portfolio that will help grow revenue, increase gross margins and provide clear competitive differentiation.

Meeting the Needs of Cloud Service Providers

The cloud service provider (CSP) market is highly competitive with providers attempting to differentiate their business and provide value to their customer base, while still growing revenue profitably. They have to show their customers that they can provide enterprise-class services better than they can do themselves; better than they can get from the likes of Amazon Web Services; and for less money. Not an easy task.

Current CSP offerings for layer 3-7 network services such as server load balancers, firewalls and VPNs come in essentially two flavors: shared or dedicated infrastructure. While both options have some advantages, the short-comings of each result in providers leaving money on the table; spending too much money upfront; and/or not allowing them to compete for certain business.

Embrane’s heleos is specifically designed for CSPs. It offers a very compelling alternative to the current options CSPs have at their disposal and enables them to do three key things:

• Add new services
• Grow revenue profitably
• Improve customer satisfaction/reduce customer churn

Current Shared Cloud Services: Volume Over Performance

Due to limitations of hardware and virtual appliances, most CSPs offer layer 3-7 network services in shared environments, which means their customers share devices with other customers. The provider delivers best-effort performance, availability and reliability, which in turn causes enterprises to be reluctant to move production applications to the cloud. Test and development environments work fine on a shared service, but if a CSP wants to offer enterprise-class services, the most likely option available is a more expensive, more complex, dedicated hosting service.

In shared environments, there is also potential for disruption if/when a customer that is sharing a particular appliance needs to add capacity beyond what is available on that appliance. Moving to another shared appliance, or even to a dedicated service is not an easy transition and likely requires downtime and disruption, not only for the customer, but also for the CSP’s operations team and sales force. This complexity and disruption can have a negative impact on customer satisfaction.

The net-net: For basic, non-critical applications, shared cloud services suffice. Unfortunately though, CSPs limit their addressable market because enterprise customers are reluctant to outsource significant business to a shared cloud environment. If that’s not enough, the nature of the hardware model requires significant upfront capital investment before a CSP sees a dime in revenue.

Current Dedicated Cloud Services: Performance Over Revenue

It is clear that enterprises do not want to share environments for business-critical applications, they demand dedicated infrastructure. They want to ensure enterprise-class performance and reliability much like they have in their own data centers. CSPs typically offer this level of service in a managed hosting environment, but when it comes to the cloud, options have been limited and more complex. The problem is the best option for dedicated infrastructure has been hardware, which unfortunately goes against every principal of the cloud.

In an attempt to attract enterprises to their cloud services, a handful of CSPs have developed a form of dedicated, cloud-based layer 3-7 network services via virtual appliances. However, it is not an ideal delivery model. With this type of offering, typically service providers will manage the delivery of the network service to the customer, who in turn is responsible for configuring and managing the service. The CSP may receive a cut of the service from the virtual appliance vendor, but it’s not as much as they could receive if they actually deployed a complete service to their customer. Additional complexity comes when a customer wants to increase the capacity of these virtual appliances. More VMs or even devices need to be added to scale, which requires increased license procurement and management headaches for both the CSP and their customer.

The net-net: In the cloud, current dedicated layer 3-7 network services options give enterprises the dedicated performance and security they prefer, but not without challenges and a significant level of responsibility and cost on their part. From a CSP perspective, they don’t make as much money as they could, and they end up placing the complexity in the lap of their customer – the exact opposite reason companies look to outsource.

The Best of Both Worlds with heleos: More Revenue, Less Cost & Complexity

As the industry’s first distributed software platform for virtualizing layer 3-7 network services, heleos delivers a new, unified platform for offering both shared and dedicated cloud services. Embrane allows CSPs to create multiple dedicated instances of network services that can be allocated to individual users and accessed and operated independently of the others. Each service instance is fully featured and provides guaranteed levels of performance – keys to enterprise adoption.

With heleos, CSPs have the opportunity to offer tiered levels of cloud services, including premier services with SLAs. The on-demand nature of heleos also means a faster time to revenue for them and a faster time to service for their customers.

From a sales perspective, they now have more logical transitions to up-sell customers. Service providers can start customers on shared services and seamlessly move them to dedicated services without disruption. When a customer outgrows the shared services, a true dedicated cloud service is available to them rather than the more expensive and extremely complex transition to managed hosting. These capacity changes within dedicated instances are supported seamlessly without having to migrate from one appliance to the other.

Finally, Embrane’s usage-based pricing and keyless licensing model allow a CSP to pay for what they sell and their customers to pay only for what they use. Everyone wins.

The net-net: With heleos, CSPs are able to add new services to their portfolio – tiered options and enterprise-class dedicated cloud services – with minimal upfront capital investment. The heleos offering also gives their sales teams a more realistic and seamless up-sell opportunity for customers whose demands exceed the capability of shared services.

Cloud service providers also can grow revenue more profitably because they pay for the services consumed after they sell them with minimal up-front capital investment. Customer satisfaction improves because they have the option for dedicated, enterprise-class cloud services with guaranteed levels of performance. Additionally, customers of the cloud will benefit from the ability to have layer 3-7 network services turned up when they need them, without the delays of a lengthy procurement and provisioning process, and the complexity of license management. With the elasticity feature of heleos, customers can grow and shrink their layer 3-7 services as their business needs change while only paying for what they use.

Profitable Revenue Growth with heleos

In general, heleos costs CSPs less and returns higher margins to the business, regardless of which service a provider runs on the platform. There is minimal upfront capital investment and a usage-based billing model, which means Embrane customers can see revenue or productivity increases before having to pay for the service. As a pure software solution, margins will improve as well.

The following two case studies provide a direct comparison of heleos to a software appliance and a hardware appliance solution for cloud-based layer 3-7 services. An even more detailed breakdown of the two case studies below can be found in a separate white paper called ‘Delivering Layer 3-7 Network Services in a CSP Environment’ available at www.embrane.com/resources/documents/csps-and-dedicated-l4-7-services-embrane-paper.

Using Embrane’s heleos-powered server load balancer as a comparison to a competitive software appliance₁, Embrane customers can see a return on investment (ROI) in the first year, while the competitive solution requires three years before achieving a positive return. The competitive solution also requires an upfront investment of approximately $2 million compared to an annual subscription and an x86-based server cost totaling $620 thousand for a heleos-powered solution. Over a four-year period, CSPs using heleos would benefit from 67 percent gross margins and a 200 percent ROI. Table 1 and table 2 show the comparative costs and profits of a load balancing service deployed using a software appliance model versus the Embrane solution with a dedicated instance of a load balancer for each customer.
 

Table 1

Table 2

The CSP realizes more than twice the gross margin and 5x the ROI with the Embrane solution compared to the software appliance solution.

Similarly, if a CSP offered a heleos-powered firewall service, they could achieve an additional $1.3 million in revenue over four years compared to a competitive hardware appliance solution with virtual context₂. The profitability metrics over that same four-year period also are extremely compelling with gross margins of 86 percent and an ROI at 606 percent.

Table 3 and table 4 show the comparative costs and profits of a firewall service deployed using a hardware appliance solution with virtual context capability versus the Embrane solution with a dedicated instance of a firewall for each customer.
 

Table 3

Table 4

heleos: Powering the Agile Network

Built from the outset to support large scale, dedicated cloud-based layer 3-7 network services, heleos bridges the gap between hardware devices and software-based virtual appliances. It presents CSPs with new service and revenue opportunities while requiring significantly lower capital expenses and delivering more money to the bottom line. If a service provider wants to differentiate their business and capitalize on the growing market for cloud-based network services, Embrane’s heleos is the ideal solution to power the agile network.

1. Based on 1,000 load balancer dedicated instances @ 5 Gbps aggregate capacity at list prices.
2. Based on 200 firewall dedicated instances @ 2 Gbps aggregate capacity at list prices.