Logicalis CEO On Microsoft Azure Surpassing His ‘Wildest Expectations’ For Growth

Bob Bailkoski, CEO of Logicalis Group, says in an interview with CRN that the global solution provider’s investments with Microsoft have paid off as demand for Azure has been ‘huge’ during the pandemic.

Driven by “sky high” demand for the Azure cloud platform, Microsoft has been the fastest-growing vendor during the pandemic for global solution provider powerhouse Logicalis Group—which plans to continue investing aggressively around Azure in the coming months, CEO Bob Bailkoski told CRN.

Just over a year into his tenure as chief executive for the U.K.-based Logicalis Group, Bailkoski said that the solution provider’s efforts to deepen its partnership with Microsoft, such as by achieving the prestigious Azure Expert Managed Services Provider certification, have been paying off in a major way.

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“I always felt that with the pandemic, demand would be high. But honestly, it’s surpassed even my wildest expectations. The demand for Azure has been huge,” Bailkoski said in an interview with CRN.

For Logicalis Group—a Microsoft Gold partner whose U.S. division ranks at No. 59 on CRN’s Solution Provider 500—year-over-year growth in its Azure business reached more than 100 percent, for the company’s fiscal year that ended at the end of February, he said.

As a result of the upheaval caused by the pandemic, “many of our clients have had to switch their focus onto agility and flexibility in their business model,” Bailkoski said. “And that’s driving demand sky high.”

Logicalis intends to continue investing heavily around Microsoft-based solutions with “a multi-million dollar investment plan” over the next 12 to 18 months, he said. “That’s all geared around building a Microsoft business unit within Logicalis that will support our local operations in making sure that they can deliver great outcomes to their customers,” Bailkoski said.

By contrast, the solution provider has not opted to focus on Amazon Web Services—the leader in cloud infrastructure services by market share—to nearly the same degree as Azure. That’s due in part to the “natural affinity” that many enterprise customers have with Microsoft, as well as the perceived complexity of understanding and working with AWS when compared to Azure, Bailkoski said.

“Microsoft’s articulation of the opportunity that’s available with Azure is much easier for our customers to understand—especially in the C suite—than it is perhaps with AWS, which is a slightly more technical, developer-style solution,” he said.

What follows is an edited portion of CRN’s interview with Bailkoski.

What have been the results of Logicalis’ efforts to go deeper with Azure?

We started our journey with Microsoft, from an Azure perspective, only about two years or so ago. So there have been pretty rapid results and implementation since that time. I would characterize the results of our efforts to establish a strong relationship with Microsoft, and build on the Azure platform, in three areas. From our perspective, the best result has been that it’s enabled much richer conversations with our customers--focused on how Logicalis solutions that have an Azure backbone to them can help deliver the business outcomes that they need. For us, it’s been a real driver of our own transformation as well. We’ve shifted pretty rapidly from being a traditional, value-added reseller to a services-first business. The services proportion of our revenue has increased now to well over 40 percent. But realistically, the key result of working closely with Microsoft to develop an Azure capability globally, particularly in my role as group chief executive, has been that it’s driven additional shareholder value—more than $100 million of additional shareholder value in the last 12 months. And that’s really impressive, from my perspective. So that’s a really positive result of the relationship with Microsoft and the Azure platform specifically.

How has the demand for Azure been among customers over the past year? Is it higher than you originally expected?

I always felt that with the pandemic, demand would be high. But honestly, it’s surpassed even my wildest expectations. The demand for Azure has been huge. We’ve grown our consumption revenue for Microsoft by over 80 percent, year over year, in Microsoft’s fiscal year—which is way higher than the reported growth for the Azure platform that Microsoft has announced. What’s driving that demand [is] the disruption caused by the pandemic. Many of our clients have had to switch their focus onto agility and flexibility in their business model. And that’s driving demand sky high. I can give you an example of that. We deal with a lot of financial services customers, and they’re notoriously traditional in terms of their outlook and in terms of their approach to transformation. But right at the beginning of the pandemic, we had a conversation with a private bank based in Germany, called Donner & Reuschel. The conversation was about their need to move around 700 employees to a remote working environment from an office environment. We supported them with that move using Windows Virtual Desktop, and we helped them achieve that migration in a couple of days. That’s a bank talking to us about some very rapid transformation using Azure as the backbone of that solution. They’re some of the most traditional and deliberate organizations when it comes to transformation. So if they’re now moving apace into a cloud environment, you can imagine what other customers in other industries and verticals are doing in that area. We’ve also seen a general acceleration of digital transformation across most of our clients—whether that’s driven directly by the pandemic or not—because of the general growing confidence that they have with the public cloud.

Do you have an estimate for what your Azure consumption growth will be for 2021 versus 2020?

I would expect that roughly that same positive momentum that we’ve achieved in the Microsoft fiscal year to continue throughout 2021. We had a target to grow that metric by 4X in the next couple of years. And based on the recent growth rates that we’ve been able to deliver, we’re going to easily deliver that original target—we’re going to exceed it in the time frame. And that’s because the Azure platform has great resonance with our customers. And of course, we’ve built some solutions on the back of Azure—so we’re not just simply selling Azure to our customers. We’ve built some Logicalis solutions on the back of Azure which are geared towards delivering on the business outcomes that our customers need.

Has it been common for Windows Virtual Desktop (now known as Azure Virtual Desktop) to drive customers to Azure?

Absolutely. The Logicalis Group is split into five regional divisions, and there’s a relative degree of autonomy in terms of the solutions that those divisions offer to the market. But in my tenure as chief executive, I’ve created a global solutions team, which is focused on creating solutions on the back of the Microsoft Azure platform—and also on a variety of Cisco solutions—that can be scaled globally and rapidly around the 27 countries that we operate in. So Windows Virtual Desktop, as it happens, is a solution that hasn’t yet been adopted by the global team, but has had really strong resonance in each of those individual regions.

Where we’ve seen the most growth, from a solutions perspective, bringing it back to Azure specifically, is in our flagship global solution—which we call the Production-Ready Cloud solution. That helps businesses transform with a scalable and secure cloud platform, which we can deliver super-fast, and in a cost-effective and controlled way. Our promise to customers is that we can get workloads transferred into Azure within the space of a couple of weeks. That’s got a three-step approach to it. It has an initial assessment, where the customer defines the business outcomes that they want to achieve. Then of course there’s typically a migration of some kind to Azure. And ultimately, the goal is to provide the customer with a managed service to ensure that their new environment is optimized—so we help them support and manage that new public cloud environment. It’s really popular with our customers, because it’s a strategic solution, rather than just the sale of an individual product or an individual solution. In other words, it helps them specifically deliver the business outcomes that they’ve asked for.

There’ll be many more in the pipeline, actually. We’ve got a great security solution that we are about to roll out very shortly. And we’re working hard at the moment to launch a solution on the back of the Azure-VMware solution, which has been announced recently by Microsoft.

How has Logicalis continued to invest around Azure?

We’re investing in creating new solutions, including co-sell solutions that are available on the Microsoft marketplace. And that requires a lot of effort and a lot of certification requirements before you can get something launched there. So yes, absolutely, we’re investing in those new solutions. But of course, when you start selling those solutions, you’ve got to deliver on them. And that means we need to invest in capability. We started our [Azure] journey a couple of years ago with Microsoft, and some investments we made back then are paying off today. So for example, we’re an Azure Expert MSP partner, which is a certification that something like only 1 percent of Microsoft partners have. So we’re in an elite group, as a consequence of those earlier investments that we made. But we’ve also got a multi-million dollar investment plan that runs over the next 12 to 18 months. And that’s all geared around building a Microsoft business unit within Logicalis that will support our local operations in making sure that they can deliver great outcomes to their customers. But the nature of those investments is in technical sales resources, for example, including black-belt style specialist resources to support complex implementations around the solutions that we’ve created—like the Production-Ready Cloud solution and like the security solution, which we’ve called LogiGuard, and like the [Azure-VMware] solution. So beyond those technical sales resources and technical support resources, we’re also building out the professional services capability, and of course the managed services resources too. So that’s a big investment plan that we’ve got.

Is Microsoft your fastest-growing vendor? How has it compared to the growth you’re seeing with AWS?

It’s definitely still our fastest-growing vendor. AWS, for Logicalis, is more of a regional play than a group play. In other words, we don’t have a strategic relationship, from a group perspective, with AWS at the moment—like we do with Microsoft. One of the consequences of being a strategic vendor for Logicalis is that we guarantee to the vendor that we have coverage, in terms of capability and skills, across our whole footprint. So as you can imagine, that’s helping to drive the above-average growth rates that we’re seeing with Microsoft. But of course, with AWS and others we are growing as well—but just not at the same rate, because of the investments that we’ve made with Microsoft.

Are you working with AWS in the U.S. market at all?

We do have a small capability [with AWS] in the U.S., but it pales into insignificance compared to our Microsoft capability. It all depends on the customer needs. Sometimes we just simply can’t fulfill AWS demand, because we don’t have the resource—because it’s not a strategic capability. At the end of the day, it’s what the client wants, and what the client really needs to deliver the outcomes.

Because it’s part of the Microsoft organization, Azure already has an immediate relevance with many of our customers. The broader public cloud capability of Microsoft—including Office 365 and Dynamics and so on—has an immediate relevance with many of our customers. They’re enterprise customers, so 99 percent of them already have a strong relationship with Microsoft. So it’s an extension of that relationship. They know Microsoft already and know that they are already prevalent in terms of enterprise capability. That’s something that makes it an easier choice for customers. But I think in general, there is also a perception of the marketplace that the Azure platform is a platform where you can build or transfer workloads easily. Whereas AWS is more of a developer-style cloud overall. But it ultimately depends what the customer is looking for.

And more and more these days, we’re seeing customers not wanting to depend on one public cloud provider. And therefore, the concept of multi-cloud, whether that’s private and public, or multiple public cloud providers, is becoming more and more prevalent. But the good thing is that Microsoft has openly acknowledged that. And that has meant that they’ve built a solution called [Azure] Arc, which is a tool that allows customers to manage various public and private cloud implementations—but using a Microsoft interface as the bridge between those various cloud environments. So that’s a really interesting recent development from Microsoft, which we will see more and more of our customers using.

How would you describe the difference in the value proposition between Azure and AWS?

I would say it’s largely that there’s a familiarity there with Microsoft, which means that it’s easier for people to understand [Azure] and understand their intent. I think many of our customers follow Microsoft and their market performance—in a way that they don’t really follow Amazon, and don’t really follow AWS’ performance. So there’s a natural affinity that many of our customers have with Microsoft.

We’ve also got many retail customers, and many of them are a bit skeptical about using AWS because it’s part of the Amazon organization, which is often a direct competitor to them. So there’s that angle as well, which is part of the value question when you’re a customer, and when you assess the various options around the clouds.

And of course, it depends on your current environment, too. If you’re a big user of Oracle today, you might choose to go to Oracle Cloud, rather than transferring all your database onto Azure. So it depends on the specifics of the environment. But I would say that that familiarity with Microsoft is a big selling point for them. And I also think that Microsoft’s articulation of the opportunity that’s available with Azure is much easier for our customers to understand—especially in the C suite—than it is perhaps with AWS, which is a slightly more technical, developer-style solution. So there’s an element of, you need to know the technology industry inside out if you want to play with AWS. Whereas Azure is a bit more user-friendly—certainly from a use case, business case perspective, in terms of the way it’s communicated by Microsoft.