Opportunities For Service Providers

Service providers (SPs) still have a golden, but short-lived opportunity to commercialize the $266.4 billion cloud services market before AWS and others call it “game over.” By being more agile, able to scale and playing to their strengths, SPs can use the cloud to not only consolidate their existing revenue streams but create new ones.

Trouble is, outdated mindsets and a lack of customer-first innovations are causing too many SPs to let the cloud services opportunity sail away without them. Here’s a look at the five ways SPs will miss the cloud services boat if they don’t move quickly:

1) Taking a Defensive Approach to Cloud Services

SPs today have two options: passively concentrate just on protecting their existing business. Or recognize the cloud tide is coming in and make a plan to lead their market with a cloud services model based on innovation and differentiation. A differentiated model, with simplified uplift to commercialization, and growth through resellers and the channel offers an offensive strategy for accelerated growth that will help SPs thrive.

Those SPs that will be successful in cloud services will understand their markets and customers better than others, anticipate the next wave of innovation — and then create services that deliver greater benefits.

2) Missing the Shift from Infrastructure to Apps and Services

Bigger cloud players with more resources are driving innovation and cost-reduction in cloud infrastructure; that’s not where SPs will make their mark. Instead, customers are looking to SPs to provide solutions beyond just infrastructure. They want preconfigured business applications (e.g., email, CRM) that can easily be deployed, much like what consumers get from an app store. This capability to deliver application provisioning offers SPs an opportunity to differentiate and drive new revenue in a market where they can excel.

What’s more, Infrastructure as a Service (IaaS) can speed parts of the application provisioning process. But without the flexibility and agility to deliver complete applications to end users, SPs cannot take full advantage of the benefits of IaaS.

The concept of cloud blueprints offers SPs a way to drive extraordinary levels of efficiency and effectiveness, increase quality of service and reduce cost. Like blueprints used in the construction industry, cloud blueprints contain everything needed to successfully build, deploy and share applications in the cloud including server, software, storage, network, images and firewall details, and importantly, how they all relate.

3) Failing to Offer Flexible Contracts and Service Provisioning

SPs that want to keep customers locked into inflexible contracts will fail. Instead, SPs must offer customers customized billing based on their individual requirements and help support complex reseller models by billing accordingly.

All cloud services billing models have pros and cons depending on the customer, usage model and internal budgeting requirements. The key is for SPs to understand that a number of different models exist, and the benefits each supports. I’m an advocate of Burstable Virtual Resource Pools that offer a set of virtual resources in a multi-tenant platform with a fixed total configuration, the ability to be reconfigured as required, and payable as a single monthly fee but able to “burst” capacity by the hour/usage as required for a separate (possibly premium) rate.

4) Adopting a ‘Not Invented Here’ Strategy

Too many SPs have their heads in the sand about the tremendous business opportunity inherent in offering cloud services. Others are taking a doomed DIY approach to building cloud capabilities, costing them time and money.

The cloud is exponentially more complicated than traditional hosting. SPs could spin their wheels trying to successfully build cloud capabilities themselves and still find themselves woefully behind. Others are betting – and losing — on open source solutions like OpenStack that lack the necessary functionality (by itself) to tackle real business challenges.

To be successful, SPs need to partner with a proven cloud services vendor that can help them quickly deploy differentiated services specific to their customers’ needs.

5) Failing to Develop a Niche

Cloud computing offers SPs the opportunity to position themselves at the heart of their customers’ operations. It’s an opportunity for them to leverage trusted relationships, be unique, and expand their services…and their margins, too. In today’s cloud services world, SPs can become one-stop shops for their customers’ needs; ranging from the homogeneous IT infrastructure services they provide today, to a growing array of high margin applications and services. SPs can offer it all and deliver it with one service level agreement, one point of contact and one bill.

By adopting extensible, customizable, flexible solutions, SPs can adapt to changing cloud demands, providing limitless opportunities. This gives them the ability to quickly commercialize the cloud and grow with no limits to stay competitive, no matter what environment is being developed on. The cloud is handing SPs a bigger, brighter future, but they have to change course today if they have any hope of getting onboard.

By Tony Lucas