As the cloud market matures, the roles of tech players is transforming rapidly. Roles established in the old ‘provide-it-yourself’ IT market are rapidly becoming less relevant in the cloud market. Some global vendors – Google, Amazon and Microsoft- were far-sighted enough to create strategies to become core players in the new era of cloud by becoming ‘hyperscale’ cloud vendors. Using their enormous economies of scale, they now provide the overwhelming majority of cloud based compute and storage for cloud solutions – Infrastructure as a Cloud Service. What this means is that previously separate vendor roles like hardware sales, software sales, ‘hosting’ and managed service providers have lost their place in the market, with role convergence fast become a defining feature of the emerging cloud market.
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With more and more of our cloud-based computing power being supplied by a very small group of hyperscale vendors, are we headed towards a completely homogenised market-place with little choice or does this create new opportunities for the fantastic breed of smaller market players that have emerged in recent years?
Where the market is today – and tomorrow
The appetite in business to continue the provide-it-yourself IT model is declining rapidly – it has too many disadvantages. Major providers have played to their strengths, building hyper-scale cloud infrastructures and individual cloud services. But does this mean they have cornered the cloud market? The answer is yes and no. Yes, they’re on track to own much of the global Infrastructure-as-a-Service (IaaS) market but these are only the basic ingredients of cloud solutions.
Today’s businesses want to move completely away from the provide-it-yourself model for IT and move to a ‘consumption’ model – simply using the business tools they need to run the business and improve their competitive capability but not having to build, operate and manage it for themselves. IaaS, even at hyperscale, does little on its own to enable businesses to do this; it simply shifts the compute and storage to the cloud. What’s more, larger players know that it’s an impractical business model for them to try and build complete, bespoke cloud solutions for, say, companies of between 250 and 1000 seats, which represent the overwhelming majority of companies with sophisticated IT requirements.
In the future, the raw cloud ingredients are likely to be delivered by 4-5 hyper-scale cloud vendors who compete hard to deliver fundamental cloud solutions at the lowest possible price
How smaller cloud providers compete
It’s self-evident that smaller businesses can’t compete with our hyperscale peers in the provision of the raw ingredients of cloud solutions – cloud-based infrastructure – we simply can’t bring the massive economies of scale to bear. So, the starting point for smaller players is to not to try and compete with the hyperscale vendors on their core offering – IaaS.
The opportunity for smaller providers is their proximity to and understanding of customer needs. Smaller players are much more able to be agile, flexible and responsive to customer requirements than hyperscalers Therefore, for smaller, innovative businesses, it’s about optimising the fantastic opportunities that the hyperscalers have created through the provision of high quality cloud infrastructures, available at accessible cost. Using these high quality, reasonably-priced raw ingredients, smaller players – Cloud Solution Providers – can design, provision, build, as well as manage, operate and support complete, sometimes complex, cloud solutions so that all customer businesses have to do is consume what they need to run their business. In this way, smaller players can transform the hyperscalers’ raw ingredients into a complete, immediately consumable solution that adds substantial value for customer businesses.
What does this look like in real terms? A genuine eco system with smaller providers working in a symbiotic relationship with hyperscale organisations. Customers benefit from the advantages of large providers – high quality and best price – combined with the skill, experience and agility of smaller players with really innovative, customer-focused outcomes.
Why go for a smaller player?
In the future, the raw cloud ingredients are likely to be delivered by four to five hyper-scale cloud vendors who compete hard to deliver fundamental cloud solutions at the lowest possible price. The new breed of service providers, Cloud Solution Providers, will then transform these into complete solutions totally in sync with customer needs, managing and operating these via a comprehensive support platform.
For an organisation looking for a new cloud partner, the benefits of teaming up with the smaller players are clear. There’s the simple fact that, to a smaller player, the customer will be far more important than they would ever be to a hyperscale provider. Smaller companies will be far more concerned about customer service, and react more attentively to customer needs than hyper-scale vendors will ever be capable of achieving. They also tend to specialise in key verticals so can bring that expertise with them too.
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Time for a shift
The provide-it-yourself market is dying rapidly and the cloud services market is growing at an astounding pace. Hyperscale cloud providers are a reality within this new eco-system and there is a rapidly growing group of small, innovative pioneering Cloud Solution Providers that have already found ways of not just co-existing but thriving together. It’s a critical point for the market, regardless of size. Because cloud is a very different, consumption-of complete services model, we’re seeing that huge shift in the IT market. Adaptability is what will separate winners from losers here. Forward thinking providers of all sizes need to work together to re-shape their businesses and respond to these changes to thrive in this converged space.