How Successful Service Providers Are Changing Their Business
The cloud and managed hosting business is a tough business to be in. There are high costs of infrastructure, the market is hyper competitive, the industry is in the midst of turmoil, and you, as a product manager or executive, have to navigate all of these issues and try to figure out what your hosting business looks like for the next three years. As a former product manager for a well known service provider, I do not envy the the pressures facing today’s service provider product managers, so this post will try to shed some perspective on the crazy changes taking place in the hosting industry and try to provide a little bit of guidance that can help you, as a product manager, think about your three-year plan.
Enterprise IT is being pushed hard to deliver more cloud-like services to its users, and they are looking more and more at using public cloud vendors to do so. One of the biggest challenges to enterprise cloud adoption is that enterprise IT staff are not typically dev-centric, and to move to a very developer-centric platform like AWS is not a realistic option. Because of the developer-related onboarding hurdles at AWS, enterprise IT needs help, and this is the reason that the managed hosting market is growing at the fastest rate of all the hosting segments, according to 451 Research.
Every service provider in every market around the world is experiencing the constant pressure and presence of AWS and Microsoft Azure and are having to change their go-to-market strategies accordingly.
We see service providers reacting the same way over and over. First, we’d like to share what’s not working. Then, we’ll share what does seem to be working, especially for those more agile service providers growing their businesses in a hyperscale world.
What’s not working:
Service providers that think they can underprice AWS/AZURE and build a successful business
Service providers that build a platform without a rock-solid understanding of the hosting needs of their prospective customers
Service providers that are not agile enough to adjust their service and solution offerings as their customer expectations and needs change
Service providers that ignore their partner ecosystem and do not consider partnership as an opportunity to grow into different potential markets
What is working:
Full application lifecycle support. Service providers that are able to deliver the onboarding support that enterprise IT needs by capitalizing on skills of their support organizations to deliver complete lifecycle managed hosting services (migration, onboarding, configuration, maintenance, auditing, reporting, and application-level support) on top of their IaaS/private/hybrid infrastructure.
Providing managed onboarding to AWS and Azure for those enterprise workloads or applications that are a good fit and cross-connecting/integrating them with other private/hybrid hosted infrastructure platforms.
Broad services delivery. Service providers that are able to deliver a broader set of applications and platform services can attract and retain a larger subset of an enterprise’s applications. The most successful service providers are making all of these services available through one portal or “single pane of glass” and are able to standardize the same managed services across all components of the infrastructure. See figure above.
Exploring alternative revenue opportunities via partners. Service providers working with systems integrators (SIs) and strategic VARs (value added resellers) with specialties such as SAP and Oracle are able to build alternate revenue streams in nonstandard environments by partnering to deliver specialized hosting services and support on top of their agile infrastructure stack.
The cloud and hosting market is changing rapidly and whether service providers are large or small, the ones that are successful in today’s tough market are the ones that are able to quickly adjust their business trajectory away from what we have seen isn’t working toward what we see is working.
Service providers that can offer a mix of the right infrastructure platforms and rich support services that solve enterprise IT cloud migration problems are the ones that are winning the revenue race and attracting new enterprise customers. These same service providers are expanding their service offerings with strategic white label and SI partnerships, enabling them to further expand their services offerings and revenue potential.
Even in today’s tumultuous hosting market, the same core functional capabilities still stand. The ability to scale, to be agile, to be automated, and to truly understand what your customers need — and then deliver the correct services across the right infrastructure — is how successful service providers are evolving to their own version of the next generation data center.