Cloud Countdown C minus 8
As we lay out our thoughts about the cloud on the road to our launch next week at Citrix Synergy, we will discuss the needs of enterprises: the capabilities and attributes they are looking for, the applications they choose to run (and not to run) in the cloud, how the internal and external clouds fit together.
But today, let’s take a look at the world of the cloud from another angle: the perspective of the cloud service provider. Here are some of the things we’ve learned from various conversations with them.
Let’s not forget that, first and foremost, it is a business. For the cloud provider, business can be a tightrope walk, with the price trap on one side and the lack-of-differentiation pit on the other.
True Cloud Economics
Providers who choose to sell raw Infrastructure as a Service face a competitive “race to the bottom,” where only those who can afford to operate on slim margins and high scale are likely to survive in the long run. To achieve the best margins possible at low cost, providers need low-cost, high-quality technologies in the stacks they run. In addition, many providers feel that the more closely they can align their costs to the dynamic month-to-month (or day-to-day, or even hour-to-hour) changes in their customer demand, the better control they can exercise over costs.
But providers can increase their revenue line as well as reducing their expense line, by differentiating their services in ways that make them more valuable than raw cycles and gigabytes and megabits-per-second. Whether they leverage their expertise in datacenter management and technology integration, in vertical line-of-business areas (such as financial services, retail, manufacturing and health care), or in providing a great user experience to promote customer satisfaction, providers can ironically offer their customers lower total costs by including the cost of their own IP.
In order to balance the issues of cost and differentiation most effectively, providers need choice, just as their customers do. The ability for them to add their own tools and processes to more than one option -- whether virtualization infrastructure, networking, storage, orchestration tools, or other components -- and have their choices interoperate makes it easier for them to avoid being victims of lock-in and to choose the right options for each type of deployment.
Just as senior IT and line-of-business management have repeatedly faced build-or-buy decisions, there is now a new flavor, akin to the outsourcing dilemmas of the past decade-or-so but with a new face: internal or external. In this, the cloud provider wants a fair playing field, without facing competition from their own vendors. Enterprises need to be able to evaluate their options without having the decision process skewed by irrelevant considerations like sales commission models.
So what’s important to the provider to avoid the Race-To-The-Bottom? To start with,
- Costs that align with true cloud economics
- Platform to help foster Differentiation of Native IP, and,
- Choice of flexibly offering multi-vendor technologies that interoperate