Cloud Computing

Infrastructure is Dead, Long Live the Cloud

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If hosting providers want to survive and thrive in the fast changing world of cloud computing, they must forget about infrastructure and embrace managed services. Although “on prem” infrastructure will never totally go away due to many factors including security, the hybrid cloud makeup is shifting towards less private infrastructure and more cloud based services.

This is according to Ashar Baig, research director at Gigaom, who spoke to the WHIR this week about current market trends in cloud. He will discuss the evolution of cloud services in depth in his presentation at HostingCon Global in Miami this June.

Baig tells the WHIR that infrastructure is no longer the main factor in the cloud and hosting industry. Storage has gotten so inexpensive that it’s not nearly as much of a consideration as it has been in the past.

With the recent price reductions in cloud going from about $1 per GB per month just a year ago to about 2.5 cents a GB per month now, providers can’t compete on price.

“When you’re talking about 2-3 cents per GB per month you can’t go any lower than that…so that’s why I say let’s not talk about the infrastructure…nobody is going to talk about the cloud infrastructure 3 years from now, they’re just going to say ‘what does the cloud infrastructure enable?’ and what that is going to bring us to is managed services,” Baig says.

Service providers need to focus on distinguishing themselves from the competition based on service offerings rather than infrastructure. For example, he says Hadoop as a Service didn’t even exist 6 months ago but now several providers have offerings. Other recent “as a service” additions include OpenStack, virtual desktops and virtual disaster recovery.

Disaster recovery and business continuity is a particularly important service for companies. The ability to recover from a data disaster without need to purchase new machines is critical to a company’s success. Just having a copy of data isn’t enough. Baig says companies care about higher value services.

Ashar Baig

Ashar Baig

“When I do have a disaster how long will it take for my Exchange to come back up, my SharePoint, my database, ERP application to come back up and they’re looking for managed service providers to provide them those SLA guarantees, service level agreements that say I will bring up this application in this many hours and all of that is written in the contract,” Baig says.

This creates a big opportunity for cloud and web hosting companies to increase revenue.

“Now they can sell it to their CIO and say we’re not going to experience any down time because downtime is going to cost us x amount in terms of accounts payable, accounts receivable, lost business, all that stuff,” Baig says. “And here’s the assurance that we’re not going to have downtime. So that’s what I call higher value service…you’re not using cloud for infrastructure any more, you’re using cloud for business continuity.”

The industry is moving so quickly that it’s hard to pinpoint any one really hot or trendy service, according to Baig.

“As soon as you say this is ‘hot’, something else becomes hotter. It’s a very fluid environment and things are changing very fast,” he says. “Service providers have to stay on their toes so if their enterprise customer comes to them and says, ‘well I’ve heard about this great thing, what do you think about that?’. Their answer should not be ‘let me investigate and get back to you’ the answer should be ‘Oh yeah, I already provide that service. You want me to just add it to the services that you have?’ That’s the answer that the CIO is looking for.”

Although a single service can’t be pinpointed as the next big thing, Baig did have some ideas as to which companies are best suited to take advantage of this environment. He says companies that already have a lot of customers in a service-based industry are in a great position. Telecoms, copier companies and imaging companies are some of the best ones suited to add new services for existing customers.

Baig will discuss these topics and more in his presentation at HostingCon where he’ll review the top two cloud consumption trends in 2013.

With regard to what cloud and hosting providers should be most aware of, he says, “The most important thing is cloud is a very fluid environment. It is changing constantly and you should be on top of your game if you want to survive. It’s a very competitive, cut-throat type of environment…anybody can target anybody…the boundaries are gone. The whole ecosystem has to stay on their toes from hosting providers to service providers to vendors to offer the right services so they can maximize the revenue opportunity of the cloud.”

When asked about the importance of HostingCon to the cloud and web hosting community, Baig says it’s a great opportunity for providers to stay in touch with trends in the quickly changing cloud market.

“Knowledge is king and you need the knowledge,” he says. “You will come to this event and learn a lot that you can go back and apply in your business the next day, and actually make some revenue based on that.”

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