The Next Mandatory Business Survival Position for Service Provider Future Success
Enterprise IT is changing how it deploys and consumes technology. This means that everyone who sells products or services to enterprise IT must start to think differently about how they go to market. Enterprise IT strategies are changing so fast that it’s getting harder and harder for cloud and hosting providers to keep up with the pace and deliver and deploy the services that enterprises want to consume. As the hyperscale cloud providers grow at a rapid 49% over a 5-year CAGR, traditional service providers are trying to figure out their future cloud strategies to remain relevant to their customers. Enterprise customers have their eyes on a hybrid multicloud end state, and they’re looking to their service provider partners to provide this hybrid multicloud environment in a secure cloud infrastructure model that can be consumed across the data location continuum and at global scale.
This post shares some insider insights about how service providers and VARs are changing their business models to lay the foundation for the future of their business.
Channel Is Changing the Rules and Building Cloud Infrastructure
Traditionally, the channel, VARs, and technology resellers ventured onto their customers’ premises to sell technology, perform break–fix work, and deliver their own unique value proposition around the sales, delivery, and support of the IT infrastructure. When their customers wanted a cloud or hosting solution, they often partnered with a local cloud and hosting provider on behalf of the customer; that was a win-win for all parties.
The challenge, however, was that the ever–tightening margins with VARs began to cause the channel to look for alternate opportunities to drive up margins. On the other hand, cloud and hosting providers were enjoying strong margins of 65% or more. Even during the toughest economic times, they were growing at 20%+ year over year. What began as a mechanism to change the margins for VARs became a cloud and hosting infrastructure delivered and managed by the VAR that targeted enterprise IT without the traditional partnership relationship of cloud and hosting providers.
Service Providers Are Changing Their Models Too
As increasing numbers of VARs are standing up their independent cloud and hosting infrastructures, the traditional service provider brands have had to change how they remain competitive in an ever busier market. Many service providers have made acquisitions to fast track skills learning, accelerate market penetration, and explore entirely new lines of business. Many service providers have also changed their operating models and are moving beyond the walls of their data centers to offer similar managed infrastructure services on enterprise premises and in colocation in an effort to appeal to enterprises that are looking for new cost models of consumption. The current state of the channel and service provider market is complicated, and it will continue to evolve as both sides offer unique value propositions to their customers in very similar and overlapping ways.
Finding a unique position that enables customer success will be crucial for VAR and service provider routes to market, and that position will most likely revolve around where data is positioned in one of the four locations on the customer data continuum.
The customer data continuum: The four locations where customer data can live.
Customer IT services can be delivered to enterprise users from four primary locations:
- From the enterprise premises in a traditional enterprise deployment.
- In colocation, either managed or unmanaged.
- In a typical service provider usually in a multitenant deployment model.
- In a public cloud model.
