The cloud computing opportunity that service providers have today goes far beyond Infrastructure as a Service that (IaaS) offers that have already been launched globally. Gartner estimates that business process services represent $71.1 billion vs only $31 billion for IaaS. According to “marketsandmarkets.com” SaaS is 73% of the cloud market – including players such as Google Mail, Yahoo Mail, Adobe Web connect and, presumably large enterprise players such as salesforce.
This is because business process services and SaaS bring much higher value to organizations then infrastructure as a service. Compare for example the size of the IT Hardware market vs IT software and services today: according to Forrester that ratio is 40/60. Furthermore, imagine I am a telecom company that brings the line to the customer but does not provide the voice or data service? (Yes these exist, but that’s a different discussion). The point is that the value is in the toilet not the plumbing and that the higher value opportunity is available now for service providers and not just the SaaS providers themselves.
THE SERVICE PROVIDER OPPORTUNITY
The reason is that as the number of cloud services available to an organization grow, so does the complexity of managing those relationships. So that, while today, specialist cloud vendors like Sales Force and Amazon, plus HP of course, can sell, for example, CRM and Virtual machines directly to organizations, once an organization has: CRM, Virtual Machines, Storage, E-mail, PC Security, platform services, collaboration and communications as a service the vendor relationships become complex to manage. More importantly, the IT department or the company itself cannot allow the free for all that would ensue if each business line begins to procure its own cloud services (sometimes just with a couple of clicks and a credit card). Procurement, security, compliance as well as performance and SLA requirements for business applications and processes could be put at risk.
THE CLOUD SERVICE BROKER
Thus intermediaries are required to “broker” the cloud services. These brokers can provide the ability to discover, subscribe to, manage, use and ultimately, be billed for, cloud services. Larger companies may decide to broker their own services for internal users or aggregate different broker’s offers, but SMBs will not accept the overheads inherent in that and will look to a service provider to do that for them.
Research from Gartner and Forrester has characterized the Cloud Service Broker functions, elsewhere characterized as an “Aggregation platform” and cloud service marketplace. Forrester, for example, categorizes a cloud service broker as implementing basic cloud principles (standardization, self-serve, elastic, pay per use), as well as aggregation of service combinations, workload management, and dynamic sourcing. (Source: Forrester “Cloud Broker — A New Business Model Paradigm”; Sept 2011) HP and other companies offer cloud service broker capability, from our side you can find out more at: www.hp.com/go/cloudsystemsp.
In conclusion, there is a massive opportunity for service providers of all kinds, both communications (telecom) and managed service providers (ie hosting, resellers etc), to broker cloud services for their customers. So the advice is not to ignore the IaaS train, but to keep your eye on the bigger SaaS and business process as a service opportunity behind it.
Richard Arthur manages the CloudSystem Service Provider Program at HP