The Emergence of CSPs
In our soon to be released book Consumption Economics, we argue that the world of IT will obviously see the emergence of large Cloud Service Providers (CSPs). These are companies that will provide hosted IT services. These Cloud Service Providers have the potential of distancing traditional product companies from their customers, as we describe in the book:
First and foremost, it is because the existence of huge, cloud-‐based infrastructure as a service (IaaS) providers are going to disintermediate a lot of core component providers from selling directly to end customers. If IT departments can buy secure storage over the Internet from industrial-‐strength, massive-‐scale, secure IaaS companies like IBM, Rackspace or Amazon, they won’t need to mess with 3Par, EMC, and Symantec.
Who Will Own the Customer?
In our last TSIA Cloud 20 webcast, I discussed the pending Battle Royale that will be occurring between Telecommunication Companies like AT&T, Large Enterprise IT providers like IBM, and large consumer companies like Google.
All of these companies could potentially be the epicenter for cloud based IT services. I then asked this question to the webcast audience:
Who do you think is best positioned to directly provide enterprise class cloud offerings?
- A. Telecommunications Providers
- B. Integrated Enterprise IT providers
- C. Large Consumer IT providers
The audience from that webcast came back with an overwhelming response: C. They believe that large enterprise IT providers like IBM, HP, Oracle, etc. are best positioned to provide enterprise class IT services in the cloud. But will companies like HP and Oracle, that are still fundamentally think like product companies, embrace the challenge of building out new service capabilities?
Some Current Data
We benchmark the growth rates of business lines within product companies. Below is a snapshot of data we brought in over the past quarter in our benchmark portal.
It is clear that Managed Service offerings are one of the fastest growing business lines within product companies. Managed Services are a step toward providing more comprehensive service capabilities for customers. It is also a defensive move to offset pressure on product and maintenance revenue streams. Technology product companies of all shapes and sizes are being drawn into a new battle for the customer dollar. A battle that will be won by service features, not product features.
The new models for IT consumption are still just emerging. Who the big winners and losers will be is yet to be determined. There is no slam dunk move for the current enterprise IT providers. Their business models may simply implode as products move from being purchased in large fork lift upgrades to being purchased through subscriptions. Yet-many of the product companies are not standing still. They are expanding into new service areas like Managed Services. They are creating direct cloud offerings for customers. And slowly, but surely, they are realizing Consumption Economics are here to stay.